Business Rates Explained

What’s included:

• Your business is likely to qualify for a 75% discount for the 2022/23 tax year
• What are they, types of relief and how to calculate your business rates tax
• Business Rates Calculator – scroll to the bottom

What are they?

Business rates, also known as commercial rates or non-domestic rates, are a tax that is levied on businesses in the UK. They are used to fund local council services, such as education, transportation, and public safety. Business rates are calculated based on the value of the property that a business occupies, and they are collected by the local council.

There are different rates for different types of properties, and the rateable value of a property is determined by the Valuation Office Agency (VOA). The rateable value is based on the annual rental value of the property, taking into account factors such as location, size, and the condition of the property.

Business rates are paid by the business owner or tenant of the property. The landlord is responsible for business rates when the property is empty. There are some exemptions and reliefs available for businesses that are eligible.

Business rates can be a significant expense and it is important for businesses to understand how business rates are calculated and what reliefs and exemptions are available.

How are they calculated?

They are calculated by multiplying the rateable value of the property by the applicable business rates multiplier. The business rates multiplier is set by the government each year, and it is based on the retail price index (RPI).

For example, if the rateable value of a property is £50,000 and the business rates multiplier is 50p, the business rates for that property would be £25,000 per year.

There are different multipliers for different types of properties and for different parts of the UK, for example England differs from Scotland and certain parts of London have different multipliers, as business rates are set locally.

What relief is available?

Some properties and some businesses are eligible for discounts from the local council on their business rates. This is called ‘business rates relief’. There are various types of relief, see below.

• small business rate relief
• rural rate relief
• charitable rate relief
• enterprise zone relief
• hardship relief
• retail, hospitality, and leisure relief
• local newspaper relief
• COVID-19 additional relief fund

The two standout types are outlined below and are likely to mean substantial savings for your business.

1. Retail, hospitality, and leisure rate relief

This one is likely to benefit you most. For the 2023 to 2024 tax year (1 April 2023 to 31 March 2024), if your business is a shop, restaurant, café, bar, pub, cinema, music venue or other class within this group, you will be entitled to 75% off your business rates bill, up to £110,000 per business.  

2. Small business rate relief

You can get small business rate relief if your property’s rateable value is less than £15,000.

You will not pay business rates on a property with a rateable value of £12,000 or less.

For properties with a rateable value of £12,001 to £15,000, the rate of relief will go down gradually from 100% to 0%.

Examples

If your rateable value is £13,500, you’ll get 50% off your bill. If your rateable value is £14,000, you’ll get 33% off.

How do I calculate my business rates?

Step 1

Look up your property’s rateable value here, either by entering your postcode and or using the ‘advance’ option if you know the exact address. The latter is recommended.

Step 2

Take the most recent valuation which will either be April 2023 or October 2017. The furthest right-hand column will give you the rateable value (RV).

Step 3

You then take the rateable value and multiply it by the UBR. For England for 2022/23 for large properties (RV is more than £51,000) the UBR is 51.2p or £0.512 for small properties (RV is £51,000 or less) the UBR is 49.9p or £0.499. Wales and Scotland vary slightly.

Then you apply any relief that is applicable.

Working example:

Rateable Value =    £40,000

UBR =                         £0.499

Rates Payable =      £19,960 pa (40,000 x 0.499)

This is what you would pay for the year without applying relief. If for example the business qualifies for ‘Retail, hospitality, and leisure rate relief’ then 75% relief would be applicable on the Rates Payable for the 2023 to 2024 tax year.

25% of £19,960 = £4,990 pa.

Am I being charged the right amount?

If you think you think you are being charged the wrong amount you need to check with your local council. Search here to find out who your council is and how to get in touch.