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Business rates – what are they, and how are they calculated?

If you work from commercial premises – either as a tenant or owner, you will probably have to pay business rates to your local council. Here we look at what business rates are, how much you have to pay, and the wide range of ‘relief’ schemes which are available to small businesses.

Business Rates
What are business rates used for?

Business rates are charged on just about all non-domestic premises, whether they be offices, factories, shops or workshops, and the amounts raised are substantial – representing around 11 to 12% of total income received by councils nationwide.

The funds raised are used to pay for local services – such as education, social care, and transportation.

How are business rates collected?

Rates are managed in slightly different ways according to where you live – England, Wales, Northern Ireland, or Scotland, but your first port of call when you move into new premises will be your local council.

How you actually pay your rates may vary according to how your council operates, but you should typically be able to pay via installments, rather than paying a one-0ff annual fee.

How are business rates calculated?

If you are based in England & Wales, the ‘rateable value’ of your property (as determined by the Valuation Office Agency – VOA) is multiplied by the prevailing business rates multiplier, which is set by the Government.

In Scotland, things are slightly different. Rates are calculated using the current estimated rental value of your premises (the ‘rateable value’), together with the poundage rate, which is set by the Government.

You can find out the rateable value of your premises via the VOA website (England & Wales), or the SAA website (Scotland).

These rateable values are re-assessed every few years, with the last revaluations taking place in 2010.

If you’re a ‘small business’ (i.e. if your rateable value is £18,000 or less – or £25,500 or less per year in Greater London), your rates will be calculated with the small business multiplier, which is more generous than the standard multiplier.

Current multipliers

  • For the 2015/16 tax year, the standard multiplier is 49.3p (the small businesses multiplier is 48p).
  • In Wales, the standard multiplier is 48.2p
  • In the City of London, the standard multiplier is 49.7p (48.4p for small businesses).

Can you claim rate relief?

Many small businesses benefit from a system of business rate reliefs, which can lower your business rates bill substantially, if you are eligible.

For the vast majority of our readers, ‘small business rate relief’ is available if the rateable value of your property is £12,000 or less. The relief must be claimed directly from your local council.

100% rate relief is available to businesses occupying premises with a rateable value of £6,000 or less until the end of March 2016, so you’ll pay no rates at all if you’re eligible.

And if your rateable value is between £6,001 and £12,000, you’ll receive relief on a sliding scale from 100% to 0%.

It is estimated that around £100m of small business rate relief goes unclaimed each year, so make you let your council know if you’re eligible, as you won’t necessarily receive the relief automatically.

Further information

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