Business rates are a crucial aspect of running a small business in the UK. They are a form of tax that is paid by businesses to their local council, and they help to fund local services such as roads, schools, and waste collection. However, many small business owners are often confused about what business rates are, how much they are, and whether they are required to pay them. In this article, we will provide a comprehensive guide to business rates for small businesses in the UK, with insights from Sophie Attwood, a leading expert in the field from Colliers.
What are business rates?
Business rates, also known as non-domestic rates, are a tax that is paid by businesses to their local council. They are calculated based on the rateable value of a property, which is determined by the Valuation Office Agency (VOA). The rateable value is an estimate of the annual rent that a property could be let for on the open market, as of a specific date. This value is then multiplied by the business rates multiplier, which is set by the government each year, to determine the amount of business rates that a business is required to pay.
How much are business rates?
The amount of business rates that a business is required to pay depends on the rateable value of their property and the business rates multiplier set by the government. The current business rates multiplier for England and Wales is 51.2p, meaning that for every £1 of rateable value, a business will pay 51.2p in business rates. For example, if a business has a rateable value of £20,000, they will pay £10,240 in business rates for the year.
Does every small business have to pay business rates?
Not every small business is required to pay business rates. There are certain exemptions and reliefs available for small businesses, which can significantly reduce or even eliminate their business rates liability. These include:
1. Small business rate relief (SBRR) – This relief is available for businesses with a rateable value of less than £15,000. Eligible businesses can receive a discount of up to 100% on their business rates.
2. Rural rate relief – This relief is available for businesses in rural areas with a population of less than 3,000. Eligible businesses can receive a discount of up to 100% on their business rates.
3. Charitable rate relief – This relief is available for registered charities and non-profit organizations. Eligible businesses can receive a discount of up to 80% on their business rates.
4. Enterprise zone relief – This relief is available for businesses located in designated enterprise zones. Eligible businesses can receive a discount of up to 100% on their business rates for up to 5 years.
5. Retail discount – This relief is available for retail businesses with a rateable value of less than £51,000. Eligible businesses can receive a discount of up to 50% on their business rates.
It is important for small business owners to check with their local council to see if they are eligible for any of these reliefs.
Why are business rates important for small businesses?
Business rates are an essential source of revenue for local councils, and they help to fund vital services that are necessary for the smooth running of a community. However, for small businesses, business rates can be a significant financial burden, especially for those operating on a tight budget. Therefore, it is crucial for small business owners to understand their business rates liability and explore any available reliefs to reduce their costs.
In addition, business rates can also have an impact on the value of a property. Sophie Attwood explains, “Business rates are a significant factor in determining the value of a property. A high business rates liability can make a property less attractive to potential buyers or tenants, and it can also affect the rental value of a property.” Therefore, it is essential for small business owners to carefully consider their business rates liability when choosing a location for their business.
Final thoughts
In conclusion, business rates are a form of tax that is paid by businesses to their local council. They are calculated based on the rateable value of a property and the business rates multiplier set by the government. While business rates can be a significant financial burden for small businesses, there are various reliefs available that can help to reduce or eliminate their liability. It is crucial for small business owners to understand their business rates liability and explore any available
