Everything you need to know about calculating business rates

Small Business Advice 2 January 2018

If you run a business from a non-domestic property, whether it’s an office, factory, shop or pub, you will be charged business rates. Applicable to any commercial property, business rates can best be described as the business equivalent of council tax. The rate you pay depends on both the location and value of your commercial property.

Why business rates are charged

Business rates are required by councils to help cover the costs associated with keeping the local community safe, comfortable, and generally pleasant to live in, and includes the police, fire department, waste management and road maintenance services.

How are business rates determined?

In a nutshell, business rates are calculated based on the location and value of the property. So, the more desirable the location, the higher the rate tends to be.

The business rate of a restaurant situated in a busy, city centre location would most likely be more than that of a similar property located in the suburbs.

Here’s how to work out the business rate of your commercial property:

  1. Determine the rateable value of your business property, which can be done online using the postcode and town search facility. The rateable value is an estimate of the property’s open market rental value as of April 1st
  2. If your property is valued below £51,000, then you need to use the small business multiplier rate of 6p*, and if it’s £51,000 or more, you would use the standard multiplier rate of 47.9p*.
  3. Your business rate can be calculated by multiplying your rateable property value by your multiplier rate.
  4. If you’re eligible for business rate relief, then deduct this from your business rate to get your final figure.

*Multiplier rates used are for 2017/2018 in England and change from year to year.

You will need to use different multipliers if your business is in London or Wales. And the way business rates are calculated in Scotland and Northern Ireland differs to England.

How to pay

The local authority that governs the area your business property is in will send you notification of your rate by post, and payments can usually be made in monthly instalments.

If you have any discrepancies regarding your rate or are unable to pay it for some reason, you must contact your local council immediately to resolve things.

Small business rate relief

If your business only uses one property and the property’s rateable value is less than £15,000, you may be eligible for small business rate relief. If your business uses more than one property, you may be still eligible for relief and can apply for the rate with your local council.

Business rates when you run a business from home

If you happen to run your company from home, the part of your house used to operate your business could be subject to business rates, while the rest of the property would be subject to the usual council tax.

Your local council will decide whether or not you should pay business rates on your home, with each case looked at on an individual basis. How often you use your business space and whether you’ve made any modifications to practice your trade are just two of the factors that may be considered when assessing your case.

Knowing the correct rate for your business address is important when calculating all the costs associated with running your company. If you have any questions or concerns regarding your business rate or business rates in your area, you should always contact your local council for help.

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