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UK Business Rates
As a UK business owner or tenant, understanding UK business rates is essential for financial planning and compliance. This comprehensive guide will cover everything from business rates to how they are calculated, with examples, tables, and more. We will also address common questions about VAT on business rates and available reliefs.
What Are Business Rates?
Business rates are a tax on non-domestic properties in the UK, such as offices, shops, warehouses, and factories. They are similar to council tax but apply to commercial properties. The money collected from business rates helps fund local services, including fire and police services.
Business rates apply to most commercial properties. However, some properties may qualify for business rates relief, which we’ll explore in detail later.
Which Properties Are Business Rates Charged On?
Business rates are charged on properties that are used for non-domestic purposes. This includes:
- Offices
- Shops
- Warehouses
- Pubs
- Factories
If your property is used solely for business activities, you are liable to pay Business rates England. However, if the property is used for both domestic and commercial purposes, like a flat above a shop, you may have to pay both business rates and council tax.
Do You Have to Pay Business Rates if You Rent an Office?
Yes, if you rent an office, you are typically required to pay business rates. In most cases, tenants are responsible for covering the business rates on the commercial property they occupy. However, this can vary depending on the terms outlined in the lease agreement. Some landlords may include business rates in the rent, but this is less common. It’s important to review your rental contract carefully to determine whether you’re directly responsible for business rates or if they are incorporated into your overall rent. Additionally, if you’re a small business, you may qualify for Small Business Rates Relief, which can reduce or eliminate the amount you charge.
Who Pays Business Rates:
In most situations, the tenant pays the Commercial rates. However, some landlords may include business rates in the rental charge, so it’s important to review the rental agreement. If the property is vacant, landlords may become liable for the rates, unless the property qualifies for certain reliefs.
How Much Are Business Rates?
The cost of business rates depends on the rateable value of the property and the business rates multiplier, set by the government each year. In 2024, the standard multiplier for properties in England is anticipated to be around 51.2p, but this figure can vary depending on your property’s location and size.
How Are Business Rates Calculated?
Business rates are calculated by multiplying the rateable value of a property by the business rates multiplier. The rateable value is an estimate of the property’s open market rental value on a specified date, typically reassessed every five years.
What Is the Rateable Value of a Property?
The rateable value is determined by the Valuation Office Agency (VOA) and is based on the market rental value of the property. For example, if the VOA determines your property has a rental value of £20,000, this figure becomes the rateable value used to calculate your business rates.
Overview of the Business Rate Calculation:
- Find the rateable value of your property.
- Multiply this value by the business rates multiplier for your area.
- Apply any business rate reliefs, if eligible.
Example Business Rates Calculation for 2024:
Let’s say your office in Birmingham has a rateable value of £30,000 and the multiplier is set at 51.2p. Here’s how the calculation would work:
| Property | Rateable Value | Multiplier | Calculation | Business Rates |
|---|---|---|---|---|
| Office in Birmingham | £30,000 | 51.2p | £30,000 x 0.512 | £15,360 |
In this case, the business rates payable for 2024 would be £15,360 before applying any reliefs.
Timing of Business Rate Payments
Business rates are typically paid annually, but most councils allow monthly instalments. Payments are usually due on the 1st of each month over 10 or 12 months. It’s best to check with your local authority to confirm payment arrangements.
What Business Rate Reliefs Are Available?
Several reliefs are available to reduce the business rates you pay. Below are the key reliefs to consider:
Small Business Rates Relief
If your property’s rateable value is less than £15,000, you may qualify for Small Business Rates Relief (SBRR). For properties with a rateable value below £12,000, you can receive 100% relief, meaning you won’t have to pay any business rates.
Enterprise Zone Relief
Businesses operating in designated Enterprise Zones may be eligible for additional relief, which can last up to five years. This is part of the government’s initiative to encourage investment in underdeveloped areas.
Transitional Relief
Transitional relief is designed to phase in any significant increases in business rates over a five-year period following a revaluation. This helps businesses adjust to changes without experiencing an immediate financial burden.
Charitable Rate Relief
Charities and community amateur sports clubs can apply for charitable rate relief, which can reduce business rates by up to 80%.
Other Business Rate Reliefs
Depending on your circumstances, you may be eligible for other reliefs, such as rural rate relief or hardship relief, which are granted on a case-by-case basis by local councils.
Can I Appeal My Business Rates Bill?
Yes, you can appeal your business rates bill if you believe your property’s rateable value is incorrect. This is done through the Valuation Office Agency, but be sure to have supporting evidence for your claim.
Are Business Rates Payable on Vacant Office Space?
Yes, business rates are payable on vacant office space in most cases. However, there is usually a three-month exemption period during which no business rates are charged after the property becomes vacant. For certain types of properties, like industrial properties, this exemption can extend to six months. After the exemption period, full business rates apply unless the property qualifies for additional reliefs, such as being a listed building or having a very low rateable value. Landlords are typically responsible for paying business rates on empty properties.
Conclusion
Understanding UK business rates is crucial for managing your business’s financial obligations. Whether you are renting an office, owning commercial property, or looking to reduce costs, knowing how business rates are calculated and what reliefs are available can save you a significant amount of money. If you’re unsure, always consult a professional to help navigate business rates in your specific area, such as Birmingham or Liverpool, where rates might vary.
If you’re wondering how to avoid business rates or curious about VAT on business rates, the information here should have provided a comprehensive overview. Keep an eye on updates, especially as business rates may increase in the coming years.
Are Business Rates and Council Tax the Same?
No, business rates apply to non-domestic properties, while council tax applies to residential properties. If a property is used for both domestic and commercial purposes, both taxes may apply.
Are Business Rates Paid Monthly?
Yes, business rates can be paid monthly. Most local authorities offer the option to spread payments over 10 or 12 months.
Are Business Rates Increasing?
Business rates are reviewed each year, and the rates are likely to increase due to inflation and revaluations. Businesses should keep an eye on updates from the government regarding any changes for 2024.
Are Business Rates Exempt from VAT?
No, business rates are exempt from VAT. Therefore, you won’t need to include VAT when calculating or paying your business rates.
However, if you need to calculate VAT on any additional services related to business rates, ensure you account for VAT accordingly.
Is There VAT on Business Rates UK?
In the UK, business rates are exempt from VAT. This means that when you pay your business rates to your local council, you do not need to account for or add VAT to the payment. Business rates are calculated based on the rateable value of your property and the business rates multiplier, and VAT does not factor into this calculation.
How to Calculate VAT on Business Rates
As business rates are exempt from VAT, you do not need to calculate VAT on the rates themselves. However, if you’re paying for services associated with business rates, such as professional advice or property management, these services may be subject to VAT at the standard rate of 20%. To calculate VAT on such services, simply multiply the service cost by 0.20. For instance, if a service costs £500, the VAT would be £500 x 0.20 = £100, making the total payable £600.
Is There VAT on Business Rates?
No, there is no VAT on business rates in the UK. Business rates are a tax levied on non-domestic properties and are collected by local councils without any VAT component.
How Do I Calculate Business Rates?
To calculate your business rates, multiply the rateable value of your property by the business rates multiplier. For 2024, the multiplier is expected to be around 51.2p for properties in England. For example, if your property has a rateable value of £40,000, the business rates payable would be £40,000 x 0.512 = £20,480. You can also apply any reliefs that your property may qualify for to reduce this amount.
Find and Check Your Business Rates?
You can find and check your business rates by visiting the Valuation Office Agency (VOA) website. By entering your property’s address or postcode, you can view the rateable value assigned to your property.
How Much Business Rates Do I Pay?
The amount of business rates you pay is determined by the rateable value of your property and the business rates multiplier. For instance, if your property’s rateable value is £100,000 and the multiplier is 51.2p, you would pay £100,000 x 0.512 = £51,200 per year. Reliefs, such as Small Business Rates Relief, could reduce this amount, depending on your eligibility.
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About the Author: Ahmad Raza
