As a small business owner, one of the many expenses you may face is business rates. These rates are a tax on commercial properties that help fund local services such as schools, roads, and waste collection. Understanding how business rates work can help you budget more effectively and avoid any surprises when it comes to paying your bill. In this article, we will break down what business rates are, how they are calculated, and provide tips on how you can potentially reduce your business rates.
business rates, often referred to as non-domestic rates, are a type of tax that businesses in the UK must pay on their commercial properties. The amount you pay is based on the rateable value of your property, which is an estimate of its open market rental value as of a certain date. The valuation of your property is done by the Valuation Office Agency (VOA), and the rateable value is then used by your local council to calculate how much you owe in business rates.
The rateable value of your property is reassessed every five years to reflect changes in the property market. The most recent revaluation took place in 2017, and the next one is scheduled for 2023. It is important to note that business rates are not determined by your business’s profitability or turnover. Instead, they are based solely on the value of your property.
Once the rateable value of your property has been determined, your local council will apply a multiplier to calculate your business rates bill. The multiplier is set by the government each year and is referred to as the Uniform Business Rate (UBR). The UBR is the same across England, but different rates may apply in Wales and Scotland.
There are some exemptions and reliefs available that can help reduce the amount of business rates you need to pay. Small business rate relief, for example, is available to businesses with a rateable value below a certain threshold. This relief can significantly reduce your business rates bill or exempt you from paying altogether. Other reliefs include rural rate relief, charitable rate relief, and enterprise zone relief.
If you believe your rateable value is incorrect, you can challenge it with the VOA. This process is known as making a business rates appeal. You can appeal your rateable value if you believe it is too high compared to similar properties in the area, or if there have been physical changes to your property that affect its value. It is recommended to seek professional advice when making a business rates appeal to increase your chances of success.
As a small business owner, keeping your business rates as low as possible can help you save money and improve your cash flow. Here are some tips on how you can potentially reduce your business rates bill:
1. Check if you are eligible for any reliefs or exemptions: Make sure to explore all available reliefs and exemptions that your business may qualify for. Small business rate relief, in particular, can provide significant savings for eligible businesses.
2. Review your rateable value: If you believe your rateable value is incorrect, consider challenging it with the VOA. A lower rateable value will result in a lower business rates bill.
3. Consider sharing your property: If you have unused space in your property, consider renting it out to another business. This can help reduce your rateable value and potentially qualify you for small business rate relief.
4. Invest in energy-efficient improvements: Some local councils offer discounts on business rates for properties that are energy-efficient. Consider investing in improvements such as insulation, double glazing, or solar panels to potentially reduce your rates bill.
5. Negotiate with your landlord: If you rent your property, consider negotiating with your landlord to share the cost of business rates. Some landlords may be open to discussing a new arrangement that is more favorable to both parties.
By understanding how business rates work and exploring ways to reduce your rates bill, you can better manage this expense and allocate your resources more effectively. Remember to review your business rates regularly and seek professional advice when needed to ensure you are not overpaying. With careful planning and proactive management, you can minimize the impact of business rates on your small business and focus on growing your enterprise.