Understanding UK Business Rates for Commercial Properties

By : Nick Marr

Business rates are charged by the UK government on most commercial, non-domestic properties, including shops and offices, factories, warehouses, pubs, guesthouses and holiday rental properties. These are calculated slightly differently depending on whether the property is in England, Wales, Scotland or Northern Ireland. In most cases, you will receive an annual bill from your local council, and you may be eligible for several different forms of business rates relief.

Rateable value

 In England and Wales, business rates are worked out based on the property’s “rateable value”. All commercial properties will be given a rateable value every five years, based on an estimate by the Valuation Office Agency (VOA). The most recent revaluation was on 1 April 2017, and this was based on the open market rental value of properties as of 1 April 2015. The next revaluation will be on 1 April 2022.

Once the rateable value has been calculated, it is multiplied by one of several different multipliers that are set by the government – not the local council. These multipliers are also revised at each five-year revaluation. This means that even if your property’s rateable value goes up, your business rates may not increase as the multiplier may have changed in your favour.

The VOA may ask you for information about your property so that they can work out its rateable value as accurately as possible. If you think that your rates or the value is wrong, then you can appeal for them to be looked at again and corrected. If your property’s rateable value is less than £15,000, then you will not have to pay business rates.

Business rates relief

 As mentioned above, you may also be entitled to business rates relief. This may mean that you get a reduction to your bill, or it may mean that any changes due to revaluation are phased in gradually, or that you can pay in instalments rather than as one lump sum. If your premises are affected by “severe local disruption” – for example, flooding or major building work – then you could get a temporary reduction in your rates. You can get professional advice on business rates from a qualified rating surveyor such as RVA Surveyors.

Your rates could change if you make improvements to your property or merge multiple properties into one. Obviously, your business rates will be different if you move to a new premises. Changing the nature of your business or subletting part of the property could also make a difference to the rates that you have to pay. It’s important to report any changes as soon as they occur to avoid being landed with a hefty backdated bill, as well as to understand the implications of any alterations.

Working from home

 Self-employed individuals who work from home don’t generally have to pay business rates. There are exceptions, though – for instance, if your home is essentially a shop, or a pub, or any other form of business where people come and pay for goods or services in person. If you sell goods by mail order from your home, then you don’t generally have to pay business rates, unless you have converted part of your home to business premises such as a workshop. If you employ other people who work in your home (not domestic staff), then your home will likely be considered as business premises.

With pubs and the like, rateable value is based on “fair maintainable trade”, which is the annual level of trade that the business can be expected to achieve. The type of pub, its size, the area it is in, and the services it offers, such as if it serves food, shows sporting matches, and puts on live music or other events, are all taken into consideration.

With holiday homes, business rates are due on a property in England and Scotland if it is available to let for 140 days or more during the year. In Wales, it must also be actually let for 70 days of the year. The rateable value for a self-catering property is based on property type, size, location and “single bed space” – how many people can comfortably sleep there.

In Scotland, business rates are set by the local assessor, and the rateable value is used alongside a poundage rate set by the Scottish government. This is currently 48p in the pound, though properties with a rateable value of over £51,000 are charged a 2.6p supplement, bringing it up to 50.6p in the pound. For full details, check the appropriate government websites or speak to a qualified rating surveyor for advice.