What are business rates in the UK?

Business rates are a tax charged in the UK on non-domestic properties, such as offices, shops, factories, and warehouses. They turn out to be a crucial source of revenue for councils, which helps finance local services such as education, waste collection, and infrastructure maintenance. Essentially, business rates are the commercial cousin of council tax on residential properties.

The amount payable by an organization is based upon the rateable value, assessed by the Valuation Office Agency (VOA). The rateable value includes an estimate of the yearly rent that may be realized on the open market for a property. Once the rateable value is established, it is multiplied by a multiplier, set annually by the government to take into consideration inflation and other economic factors. There are two multipliers: the standard multiplier and the small business multiplier; the latter has a lower rate for eligible businesses.

Businesses can be entitled to reliefs, which come off the amount of rates payable. The most usual reliefs are:

• Small Business Rate Relief (SBRR) on properties with a low rateable value.
• Charitable Rate Relief for charities.
• Rural Rate Relief for premises in sparsely populated areas.
• Empty Property Relief for unoccupied premises under certain conditions.

The government engages in periodic revaluation of properties to ensure that the system reflects the current market. The most recent revaluation came into effect in 2023.

Business rates are a considerable cost of operation for many companies. Businesses are encouraged to explore potential reliefs and exemptions to manage their financial obligations effectively. Consulting with a professional or using government tools to check eligibility for reliefs can provide savings and ensure compliance.