What are business rates? A guide for small businesses

What are business rates?

Business rates are taxes designed to help fund services in your local authority. The government charges business rates on properties like offices, shops, pubs, and warehouses – most non-domestic properties will attract business rates.

They may also be charged where only part of a building is used for non-domestic purposes.

How much are business rates?

Business rates are calculated using a property’s ‘rateable value’. The rateable value is a property’s estimated value on the open market. The last revaluation, conducted by the Valuation Office Agency (VOA) and which came into effect on 1 April 2023, refers to values as of 1 April 2021. Revaluation usually happens every five years.

Ahead of the most recent revaluation, a transitional relief scheme was introduced to cap bill increases caused by changes in readable values. Bill increases for the smallest properties were capped at five per cent, while increases for medium-sized and larger properties were capped at 15 per cent and 30 per cent respectively.

On top of this, bill increases were capped at £600 a year from April 2023 if businesses lose their eligibility for small business rates relief as a result of revaluation.

It’s possible to estimate your business rates by multiplying your property’s rateable value by the relevant number – there’s more on this at the bottom of the article.

Business rates changes 2024-25

As part of the 2023 Autumn Statement, the government announced a range of business rates measures. From 1 April 2024:

• the small business multiplier will be frozen at 49.9p
• the standard multiplier will increase from 51.2p to 54.6p (in line with September’s’ inflation figure of 6.7 per cent)
• the 75 per cent business rates relief for retail, hospitality, and leisure has been extended for 2024-25 (up to a cap of £110,000 per business)

You can read more about Autumn Statement business rates changes on the government website.

Using the VOA business rates checker

The government has a tool you can use to check the VOA’s rateable value for your property.

This is a useful tool, because if you think that your rateable value is wrong, your business rates could be too.

Using the tool, you can request changes to property or valuation details, see the valuation details of other properties, and apply to change the rateable value.

You’ll need to use this tool if you want to estimate your business rates.

What is the small business rates relief?

Reliefs are available for some properties – the most useful for small firms is the small business rate relief. You can get this relief if your property has a rateable value of less than £15,000, and generally if your business only uses one property:

• full relief is available on properties with a rateable value of £12,000 or less
• for those between £12,001 and £15,000, relief goes down gradually from 100 per cent to zero per cent

If you’re a small business but you don’t qualify for small business rate relief, your bill will still be worked out using the lower small business multiplier (for properties with a rateable value below £51,000).

There are other business rates reliefs available, including the rural rate relief and charitable rate relief. You can read more about these on the government website.

Business rates and working from home

You won’t generally have to pay business rates if you use a small part of your home for business purposes (for example, if you use a room as an office).

But in some circumstances you’ll have to pay business rates on top of Council Tax – if, for example:

• your property’s split into domestic and business parts, for example in the case of a flat above a shop
• you sell things to people who visit the property
• you employ anyone at your property
• you’ve made changes to your home so you can run your business (like converting your garage)

If you’re not sure whether or not you should be paying business rates, you should contact the VOA.

Business rates calculator

If you want to estimate your business rates bill, you’ll need to find out your property’s rateable value.

With this you can find the correct multiplier, which will depend on the rateable value. Then, deduct any reliefs you’re entitled to.

You can use the government’s business rates calculator.

This article is a guide only – but for more help with business rates, the government says you can contact qualified surveyors. They list the Royal Institution of Chartered Surveyors (RICS), the Institute of Revenues, Rating and Valuation (IRRV) and the Rating Surveyors Association.

Do you have any unanswered questions about business rates? Let us know in the comments below.

More useful articles for small business owners

• Corporation tax: a guide for small businesses
• A guide to dividend tax and the dividend tax rate
• A guide to going self-employed in the UK
• Why do I need business insurance?