Understanding business rates revaluation and rateable value changes

Business rates are changing in England (not in the rest of the UK – read more about regional business rates here). If you own a commercial property in England, you’ve probably received a revaluation and a revamped business rates bill. You might not like what it contains.

Revaluations are nerve-wracking for commercial property owners because there’s a chance their business rates bill will rise significantly, forcing a higher payment from bricks and mortar businesses that are already experiencing thin profit margins.

But the business rates changes outlined in 2021, which are now taking place in 2023, won’t necessarily translate to a higher bill for your commercial property.

In this blog, we’ll explain the changes to business rates in England in 2023, and we’ll outline the business rate relief available and small business rate relief for commercial enterprises impacted by those changes.

What’s involved in revaluation of rateable values?

Business rates apply to any non-domestic property in the UK. This could be a business’s sole or main property, such as a shop, or other properties that are not residences, such as a warehouse or store room.

Each business rates change involves a revaluation of the property market to establish how much a commercial property’s rent is worth in its market at a given time (its total rateable value).

The Valuation Office Agency (VOA) oversees revaluation and sets the rateable values of commercial properties. The newest rateable values are based on the property markets from 1 April 2021.

Freezing the business rates multiplier

The business rates multiplier is the number by which you multiply your commercial property’s rateable value to find your estimated business rates.

In 2021, it was decided that the current multiplier in England would freeze at its current number, which is:

• Standard multiplier (a rateable value of greater than £51,000): 51.2p
• Small business multiplier (a rateable value of less than £51,000): 49.9p

These multipliers will not change this year.

Business rate relief of 100% for improvements

Businesses that improve their commercial properties could see higher business rates bills as the improvements would give their property a higher total rateable value.

But under current legislation, businesses that improve their commercial properties (and meet specific eligibility requirements) would see a 100% relief on their business rates bill increase for 12 months. That means they would not pay a higher rate for an entire year after their bill increased.

This business rate relief opportunity will remain in place from 2023 to 2028, and the UK government will revisit the legislation regarding the relief to decide on its future.

Business rate relief for renewables

There are currently two business rate relief opportunities around renewable energy. They are, according to the UK Parliament website:

• “100% relief for eligible low-carbon heat networks that are listed as separate properties on the rating list, to be available from 2023 to 2035.”
• Total business rates exemptions for “eligible plant and machinery used in onsite renewable energy generation and storage, such as rooftop solar panels and battery storage used with renewables and electric vehicle charging points,” in place from 2023 to 2035.

Transitional Relief Scheme

The government has extended the Transitional Relief Scheme, sometimes called tapered relief, to help ease the burden of higher rateable values for businesses.

When revaluation sees a commercial property’s rateable value increase, a higher business rate is often the result. But a jump in business rates can have a big impact on businesses. The Transitional Relief Scheme aims to help businesses transition smoothly to their higher rateable value bracket.

Changes to bills are gradually phased in. A small business (rateable value of £20,000 or £28,000 in London) will see business rates bill changes capped at 15%. For medium businesses (those with a rateable value of up to £100,000) will have a change cap of 25%.

This opportunity is a tapered relief scheme. You stop receiving the Transitional Relief Scheme when your bill reaches the full business rate required for your property.

Small business rate relief

As a result of revaluation, some small businesses may see their rateable value increase due to changes in the property market. It’s frustrating for SME owners, but supports are still in place.

The Transitional Relief Scheme described above can take some of the sting out of increased rateable value for small businesses. And they still enjoy a lower multiplier than larger companies. Specific small business relief is available for qualifying businesses, too. If your small business is in a rural part of the UK, you may also qualify for rural rate relief.

If you need help applying for a small business relief, or to find the small business relief that’s right for you, you can talk to an expert team member here at Verity.

Expert advice, no matter what the business rates future holds

This year’s revaluation may significantly increase your business rates bill, and future changes pose the same threat. It can be disheartening to receive a large business rates bill, but at Verity, we’re here to help you find any relief that can help shrink your bill, from small business rate relief to rural rate relief.

We can help challenge your revaluation with the Valuation Office Agency and find a rateable value that’s appropriate for your business’s size and industry. We have over 30 years of experience pinpointing opportunities for companies to reduce their bills and liaising with the VOA to get results for business owners and commercial landlords.

With Verity, you never have to navigate revaluations alone. Our expert team is standing by to calculate your business rates and offer advice free of charge. Get in touch today to find lower business rates for your property.