Embarking on the entrepreneurial journey is as rewarding as it is challenging, with its fair share of critical tasks and obligations. Navigating the intricacies of pension schemes, tax calculations, and payroll setup is just the beginning. One crucial element in the mix is understanding business rates—key to maintaining a compliant and successful business.
We’ve streamlined the complexities of business rates to help you stay on top of this essential business aspect without the stress.
Understanding Business Rates in the UK
Business rates, or non-domestic rates, are a tax charged on properties used for business purposes. These rates are crucial for local governments in the UK, as they fund community services and infrastructure enhancements.
Who is Affected by Business Rates?
Business rates apply to a variety of non-domestic properties, including:
- Retail shops
- Pubs and bars
- Office spaces
- Industrial factories
- Warehouses
- Holiday rental accommodations
Calculated based on the property’s rateable value (RV), which is set by the Valuation Office Agency (VOA), business rates have undergone a recent change in assessment frequency—from five to three years—to ensure more current valuations.
Calculation of Business Rates
Your local council determines your payable amount by applying a multiplier to the RV, which is annually reviewed by the government.
Exemptions and Reductions: Not Everyone Pays the Same
While business rates are widespread, not all properties are subject to them. You might find relief if your property is:
- Used for agricultural purposes
- Valued below £2,900, potentially qualifying for Small Business Rate Relief
- A training or welfare facility for disabled individuals
- A charitable establishment or a place of religious worship
Certain properties may also qualify for specific relief schemes based on usage, location, or business sector.
Forecasting Your Business Rates
To estimate your business rates:
- Find your RV through the gov.uk’s rateable value checker.
- Determine which multiplier applies to you—the standard or small business multiplier—based on your RV.
In 2024/25, the standard multiplier will be 54.6p, reflecting an inflation adjustment, while the small business multiplier remains at 49.9p.
Industry-Specific Rate Calculations
The VOA assesses pubs differently, focusing on the expected fair maintainable trade. Similarly, self-catering and holiday let accommodations are rated on potential income and other factors.
Home Businesses and Business Rates
For those working from home, the need to pay business rates depends on the extent and nature of the business activities conducted.
Changes in Business Premises and Rates
Relocating, modifying, or merging premises can affect your business rates. Always inform the VOA promptly to prevent unexpected rate hikes.
Empty Property and Business Rates
Empty properties typically receive a three-month rate exemption, with certain properties, such as industrial ones, enjoying extended relief.
Paying Your Business Rates
In England, business rates are paid directly to the local council. Bills are usually issued annually and can be paid online.
Relief Schemes for Businesses
As of March 2024, several business rates relief schemes are available, including:
- Small Business Rate Relief for properties with low rateable values
- Transitional relief to limit sudden increases due to revaluation
- Rural rate relief for businesses in less populated areas
- Charitable rate relief for organizations using their property for charitable purposes
- Retail, hospitality, and leisure relief, especially relevant post-pandemic
Appealing Your Business Rates
If you believe your rates are unfairly assessed, you have the right to appeal through the Valuation Tribunal Service.
Expert Tips for Managing Business Rates
- Pay promptly to avoid penalties.
- Budget carefully, especially with the recent rate multiplier increase.
- Explore all relief options available to your business.
With these insights and guidelines, you’re now better equipped to handle the nuances of business rates in 2024, ensuring your business remains financially savvy and ahead of the curve.