Business rates: Are you paying too much?

Sarah Bradford advises that you should check your business rates bill to ensure that you are not paying too much. 

Business rates are charged on non-domestic properties such as offices, shops, pubs, factories and warehouses. Holiday rental homes are also within the scope of business rates, and this can be a good thing.  

There are various reasons why a business may be paying too much in business rates. It is vital, therefore, to check your bill and to claim any reliefs to which you are entitled, as not all reliefs are given automatically. 

Calculation of business rates 

Business rates are based on the property’s rateable value. Business rates from 1 April 2023 onwards are based on the valuation as at 1 April 2021. A business may benefit from reliefs which reduce or extinguish their business rates bill. Some properties are exempt. 

For properties in England and Wales, the business rates for a property are found by multiplying the rateable value by the relevant multiplier. Where the rateable value of the property is £51,000 or more, the standard multiplier is used. For properties in England (excluding the City of London) the standard multiplier is 51.2 pence in the pound. The small business multiplier of 49.9 pence in the pound applies where the rateable value is below £51,000. For properties in the City of London, the standard multiplier is 52.6 pence in the pound and the small business multiplier is 51.3 pence in the pound. A business rate supplement of £0.02 pence in the pound is levied by the Greater London Authority on properties with a rateable value of more than £75,000. This provides a contribution to the cost of the Crossrail project. 

A single multiplier applies in Wales. This is set at 53.5 pence in the pound.  

Different rules apply to calculate business rates in Scotland and Northern Ireland. 

Impact of revaluation 

The Valuation Office Agency (VOA) updates the rateable value of business properties to reflect market conditions. The most recent valuation was undertaken on 1 April 2021 and applies to calculate business rates from 1 April 2023. Consequently, 2023/24 is the first year using the new valuations. 

It is important to check that your valuation is correct. You can find your rateable value on your bill and also online by visiting www.gov.uk/find-business-rates. You can appeal if you do not agree with your valuation.  

Revaluation may mean that your bills look quite different from 2022/23 – or it may not change. However, transitional relief is available to protect businesses from a steep hike in their business rates. The relief applies where the bill changes by more than a certain amount. The effect is to phase in the changes to the bill gradually. Where it applies, transitional relief should be given automatically. However, it is prudent to check that if you are eligible, it has been applied to your bill. 

The relief operates by placing a cap on how much your business rates can increase. The following table shows the maximum permitted amount your bill can increase from 1 April 2023 as compared to the previous year as a result of the revaluation effective from that rate. Relief ceases when the increase is within the permitted limit. 

If your business has received a transitional certificate, that will be used in the business rate calculation rather than your rateable value. 

Small business rate relief 

Small business rate relief is available for properties that have a rateable value of less than £15,000, provided you only have one business property. In certain circumstances, you may be able to obtain relief if you have more than one business property. 

The rate of small business relief depends on your rateable value. If your rateable value is £12,000 or less, you are eligible for 100% relief, meaning you do not have to pay any business rates. Where your rateable value is between £12,000 and £15,000, the rate of relief reduces gradually from 100% to 0%. The calculation is (£15,000 – rateable value/£3,000 x 100%).  

For example, if the rateable value is £13,500, small business relief is given at the rate of 50% (£1,500/£3,000 x 100%) and if the rateable value is £14,000, relief is given at the rate of 33.33% (£1,000/£3,000 x 100%).  

Example: Business rates post-relief 

A business property has a rateable value of £13,000. It benefits from business rate relief of 66.67%.  

Its business rates bill is therefore £6,487 – (£6,487 x 66.67%) = £2,162.12. 

Small business rates must be claimed; it is not given automatically. Check your bill and claim if need be. 

If you have more than one business property, you will be able to keep any small business relief on an existing property for 12 months from the date on which you acquired your second business property.  

You will be able to retain small business relief on your main property if the total rateable value of your business properties does not exceed £20,000 (£28,000 in London) and none of your other properties has a rateable value in excess of £2,899. 

Supporting small business relief 

The revaluation may mean that you no longer qualify for small business relief. Help may be available if you have lost some or all of your small business rate relief. You will be able to benefit from supporting small business relief if your bill has increased by more than £600 in 2023/24 as a result of the loss of relief.  

Your local authority will adjust your bill automatically, if appropriate. Again, it is prudent to check that this has been done. 

Retail, hospitality and leisure relief 

To help businesses in the retail, hospitality and leisure sectors to recover from the impact of the pandemic, help remains available for 2023/24 for businesses that are used as a shop, restaurant, café, bar or pub, a cinema or music venue, or a hospitality or leisure business such as a gym, spa or hotel.  

For 2023/24, you are entitled to a discount of 75%, capped at £110,000 per business per year. 

Furnished holiday lettings 

Being within business rates rather than council tax is beneficial for most holiday lettings, and many holiday lettings benefit from small business rate relief at the 100% rate – meaning that there is nothing to pay. 

From April 2023 (in England), holiday lettings must be available to let for shorter periods for at least 140 nights over the current and previous tax years and actually be let for at least 70 nights in the last 12 months to be within business rates rather than council tax.  Stricter tests apply in Wales, where properties must be available for letting for at least 252 nights over the current and previous tax years and actually let for at least 182 nights in the last 12 months.  

Businesses that qualify as a furnished holiday letting for tax purposes will pass the business rates tests. 

The tests were introduced to prevent holiday homeowners from claiming their holiday home was a holiday let to benefit from 100% business rate relief when, in reality, it was rarely let as such. 

Empty properties 

If your business property is empty, you will not have to pay business rates for three months. The relief runs from the date on which the property became empty.  

Certain properties benefit from extended relief. This includes business properties with a rateable value of under £2,900 on which no business rates are payable until they are occupied.  

Practical tip 

Check your business rates bill to ensure that it has been calculated correctly. Check that you agree with your latest revaluation and that the correct multiplier has been used to work out your business rates. Also, check that your bill has not increased by more than the permitted amount as a result of the revaluation. Finally, check whether you are entitled to any other reliefs and claim them as appropriate.