What are business rates?
Business rates, also known as non-domestic rates, are a tax payable on commercial properties in the UK. Business rates are paid by the occupiers of commercial properties. On a rented property, the tenant is responsible for paying business rates, while when purchased, it is the buyer’s responsibility to pay the business rates.
Calculating business rates
Business rates are calculated using the rateable value and the multiplier, which is set by the VOA (Valuation Office Agency) annually.
2019/2020 Business rates multiplier
Depending on the size and value of the property and where it is located, different sets of multipliers, also known as UBR (Uniform Business Rates) are used. You can find out which multiplier will apply to your commercial property using the table below.
England & Wales Business Rates Multiplier Table
Since 2017/2018, the small business multiplier is used for properties with a rateable value of under £51,000 to calculate business rates all across England.
In Wales, there is only one multiplier used to calculate business rates for all commercial properties regardless of the rateable value.
To calculate the 2019/2020 business rates for a commercial property in England, which has a rateable value of £20,000:
£20,000 (RV) x 0.491 (Multiplier) = £9,820 (Business rates – before any reliefs applied)
Business rates reliefs
There are a number of reliefs to reduce the amount of business rates payable.
Small business rate relief
If you occupy a commercial property with a rateable value of under £15,000, you may be eligible to claim small business rate relief.
For any properties with a rateable value of under £12,000, a discount of 100% will be applied, meaning no rates will be payable. If you rent or buy a property that has a rateable value of between £12,001 and £15,000, the reduction rates will be applied on a sliding scale from 100% to 0%. See table below.
Small Business Rate Relief Reduction Rate Table
To calculate business rates for a property with a rateable value between £15,000 and £51,000 in England (including the City of London), the small business multiplier will still be used.
If you have multiple properties, you have to meet the following criteria in order to keep receiving small business rate relief on the first property.
- An overall rateable value of all your properties does not exceed £20,000 in England. (£28,000 in London)
- Each additional property does not have a rateable value exceeding £2,900.
Rural rate relief
If you decide to occupy certain types of commercial property in a rural area where a population does not exceed 3,000, you may be eligible for rural rate relief. The following properties will be entitled to 100% business rates relief.
- The area’s only post office, village food shop or general store with a rateable value under £8,500.
- The area’s only public house premises or petrol filling station with a rateable value under £12,500.
Enterprise zone business rates relief
As part of the government’s 2011 budget, Enterprise zones were introduced to encourage new businesses to grow across the country. For new enterprise zones that established in April 2016, you will need to be located to the zone before March 2021 to be eligible for business rates discounts.
You could get up to 100% business rate relief worth up to £55,000 a year for five years. To see a list of enterprise zones in the UK, click here.
Pub business rates relief
If you occupy a pub in England that does not exceed a rateable value of £100,000, you will be eligible for a discount of £1,000 on your business rates.
Hardship rate relief
Hardship relief is designed to help the taxpayers who would suffer if no relief was granted. You will need to apply for hardship relief through your local authority.
Business rates exemptions
There are other certain circumstances where business rates are not payable.
- Empty properties – Up to three months (six months for industrial properties)
- Agricultural land and buildings
- Properties that are used as places of worship
- Properties that are used to train disabled people
Rateable value revaluation for commercial properties, which is carried out by the VOA, happens typically every five years. However, the most recent revaluation took place at the beginning of April 2017 following missing the 2015 revaluation.
It is always possible to make an appeal if you believe the valuation is incorrect. Remember, you will still continue to pay your business rates until the appeal decision has been made. It may be worthwhile seeking expert advice from professional business rates consultancy.
Business rates in Scotland
The main differences of how business rates are handled in Scotland from England are the multipliers used and the reliefs.
Multipliers in Scotland are also known as poundage rate and NDR (Non-Domestic Rats per pound). The table below shows the NDR for 2019/2020.
Scotland Business Rates Poundage Rate
There are several business rates relief types available in Scotland
- Clubs practising a sport recognised by SportScotland
- Small business bonus scheme
- Disabled relief
- Fresh start relief
- New start relief
- Renewable energy generation relief
- Rural rate relief
- Charitable rate relief
- Enterprise area relief