NOTE: Due to the ongoing coronavirus outbreak, the government has made several announcements relating to temporary business rate reliefs.
UK business rates are a tax on non-domestic property. They vary depending where the premises are located. Business rates in England are different to those in Wales, Scotland and Northern Ireland
Business rates in the UK are largely unavoidable, but you should ensure you are taking advantage of any available reliefs.
UK business rates basics
UK business rates are worked out by multiplying the rateable value of commercial premises by the business rates multiplier.
For properties in England and Wales, the Valuation Office determines the rateable value used for business rates (equivalents exist in Scotland and Northern Ireland). New rateable values came into effect on 1 April 2017. The next revaluation is expected to come into effect on 1 April 2021.
There are different UK business rates multipliers for England, Wales, Scotland and Northern Ireland. There is a supplement for premises in London with a rateable value of £70,000 or more, and a special multiplier for premises in the City of London. The multiplier tends to increase each year, thereby increasing the amount of business rates payable.
Business rate relief for small businesses
In England, small business rate relief is given to businesses for an only or main property with a rateable value below £15,000. Businesses with a rateable value up to £12,000 receive 100% relief. The relief is then gradually reduced from 100% to 0% for properties with rateable values between £12,001 and £15,000.
If you have more than one business property, you only qualify for small business rate relief if each additional property has a rateable value below £2,900 and the total rateable value of all your properties is below £20,000 (£28,000 in London).
For 2020/21, businesses that qualify for small business rate relief may also be entitled to a £3,000 grant.
In England, if you are a small business but you don't qualify for small business rate relief, you may still benefit from reduced rates if your business premises have a rateable value below £51,000. In this case, your rates will be calculated using the lower small business multiplier instead of the standard multiplier.
In England, retail and some other businesses with a rateable value below £51,000 may also qualify for a retail discount for the 2019/20 and 2020/21 tax years:
- For 2019/20, small retail businesses can get a third off their business rates bill.
- For 2020/21, the discount is increased to 100%. As well as small retailers, small leisure and hospitality businesses also qualify for the discount.
- For 2020/21, pubs with a rateable value below £100,000 are entitled to a £5,000 business rates discount.
Other business rates reliefs
UK business rates relief schemes vary from country to country. In England, the reliefs include transitional rate relief, empty property relief and rural rate relief.
Transitional relief cushions the impact of rates revaluation. The relief limits the amount by which business rates can increase (or decrease) from one year to the next if there has been a significant change in your rateable value.
Empty property relief exempts empty properties from business rates for the first three months after they become vacant. Longer periods apply to some properties including industrial premises (six months) and premises with a rateable value below £2,900 (until occupied).
Rural rate relief applies to some rural businesses - for example, the only remaining village shop, public house or petrol station. Businesses that qualify get 100% rate relief.
Rate relief of up to 100% is also available for charities and amateur community sports clubs. Local councils have the discretion to give relief to other types of non-profit organisations, and to businesses that are suffering hardship. You should contact your local council if you think you may be eligible.
Some buildings are exempted from business rates entirely. This includes some agricultural buildings, places of public religious worship and buildings used for the training or welfare of disabled people.
Business rates planning
For most UK businesses rates are simply another tax that must be paid, but there are circumstances where planning can reduce your bills.
If you think the rateable value has been wrongly assessed or if there have been changes to your premises, it may be worth appealing. Changes that can affect the rateable value of your premises include alterations, change of use or changes in the surrounding area. You can find more information on business rates appeals from the Valuation Office Agency. You may also want to take advice from a reputable rating agent.
If you expect to be responsible for empty commercial premises for a significant period, you may want to consider your options. For example, attracting a relatively short-term tenant at a low rent can allow you another three (or six) months’ empty rates relief after the tenant vacates the premises.
If you use part of your home as business premises, you may need to check whether UK business rates are payable. This is most likely to be the case if part of your home is used exclusively for business or adapted for business purposes.