5 common business rates myths debunked

15 May 2023, by Verity Editor

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As a business owner, you need to be aware of business rates. All businesses in the UK should understand business rates and be mindful of how their business rates bill is generated.

But like many taxes, business rates can be confusing. And when you’re busy running a small business, you have precious little time to spend on more paperwork and red tape.

If you operate a small business or own a property with a rateable company, you should know your rights and obligations regarding how to pay business rates and your rateable value, and how much you’ll likely owe. Small business rate relief can help offset the impact of your business rates, and there are other ways you may qualify for a business rates exemption.

Below, we’ll explain business rates, including small business rate relief for small business owners. We’ll debunk the misunderstandings that lead business owners to pay business rates incorrectly.

What are business rates?

Business rates, also called non-domestic rates, are a tax that local non-domestic (business) properties pay to help the local council provide essential services. There are different types of payment plans available; you can choose monthly, half yearly or annually and on a date that suits your budget best.

“Essential services” means things like water services, waste disposal, police and fire services, and waste disposal, which are vital for health and safety reasons.

Why do you have to pay business rates?

Businesses, even small businesses, contribute to business rates because the funds help keep your local community safe, clean, and a pleasant place to do business.

The good news is that, under business rates retention guidelines, your local council keeps almost all the business rates paid in your locality. That means your council has a direct incentive to introduce business-friendly laws that will boost economic growth for small businesses in your area – including yours!

What is a rateable value?

Local councils calculate business rates based on the total rateable value, and the rateable value is set by the Valuation Office Agency (VOA).

The Valuation Office Agency uses your property’s open market rental value to decide its rateable value (the VOA has provided a free tool to help you estimate your rateable value). The rateable value is then multiplied by a specific percentage based on your business’s value. Small businesses have a smaller multiplier as well as a smaller rateable value.

Myth 1: You’ll always get stuck with a large business rate bill

Businesses may often qualify for some form of business rates relief. For a small business, that may be small business rate relief (more on that below). For a company operating in a rural setting, you may qualify for rural rate relief.

Those who don’t qualify for any sort of relief must pay their business rates, but that doesn’t mean that all rates bills are accurate. In fact, 1 in 3 are said to be incorrect – meaning a third of UK businesses are overpaying. But with thoughtful attention to regulations and your rateable value, even a large bill could be eligible for reduction.

Myth 2: Working from home requires business rates

Some small businesses that operate from one’s home may be required to pay business rates. These types of companies would be those that operate from a portion of the house built for non-domestic purposes or businesses with customers calling to the home for services.

A good example of a small business that is required to pay rates would be a massage therapist. But if you operate an eCommerce business that ships parcels from home or work from a home office to which clients do not visit, you will likely qualify for a business rates exemption.

Myth 3: Small businesses pay the same business rate as large businesses

If you’re a small business, your first advantage is that your rateable value (RV) will be lower than a larger business. Also, that smaller RV will be multiplied by a smaller percentage than larger businesses.

This table shows the difference in the multiplier percentages:

Year Standard multiplier Small business multiplier
2023 to 2024 51.2p 49.9p
2022 to 2023 51.2p 49.9p
2021 to 2022 51.2p 49.9p
2020 to 2021 51.2p 49.9p
2019 to 2020 50.4p 49.1p
2018 to 2019 49.3p 49.0p
2017 to 2018 47.9p 46.6p

Suppose your business grows or the government increases the multiplier percentage. In that case, you will be allowed to slowly increase your payment rate so that you’re not faced with a bill that’s shockingly higher than the previous month’s.

But small business owners may qualify for small business rate relief as well. Small business rate relief applies to businesses that operate from only one property and have a rateable value of less than £15,000.

The small business rate relief is especially favourable for companies with a rateable value of £12,000 and under who will pay no rates at all. Those valued between £12,000 and £15,000 will pay business rates at a reduced percentage.

Myth 4: Empty rates are the same as business rates

One area of confusion is the difference between empty rates and business rates. If you own a non-domestic property, you must pay attention to business rates. Any property with a rateable value is fair game. But if your property is empty, you may be liable for empty rates.

Myth 5: Dealing with business rates is difficult

Business rates can be confusing, but they don’t have to be overwhelming. Working with rates experts can help you qualify for a lower rateable value and can help you find small business rate relief, both of which will bring down your rates bill.

If you want to skip the bureaucracy and reduce your business rates with the lowest possible bill and the least possible effort on your part, consider using expert business rates services. They’ll check your rates bill for free and inform you of any savings you could be missing out on.

As business rates change and new relief schemes become available, it pays to work with professionals who understand the landscape and closely monitor shifting legislation and eligibility criteria.

Excellent service. Josef was very patient and explained all my options clearly. Highly recommend

Rosie Lasry

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