Preparing for the business rates rise and relief changes

For many businesses, the payment of business rates is already a considerable expense.

That cost is due to increase in Spring 2024 thanks to a combination of rising inflation and the end of rates’ relief for the retail and hospitality sector that was brought in over the pandemic. This week’s inflation figures mean that rates will rise by 6.7%.

The Federation for Small Businesses has called for small business rates relief to be extended, saying that the current business rates system is not fit for purpose.

It also wants the government to more than double the threshold under which a property does not attract business rates, from a rateable value of £12,000 to at least £25,000.

It is wise to be prepared for the cost of business rates but there are also things you can do to see if you can bring them down yourself, or with the help of your landlord.

Who pays business rates?

Business rates are paid by the occupier of any non-domestic property. Most people who work from home don’t have to pay them, but if you employ others to work at your property or clients visit your property then you may have to pay.

How much are they?

Business rates are based on the ‘rateable value’ of your premises. This means the annual rent that the landlord would have received for it on the open market in April 2021. You can find yours (and see similar properties) on the government website at https://www.gov.uk/calculate-your-business-rates.

This is then multiplied by either 51.2p for larger businesses or 49.9p for smaller ones.

Does everyone pay this figure?

No. There are reliefs available for smaller businesses, and currently for some sectors after COVID. If you have only one property and it has a rateable value of £12,000 or less you won’t pay any business rates, while there is a gradual increase in the rates paid if the property has a value of between £12,000 and £15,000.

If you have more than one property the calculations are more confusing – there’s more here.

Currently, if you are using your property as a shop, hospitality or leisure premises, you receive 75% relief on business rates. This is due to finish in April, although the industry is lobbying for this to continue.

Other reliefs include hardship relief – where you can apply to have your rates reduced if the council believes that you will be in hardship if you pay them and transitional relief if your bill has risen by a large amount due to a property revaluation, which means your increases are phased in over time.

Why are reliefs changing?

One reason is inflation, which will push rate bills up by the CPI headline rate of inflation, 6.7%, in April. Another is that the relief for hospitality businesses and shops is due to end then, meaning some companies will face a double whammy unless this changes.

Is there anything I can do about it?

Challenge your rateable value

If you think your business rates bill is wrong, ask your landlord to challenge the rateable value of your property.

Abi Ribchester, who owns children’s clothing company Tutti Frutti Clothing, recently asked her landlord to do this. “It is a very small shop,” she says. After the revaluation, the rateable value dropped by £10,000, and her rates bill reduced “considerably”. She also qualifies for the current retail rent relief at 75%. “At the moment my rent is low and so rates, whilst frustrating, are manageable.”

There is more information on how to challenge rateable value here.

Check all the reliefs available to you

Not everyone is aware of the business rate reliefs that are available to them. Kate Greenhalgh, who runs online gift business A Year of Dates, found that by having a small retail element at her new premises, she was eligible for 75% rate relief for this year. “Because customers can come and buy from us, we are eligible. This was a huge benefit!” she says.

Although it isn’t clear whether any further relief will be available to the sector after the autumn statement, many small businesses hope there will still be a reduction for retail, even if it is smaller, so this may still be worth considering.

Other reliefs include those available to rural businesses – for example village shops – which are the only ones in the area, and transitional rate relief for those whose premises have been upvalued substantially, leaving them with higher bills.

Split if you can

Claire Goodliff, who runs three businesses, found an unusual way to bring down business rates. When launching Amazing Jane sportwear, she knew she needed warehouse space but it was too expensive with the rates.

However, the premises she found had three partitions to make separate space so she submitted plans to the Valuation Office online to split it into three business suites with a communal kitchen. Each of her businesses now operates out of a separate suite.

Because the rateable value for each suite is smaller, they qualify for the small business exemption.

Rosie Murray-West

Rosie Murray-West is a freelance journalist covering all aspects of personal finance, as well as business, property and economics. A former correspondent, columnist and deputy editor at The Telegraph, she now writes regularly for publications including the Times, Sunday Times, Observer, Metro, Mail on Sunday, and Moneywise magazine.