Business rates or non-domestic ratings are property tax applied to owners or occupants of non-domestic property. These rates are determined by multiplying the rateable value of a property by the multiplier. The rateable value is used to calculate the annual rates charged before applying any adjustments such as reliefs and other reductions, while a multiplier is an amount per pound of the rateable value.
Finding your Business Rates
The rateable value of a property is fixed by the Valuation Office Agency (VOA) and used by the local council to evaluate your tax bills on the non-domestic property. The rateable value is estimated by open market rental value as of 1 April 2015 multiplied by a “multiplier” to get business rates. The small business multiplier is used for rateable values less than £51,000. While for a rateable value greater than £51,000, a standard multiplier is used. As per 2021-2 small business multiplier is 49.9 pence whereas standard multiplier is 51.2 pence. You can also apply for business rate reliefs that you are entitled to for reducing your business rates.
Suppose you own a small business having the rateable value of £13,500. Your business rate will be calculated as:
Rateable value X small business multiplier = business rates
£13,500 X 49.9p = £6736.5
Your rateable value is less than £15,000, so you may apply for small business rate relief. In this case, it will be 50% less than the calculated business rate, given you have a ratable of £13,500 that is £3,368.25.
Business rate reliefs
Small business reliefs
You are exempted from the business rate if your business value is less than £12,000. While for properties with a rateable value of £12,001 to £15,000, the tax relief goes down gradually from 100% to 0%. If you have multiple properties, you might be eligible for relief as follows:
If you buy a new property, you will still get tax relief for your existing property for the next 12 months.
Other properties than the rateables property have a value less than £2,899.
The cumulative rateables of all your properties are less than £20,000 or less than £28,000 in London.
These relief rates can be different with respect to the location of your property. Click here for more details.
Rural rate reliefs
You might be eligible for rural rate reliefs if your business is in a rural area with a population of fewer than 3000 people. While you are exempted from business rates if:
You have a village shop or a post office having a rateable value of less than £8,501.
You own a public house or patrol station having a rateable value of less than £12,501.
You can also contact your council for inquiring about business rates for your rural property.
Charitable rate relief
You can apply for charitable relief up to 80% if you use your property solely for charitable purposes. You can also get discretionary relief (100% discount on your business rates) if you are a non-profit or voluntary organization. For more details, click here.
Enterprise zones are locations specified by the UK government. These zones provide business opportunities to the new or expanding firms with benefits like tax reliefs. You can get up to £55,000 a year for five years. You can check if your local enterprise zone offers business rate reliefs by clicking here.
Exempted properties on business rates
There are certain properties on which business rates are not applicable. These properties include agricultural land including fish farms, buildings registered for public religious worship, and buildings used for the welfare of disabled people. However, legal requirements are to be fulfilled for these exemptions. If you own such property in England you can visit GOV.UK website for more details and click here if you have such property in Wales.
Reliefs on empty property
Some empty properties are exempted from business rates as following:
Properties owned by charities given that its next use will be for charity purposes.
The building has rateable values under £2,900 and is empty.
Warehouses or other such industrial buildings are exempted from business tax for 3 months.
It is a Community building given that its next use will be for a community purpose.
Local newspaper and nurseries discounts
A special discount of £1,500 per year is applicable on a property used as a local newspaper office. You can only get relief for one property per newspaper. If multiple newspapers are using the same property, business rate relief will apply to only one newspaper title.
You can also be eligible for a nursery discount if your business is on Ofsted’s Early Years Register, and the property is in use for the early year foundation stage of education.
If you are eligible for nurseries discount, you can get a 100% discount on business rates for 2020 to 2021 tax year, 100% discount on business rates for three months of the tax year 2021 to 2022, while 66% relief for the remaining of the tax year for the value up to £105,000.
Retail discounts apply to businesses like shops, restaurants, cinemas, hospitality, or leisure business. If you are eligible, you can get a 100% discount on business rates for 2020 to 2021 tax year, 100% discount on business rates for 3 months of the tax year 2021 to 2022 while 66% relief on the remaining of the tax year up to a value of £2 million. But if you are allowed to do business during the national lockdown starting from 5 January 2021, your discount will be capped at £105,000 rather than £2 million. You can apply for a retail discount on top of any other business rate reliefs you are eligible for.
Your bill is adjusted automatically by the council if you are eligible for transitional relief. You are eligible for transitional relief if your property is in England and rate fluctuation is more than a certain amount set by your council. Your bill can change depending on your property’s rateable value and whether your bill is increasing or decreasing as a result of the revaluation.
You can also opt for hardship relief on your business rates if you satisfy the council on your financial difficulties or on the reason that hardship relief is in the interest of local people. You can contact your local council to apply for hardship relief.