Business rates are a controversial tax, representing one of the largest overheads for many business owners.
The much-anticipated business rates review announced in March 2020 has so far been delayed four times, with the government’s response to the consultation on reform expected in autumn 2021.
While we await the outcome, here is some information that every business owner needs to know about business rates…
What are business rates?
Business rates are one of the UK’s oldest taxes, and are the tax paid for the right to occupy a commercial property. They are a way for those occupying non-domestic properties to contribute towards the cost of local authority services – the business equivalent of council tax.
Who sets business rates?
Business rates are set by the government’s Valuation Office who will calculate your business rates based on the property’s “rateable value”.
How much are business rates?
The rateable value set by the Valuation Office is based on the yearly rent the property could have been let for on a certain date specified in legislation. This same date is used when calculating the business rates for all properties.
This rateable value is not the amount of rent that you pay, but is used by councils to calculate your business rates bill. Typically, the business rates tax is equal to approximately 50% of the property’s annual rental value.
Do I need to pay business rates if I work from home?
If you run a business from your home, you won’t usually need to pay business rates if you are only using a small part of your home, for example using a bedroom as an office.
However, you may need to pay business rates as well as Council Tax if your property is part business and part domestic, such as an apartment above a shop. If you sell goods or services to people who visit your property, employ other people to work at your property, or have made changes to your home in order to run your business (for example a home salon) then you may also be liable to pay business rates.
To find out if you need to pay business rates, you should contact the Valuation Office Agency.
What is Small Business Rate Relief?
Small Business Rate Relief applies to those business who:
Are based in a property with a rateable value of less than £15,000, and/or are only using one property.
The level of relief depends on your property’s rateable value. With a rateable value of less than £12,000 you will receive 100% Small Business Rates Relief. For properties with a rateable value of between £12,001 – £15,000, the rate of relief will decrease gradually from 100% to 0%.
To apply for Small Business Rate Relief you need to apply to your local council.
If you have any questions about taxes involved in running your business, or would like advice on how to reduce your tax bill, feel free to get in touch with us here at Magpie Accountancy.