How business rates are calculated: What your local VOA considers

15 May 2023, by Verity Editor

man writing notes and typing on calculator

Business rates are a necessary yet, let’s face it, annoying business tax that those who rent or own a commercial property must pay to keep the UK government happy.

But if you’ve just opened up a new business and are renting a commercial property to operate from, or you’ve recently bought a property for your business, then paying business rates might be a new concept to you.

You might be wondering how business rates are calculated, who has to pay them, how often, and for how much. These are all completely valid questions, but you don’t have to feel bogged down by business rates.

Our experts are here to help you understand what business rates are, how business rates are calculated, and so much more. Just keep reading!

What are business rates? Why do we need to pay them?

Business rates are a tax the UK government requires you to pay when you run your business from a commercial property you rent or own.

The UK government’s tax funds from business rates bills go towards developing your local area’s community, infrastructure, housing, transport, public amenities, and more.

The reason you need to pay business rates bills is that the council improving your local area contributes to the success of your business.

Why you need to calculate your business rates now

The last date to claim refunds on business rates bills is 31.03.23, and if you don’t claim your business rates tax refunds by then, you could miss out on thousands of pounds in tax savings!

The oncoming deadline means that it’s vital that you know what business rates you should be paying as soon as possible. This way, you can ensure you’re not paying too much and receive a tax rebate if needed.

When do I have to pay business rates bills?

Typically, you’ll get your business rates bill every February or March for the next tax year. But don’t worry; you don’t have to pay the full amount in one lump sum. The UK government will allow you to pay your business rates bill over 10 or 12 months.

How are business rates calculated? What is rateable value?

Your local valuation office agency (VOA) will calculate your business rates based on the rateable value of your commercial property/the property you are renting. Not sure what rateable value is?

Rateable value is the market value your local valuation office agency assigns to your property. The valuation office agency will determine this rateable value figure based on your property’s “rateable values.”

Rateable values include square footage, level of usage, and estimated market rent value.

To calculate how much you’ll pay for business rates as an estimation, you’ll need to find out the rateable value of your property and multiply it by one of two business rates multipliers:

  • One for small businesses with a rateable value of under £51,000 – which is currently 49.9 pence
  • One for larger corporations with a rateable more than £51,000 – which is currently 51.2 pence

So, for example:

If the rateable value of your commercial property is £20,000, you will multiply this by the 49.9 pence multiplier (£20,000 x £0.499 pence), meaning you would pay business rates of £9,980.

Please note that on the 1st of April every year, the UK government changes these multipliers based on current inflation rates.

The VOA will also consider factors that may affect your rates by making you eligible for rates tax relief or full exemptions. (More on that later.)

How do I calculate my property’s rateable value?

To calculate your property’s rateable value to select the correct business rates multiplier for your business premises and estimate your bills, you’ll need to use the UK government’s rateable value calculator tool.

All you have to do is enter your local postcode and follow the simple instructions. The tool will then give you an estimate of your commercial property’s rateable value.

If you’d like to learn more about business rates, check out our previous blog, “Business rates: All you need to know.”

4 factors that can affect your business rates bills

There are many factors your VOA will take into consideration when evaluating your rates bills. These factors can increase, decrease, or eliminate your bills.

#1 Business rates revaluations

In April 2023, the current multipliers will be assessed for calculating your business rates bills based on inflation. At this time, there will be a revaluation of your rateable value – increasing or decreasing your bill amount.

#2 Eligibility for business rates relief

In some cases, you might be eligible for business rates relief, which can reduce the tax you pay. These business rate relief schemes include:

  • The small business rates relief scheme
  • The rural tax relief scheme
  • The retail, hospitality & leisure relief scheme
  • The transitional relief scheme

#3 Eligibility for full exemption

In some cases, you might get a full exemption on paying your business rates as some property details and circumstances make it unfair to pay rates. These property details include:

  • Your property being used for a community sports club
  • Your property being unusable because of weather, road works, etc.
  • Your property is being used for farming, religion, or to help disabled people

#4 Circumstance changes 

Some situations can also alter your business rates bills. These could include things like:

  • Renovations
  • Moving property
  • Subleasing
  • Trade changes
  • Business model changes
  • And more…

Want to learn more about these business rates relief and exemption schemes and how your business can take advantage of them? Check out our previous blog, “How to dramatically reduce your business rates in 8 easy steps.

Don’t forget: The deadline to receive a business rates rebate is the 31st of March 2023, so if you want to reduce your business rates – you better hurry!

Jozef is so approachable. Even as MD, he took the time to clearly explain to the process and remains on call. Great service!

Kevin Feldson

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