Understanding and accurately estimating your business rates is crucial for effective financial planning and ensuring compliance with UK tax regulations. Business rates represent a significant expense for many businesses, and miscalculations can lead to unexpected financial burdens. This comprehensive guide will walk you through the process of estimating your business rates, explain the factors that influence these rates, and highlight available reliefs and exemptions that could reduce your liability.
Business rates are a tax levied on non-domestic properties in the UK, including shops, offices, pubs, warehouses, and factories. They contribute to funding local services and are typically charged to the occupiers of these properties. If you use a building or part of a building for business purposes, it's likely that you'll be required to pay business rates.
The first step in estimating your business rates is determining the rateable value of your property. This value is an estimate of the property's open market rental value on a specific date, assessed by the Valuation Office Agency (VOA). As of the latest revaluation effective from April 2023, the rateable values are based on rental values as of April 1, 2021.
To find your property's rateable value, you can use the VOA's online service. This value serves as the foundation for calculating your business rates.
Once you have the rateable value, the next component is the multiplier, also known as the Uniform Business Rate (UBR). The multiplier is set annually by the government and represents the number of pence per pound of rateable value that you will pay in business rates. There are two types of multipliers:
For the 2024 to 2025 tax year, the multipliers are:
To estimate your annual business rates:
Multiply the rateable value by the appropriate multiplier: This calculation gives you the gross amount before any reliefs or exemptions.
If your property's rateable value is £20,000 and you qualify for the small business multiplier:
£20,000 × 0.499 = £9,980
So, your estimated annual business rates would be £9,980 before any reliefs.
For a more precise calculation that includes all applicable reliefs and adjustments, try our Business Rates Calculator.
Several reliefs and exemptions can reduce your business rates liability:
If your property's rateable value is less than £15,000 and your business uses only one property, you may be eligible for small business rate relief. Properties with a rateable value of £12,000 or less may receive 100% relief, meaning no business rates are payable. For properties with a rateable value between £12,001 and £15,000, the relief tapers from 100% to 0%.
Businesses in rural areas with a population below 3,000 may be eligible for up to 100% relief if they are the only shop, post office, pub, or petrol station in the area and have a rateable value below certain thresholds. Learn more about rural rate relief.
Charities and community amateur sports clubs can apply for charitable rate relief of up to 80% if the property is used for charitable purposes. Local councils have the discretion to grant further relief on the remaining bill.
If your business rates change significantly due to a revaluation, transitional relief limits how much your bill can increase or decrease each year, phasing in the changes gradually. Eligibility and the amount of relief depend on factors such as the property's rateable value and the magnitude of the change.
For eligible properties in the retail, hospitality, and leisure sectors, a relief of 75% is available for the 2024 to 2025 tax year, up to a cash cap limit of £110,000 per business. This relief is set to reduce to 40% from the tax year 2025-26. Learn more about retail, hospitality, and leisure relief.
If you run a business from home, you may be liable for business rates on the portion of the property used for business purposes, especially if that area is used exclusively for business or if clients visit your home. However, if you use a small part of your home (e.g., a bedroom as an office), you typically won't be liable for business rates. It's advisable to contact the VOA to determine your specific liability.
If you believe your property's rateable value is incorrect, you have the right to challenge or appeal the valuation. The process involves:
By understanding business rates, utilizing available reliefs, and ensuring your valuation is correct, you can effectively manage your business expenses and ensure compliance with UK regulations.
Use our Business Rates Calculator to get a precise estimate of your business rates liability, including all applicable reliefs and exemptions.