What Are Business Rates In The UK?

Do you know of business rates? Basically, these rates are a tax that is charged on most commercial properties. They would apply to buildings like shops, offices, pubs, warehouses, factories, and guest houses. If a property is used for business activity as opposed to living, it usually would be classified under this system.

In England and Wales, local councils issue business rates bills once a year, and this is usually in February or March. These bills cover the tax year to come. The money collected helps to fund local services. Properties in Scotland and Northern Ireland follow different systems.

Now, there are some buildings that are exceptions to this, such as with buildings used for agriculture or the care of disabled people that won’t be charged. In cases where the use is unclear, such as with stables or live-work spaces, the Valuation Office Agency can help confirm if business rates or council tax should be paid.

 

How Are Business Rates Worked Out?

 

The amount paid depends on the property’s rateable value. This is set by the VOA and is based on what it would cost to rent the property on the open market as of 1 April 2021. Revaluation happens every few years to keep the figures in line with changes in the property market. The latest revaluation took effect on 1 April 2023.

The VOA uses rental information to help calculate rateable values. This can include floor area, facilities, or even what nearby properties pay. Businesses can check their valuation through a VOA online account. If something looks off, they can submit a correction or challenge.

Business rates do not always change after a revaluation. This is because multipliers, which are used to convert rateable value into actual tax, are also adjusted at the same time.

 

Who Has To Pay And Who Does Not?

 

In general, if a property is used for business, rates must be paid. This includes when only part of the building is used commercially. For example, someone running a shop from the ground floor of their house would still be charged.

Some home-based businesses are usually not affected. For instance, using a spare bedroom as an office or selling items by post would not lead to a business rates bill. But if the home is changed in a way that clearly supports commercial use, such as turning a garage into a salon, the owner might have to pay.

Holiday lets also count. In England, a self-catering property must be available to rent for at least 140 nights and actually let for 70 to qualify. In Wales, the rules are stricter, requiring 252 available nights and 182 actual bookings.

 

Can The Amount Be Lowered?

 

Local councils can offer help in the form of business rates relief. There are different types depending on the property and its use.

Small businesses with rateable values under certain thresholds can get a discount. Retail, hospitality, and leisure properties may also qualify for relief. Transitional relief is sometimes available if a business faces a sharp increase due to revaluation.

These reliefs are not automatic in every case as aome need to be applied for directly. Businesses should check with their council to see what help is available to them.

 

What Happens Where There’s Changes?

 

If a business moves, merges buildings, changes how the space is used, or lets out part of the property, they must inform the VOA. The same applies when something happens nearby that affects the business, such as major roadworks or flooding. Reporting these changes can stop future disputes or backdated charges.

Businesses can manage their rates themselves using a business rates valuation account. Through this, they can make corrections, view communications, and monitor what’s happening with their property’s valuation.

 

 

What If Someone Wants Help With Their Rates?

 

It is legal to use an agent or rating surveyor to help manage business rates. Some people find this useful when dealing with appeals, revaluations or relief applications.

The VOA advises choosing agents carefully. Their new guide, published in June, puts it that although most agents are reputable, a few operate dishonestly. Some promise large savings but use false data, which can lead to penalties for the business owner.

In order to stay safe, the VOA advises checking online reviews, speaking with other local businesses, and asking if the agent is part of a professional body such as the Royal Institution of Chartered Surveyors, Rating Surveyors’ Association, or Institute of Revenues, Rating and Valuation… Being a member of one of these bodies means the agent must follow a code of conduct.

The guide also speaks on how important reading contracts in full before signing is… Business owners should check fees, contract length, and whether the agent is using their correct legal name.

 

Are There Risks To Using A Agent?

 

There are cases where agents have submitted poor quality or misleading information through the VOA’s online services, which can be used for free. In these cases, the business owner may be forced to pay higher rates or face penalties. Even when an agent is managing the process, the business owner is still legally responsible for the final result.

Agents should never ask for large sums of money upfront or use high pressure tactics to get contracts signed. Anyone unsure about an agent’s behaviour should report them to the VOA using the contact email [email protected].

To appoint an agent, the business owner must first set up their own business rates valuation account and then use a code to authorise the agent. Account login details should never be shared.

Once an agent is appointed, the account can still be used to track what they are doing. It is good practice to check the account at least once a year to confirm everything is still in order.

 

What About Pubs And Similar Businesses?

 

For pubs and licensed premises, the VOA uses a slightly different method. The rateable value is based on expected turnover, instead of just building size. This method, called fair maintainable turnover, looks at what the business could make if it were run in a reasonably efficient way.

Details used for the calculation can include rent paid, location, type of pub, services like food or sport broadcasts, and income from things like accommodation. These numbers are compared with similar pubs in the area.

Some pubs can get relief too, so, if a business is the only pub in a rural area or a small venue serving food, it may qualify for a reduced bill.

 

Where Should Businesses Get Help?

 

For questions about the rates bill, payment schedules or relief, businesses should contact their local council. For valuation questions, corrections or general enquiries, they should contact the VOA.

Help can also be found with approved agents, as long as they follow the VOA’s standards and are open about costs and services.