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How to calculate your business rates

All you need to know about business rates payable and the impact for your start-up

In a similar way that residents pay council tax, businesses pay business rates to local authorities, which help finance local services.

Who pays business rates?

Business rates are charged on businesses that occupy non-domestic or commercial properties. The property occupier, either the owner or the leaseholder, pays the business rates.

If you use a building or part of a building for non-domestic purposes, the part used for business will require payment of business rates, take for example a shop with a residential flat above it.

Similarly, if you work from home, you may have to pay business rates on the section of your house that is used for work purposes. You’re more likely to have to pay business rates if a room is exclusively used for business, or if it has been adapted for work purposes.

Calculating your business rates

It’s worth knowing how to calculate your business rates yourself to ensure you’re paying the right amount. It is also useful to know if you want to plan your financial year ahead in a new property that you don’t yet know the business rates of or, if you want to know the business rates for a property you’re thinking of moving your business into.

To calculate your business rates you need to multiply the rateable value for your business with the ‘multiplier’, also known as ‘poundage’, set by government.

Rateable value is the value given on a premises by the Valuation Office Agency, which is based on its probable annual market rent. These values are reviewed every five years and take the size of the property and its usage into consideration, in addition different parts of the premises may be valued at different levels.

A multiplier is the number of pence per pound of rateable value that you’ll have to pay in business rates, before any relief or discounts are deducted. These are reviewed every year by the government in line with inflation.

How to:

1)   Search for your rateable value by postcode using this search option

2)   Find the correct ‘multiplier’ for the size of your business and location here

3)   Now multiply your rateable value by the correct ‘multiplier’

Example:

In England the standard multiplier for 2014-2015 is 48.2p. Say you are looking to move into a property that has a rateable value of £10,000, to calculate your business rates you would multiply the ‘multiplier’ by the rateable value – 48.2p x £10,000 = £4, 820. So the estimated business rates for your property would be £4,820.

Business rates are handled differently in Scotland and Northern Ireland and you can access the Scottish government’s business rates calculator here and the Northern Ireland calculator here.

How to pay your business rates bill

The council will normally send you a rates bill in March or April, and most councils will ask you to pay in equal monthly installments.

Make sure you tell your local council if you start up a new business or if you move premises, so they can charge you the right amount.

You can contact your local authority if you think your bill is incorrect. Likewise, if you are having cash flow problems and are finding it difficult to pay the bill, contact the local council because they may be able to change the amounts and dates of your payments to make things easier for your business.

Who doesn’t need to pay business rates?

There are certain buildings that are exempt from business rates. These are:

  • Farm buildings and land (excluding building used as offices or for business activities)
  • Buildings used for training or welfare of disabled people
  • Fish farms
  • Places of public religious worship]

Businesses that own empty property are exempt from empty property rates for the first three months that they are empty, while industrial or warehouse properties are exempt for the first six months. After these periods businesses that own empty property are liable to pay business rates in the normal way.

Useful resources

To find out whether you qualify for small business rates relief, visit our small business rates relief guide here.

Gov.uk – www.gov.uk/calculate-your-business-rates

Valuation Office Agency -  http://www.voa.gov.uk/

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