Are you a CEO, financial manager or C suite executive looking to keep up with all the complexities of UK business rates? If so, you’ve come to the right place! Our guide can equip decision-makers with a thorough understanding of business rate changes in 2023. Whether you’re just starting out as an entrepreneur or need help determining how business rates could impact your future office space costs - this guy has the answers!
An Introduction to Business Rates
What are business rates?
Business rates are taxes that are paid on non-domestic properties, such as shops, offices, and warehouses. Business rates are collected by local authorities and are channelled into local services (in a similar way to council tax). The rate you pay depends on the value of your property and the area that it's located in. While business rates can seem daunting at first, it's important to familiarise yourself with them to avoid any unexpected surprises and ensure you know exactly how much they will impact the monthly costs you have to pay for office space (or other commercial property).
Which properties are business rates charged on?
Most non-domestic properties, used for business purposes for example:
- Offices
- Factories
- Shops
- Holiday rental homes or guest houses
- Pubs
- Warehouses
There are certain types of properties that are exempt from business rates, e.g. Farm buildings, see HMRC's full list of exempted buildings. However, unfortunately, these exemptions do not normally apply to office spaces.
Do you have to pay business rates if you rent an office?
If you opt for a fully serviced, "all-inclusive" office contract then business rates will normally be included in the rental cost each month. With conventional office space business rates will be chargeable on top of the rental cost.
It is very important when comparing different office spaces that you understand which costs are covered in the rental amount. At Tally Workspace we use a cost comparison table which lays out the different office costs to ensure you are 100% clear on what is included and excluded so that you can be sure that you are making the best office space decision for your budget.
Who pays business rates the tenant or the landlord?
The occupier of a property is responsible for paying business rates. In some cases, the landlord will include business rates in the monthly rental amount. However, it is important to note that the bill will still be to the occupier and if unpaid the action will be against the occupier not the landlord. If you are a tenant, you should therefore always make sure to double-check whether business rates are included in your lease.
How much will Business Rates Cost?
How much are business rates?
Business rates are the rateable value of your property (this is supposed to represent a year's rent) x the multiplier (currently 51.2 pence for properties with rateable values over £51,000 and 49.9 pence for properties with rateable values less than £51,000). Less any deductions or reliefs (e.g. small business rate relief).
How are business rates calculated?
The amount you pay is based on the rateable value of your property - this is determined by the government's Valuation Office Agency. The rateable value is then multiplied by the "multiplier" - this is the amount set each year by the government, and is designed to cover the overall cost of business rates in the UK. However, depending on your location and the type of business you run, you may be eligible for discounts, reliefs or exemptions (see what business rate reliefs are available below).
What is the rateable value of a property?
Rateable values are set by the Valuation Office Agency and are supposed to represent the annual rent of a property. Therefore, a property's rateable value will change as the property market changes. All rateable values are based on market values on a single date - the next revaluation will come into effect on 1 April 2023.
Overview of the business rate calculation:
HMRC has a handy tool where you can look up the rateable value of your property. You can also see
2. Look up the "multiplier" for your property
For 2023 to 2024:
2. Look up the "multiplier" for your property
For 2023 to 2024:
- Multiplier for properties with a rateable value over £51,000 = 51.2 pence
- Multiplier for properties with a rateable value less than £51,000 = 49.9 pence
3. Multiply the rateable value by the multiplier. This will be the amount payable before rate relief.
4. Deduct any business rate relief
4. Deduct any business rate relief
Example Business Rates calculation 2023
Sally's business property has a rateable value of £60,000 she applies the 2022-2023 standard multiplier (51.2 pence) because her rateable value is greater than £51,000
- Rateable value = £60,000 (Post code was entered into the HMRC rateable value tool)
- Standard multiplier = 51.2 pence (taken from multiplier table)
- Tax payable = £60,000 (rateable value) x £0.512 pence (multiplier) = £30,720 (business rates payable)
- Sally has no deductions from this as she is not eligible for business rate relief.
Paying Business Rates
Timing of business rate payments
Local councils issue business rates bills in February or March each year to cover the amount owed for the following tax year. The amount is shown on the bill and is calculated as rateable value x multiplier less any reliefs or reductions. The bill covers charges for the next year so it is essentially a prepayment.
Business rate bills are paid on a 10-month cycle but there are regulations in place which allow businesses to request payments to be made in 12 monthly instalments.
Business rate bills are paid on a 10-month cycle but there are regulations in place which allow businesses to request payments to be made in 12 monthly instalments.
What Business Rate Reliefs are available?
Small Business rates relief
The most common form of relief for small businesses is small business rate relief this is designed to reduce or remove business rates for smaller companies. As a result, if your company has a rateable value of less than £12,000 then you will be exempt from business rates. And if your business' rateable value is between £12,000 and £15,000, you may be eligible for a small business rate relief, which could significantly reduce the amount you need to pay. However, if your business has a rateable value above £15,000, you'll be required to pay business rates. But don't worry, there are options available to make sure you're not paying more than you need to. So if you're unsure of your company's rateable value or if you qualify for any relief, it's always best to reach out to your local council for guidance.
Enterprise Zone Relief
Another exemption is for businesses located in Enterprise Zones, which offer reduced business rates and other benefits to encourage economic growth in specific areas. It's worth doing your research and working with a professional to ensure you're taking advantage of any exemptions that apply to your business. Councils work out how much relief is applicable to each property and businesses can get relief of up to £55,000 a year over a 5-year period i.e. up to £275,000.
There are 48 Enterprise zones in the UK that focus on different business sectors. For a full list of different zones see this handy Enterprise zone map.
It is worth noting that to qualify for a Government-backed business rates discount for new Zones (which started in April 2016 or April 2017), businesses need to have located to the Zone before March 2021 or March 2022.
Transitional Relief
Transitional relief is there to limit how much rate bills can increase in a single year. It means that changes are phased in over time so you should not have to pay a much larger amount than you have previously.
Charitable rate relief
Charities can apply for charitable rate relief of up to 80% if a property is used for charitable purposes. Non-profit organisations can also receive discretionary relief so it is worth contacting your local council to see if you are eligible.
Other business rate reliefs
There are a number of other reliefs available, including:
- Rural rate relief
- Exempted buildings and empty buildings relief
- Hardship relief
- Transitional relief
- Retail, hospitality and leisure relief
- Local newspaper relief
- COVID-19 additional relief fund
- Nurseries discount
The HMRC has a business rates relief section which details all of the available reliefs. However, if you are unsure which apply we would recommend contacting your local council who will be able to advise on available reliefs.
Business Rate Disputes
Can I appeal my business rates bill?
As a business owner, you may find yourself in a situation where you believe the rateable value assessment of your property is incorrect. Fortunately, there are options available for challenging or appealing these assessments. The first step is to gather evidence regarding the value of your property, such as recent sales or rental values of similar properties in the area. It's also important to have a clear understanding of the valuation process and the factors that are taken into consideration. You can then submit a formal appeal or challenge to the Valuation Office Agency. While the process may seem daunting, it's important to remember that you have the right to question the assessment and seek a fair outcome. With the right information and approach, you can successfully appeal or challenge the rateable value assessment of your business property.
Are business rates payable on vacant office space?
Business rates are normally payable even if a property is unoccupied - for the first 3 months you do not have to pay business rates but after this period most businesses pay full business rates. It is your responsibility to contact your local council and notify them if your property is vacant.
FAQs on Business Rates
Are business rates and council tax the same?
Business rates and council tax are very similar but business rates are payable on non-domestic properties whilst council tax is payable on domestic properties.
Are business rates paid monthly?
Business rates are automatically payable on a 10-monthly cycle. However, there is a government regulation that allows ratepayers to be able to request from their local authority to make payment through 12 monthly instalments.
Are business rates increasing?
Business rates multipliers will be frozen in 2023-2024 at 49.9 pence and 51.2 pence but rateable values of properties will be re-assessed on the 1st of April 2023. To prevent large increases in business rates the government has a "transitional relief scheme" which is aimed at phasing bill increases in gradually.
Are business rates exempt from VAT?
Yes, business rates are outside the scope of UK VAT.
Where should I go for advice on business rates?
You do not need a representative to dispute your rateable value or bill. However, if you are seeking advice members of the Royal Institution of Chartered Surveyors (RICS) are a good place to start as they are qualified in the area.
