Business rates and working from home

Woman working from home

People are increasingly working flexibly from home and numbers have risen sharply since the pandemic. Increasing numbers of people are also running a side hustle from home. If you're running your business from home, you should bear in mind that business rates are payable on most commercial premises. So, will you be liable to business rates if you work from home?

If you work from home, you may become liable for business rates for the part of your home you use for work purposes. This is in addition to council tax which is payable on the domestic part of your home.

What business rates will I pay if I work from home?

Much will depend on the extent to which you use your home for work purposes and how frequently you work there. The Valuation Office (VOA) will consider factors such as:

  • how you operate your business
  • whether customers visit your home to buy from you or you post products to customers
  • whether you employ people to work for you from your home
  • if special modifications been made to the workspace to enable homeworking
  • if your premises are part commercial and part domestic - for example, if you live above your shop

If you have space which you occasionally use as a home office, you are unlikely to be affected by business rates - especially if that room also functions as a domestic space such as a spare bedroom. On the other hand, if you have a space that has been adapted specifically for work purposes (for instance, a garage that has been converted into a hairdressing salon) and its main function is related to your business or work activities, it is likely that it will be assessed for business rates. The VOA has produced some examples to illustrate when business rates might be payable.

The VOA will assess each case on its own merits and may decide they need to visit you to check your workspace before they make an assessment for business rates. If the VOA decides that the space is liable to business rates, they will only be payable on the non-domestic parts of you home. The rates will be calculated in the same way as other non-domestic properties.

If you are liable to rates and are self-employed, you can claim your business rates as an allowable expense in your self-assessment income tax return.

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