Understanding business rates in the UK
Find out everything you need to know about paying business rates in the UK in this helpful guide.
Key points
Business rates are a tax on properties used for business activities in the UK, supporting local services like rubbish collection and road maintenance
The rateable value of a property, determined by the Valuation Office Agency, is multiplied by a government-set multiplier to calculate business rates
Payment methods for business rates include direct debit, online, or by post, with options to manage accounts and track payments through local council websites
What are business rates?
Business rates are a tax on properties used for business activities in the UK. This tax supports local services that benefit the community. Properties such as shops, offices, pubs, and warehouses are typically liable for business rates.
The funds from these rates help maintain essential services. These include rubbish collection, road maintenance, and local policing. Such contributions ensure the effective upkeep of local infrastructures and services.
How are business rates calculated?
Business rates are determined by the Valuation Office Agency (VOA). This agency assesses each non-domestic property to assign a 'rateable value.' This value determines the business rates you will pay.
The 'rateable value' is an estimate of the annual rent the property could achieve on the open market at a standard valuation date. Factors such as the property's size, location, and usage influence this value.
After establishing the rateable value, the 'multiplier' is applied. This amount, set annually by the government in pence, is multiplied by your rateable value to calculate your business rates. This figure is adjusted yearly to reflect inflation changes, ensuring stable revenue from business rates.
Who has to pay business rates?
Any business that is classed as a non-domestic property has to pay business rates in the UK. This includes shops, offices, pubs, and warehouses. Essentially, if you manage a space for commercial activities, you're likely liable for business rates.
Some entities, like small businesses, may receive reliefs or exemptions. This can significantly reduce their payable amount. For example, properties used for training or welfare of disabled people are usually exempt.
The structure of your business also affects your liability. Sole traders, partnerships, and limited companies each have different implications under the business rates system. This affects how much you owe and when.
How much could my business rate be?
This will depend on certain factors, including:
Property value: The rateable value of your property, which is an estimate of its open market rental value at a specific date
Local council rates: Each local council sets a multiplier, which is applied to your property's rateable value. This multiplier changes annually
Transitional relief: This may apply if the value of your property changes significantly at revaluation
The impact of location and property type on business rates is also significant:
High street shops: Properties in prime locations often face higher rates due to their increased market value
Industrial units: These might have lower rates compared to retail locations, reflecting differences in market value and usage
To estimate your business rates, consider using online calculators and tools provided by government websites and commercial tools that also consider factors like transitional relief and small business rate relief.
How do I pay business rates?
Here is how to pay your business rates:
Payment methods
You can pay business rates through direct debit, online, or by post. Each method has its benefits. Direct debit automates payments, ensuring deadlines are met without fail.
Online payments offer flexibility, allowing payments at any time from any location. Postal payments provide a tangible proof of payment, preferred by some for record-keeping.
Setting up payments
Setting up direct debit involves providing your bank details to the local council. This can be done via their website or by phone. To make online payments, visit the council's payment portal.
You will need to enter your payment details. For postal payments, verify the correct address and payment details with your local council. This ensures your payment is sent to the right place.
Managing accounts
Most councils provide online services to manage your accounts. These services allow you to track payments and check due dates easily.
