Small Business Rates Relief: A Comprehensive Guide

You may be eligible for relief on your business rates as a small business. These are handled differently in each of the UK's countries, so this article will provide a general guide to what they are and how they work, but you may want to consult your specific Government's website to ensure you have the most up-to-date information.

These special rates are automatically applied in some places and must be actively applied for in others, so it's worth checking out and seeing if you can reduce the rates for your business and save a few pounds.

What are business rates?

Business rates are a tax applied to a property used for business purposes, whether an office, a shop, a restaurant or a pub. The business rates are charged to the property occupier or leaseholder, and the fees are used by local authorities to finance local services.

When are business rates charged?

If you use part of a building for business purposes, such as a shop with a residential flat above it, you only pay rates on the section used for business. Similarly, if you run a home-based business, you'll have to pay business rates on the rooms or sections of your house that have been adapted for work purposes. If you're unsure whether you should be paying business rates, you should contact the VOA.

Fundamentally, business rates are determined purely on your business's property, not its turnover or profits.

What is rateable value?

The rateable value is the value granted to non-domestic premises by the Valuation Office Agency (VOA) based on their annual market rent, which is used by local councils to calculate a property's business rates. The VOA will include certain business assets in their valuation. For example, CCTV security systems, fire protection and other types of plant and machinery may add value to a property.

These values tend to be reviewed every five years, with the usage and size of the property taken into consideration.

What is a multiplier?

Reviewed on 1 April each year in relation to the level of inflation, a multiplier is the number of pence per pound of rateable value you need to pay in business rates before discounts or reliefs are subtracted. To calculate your business rates, you need to multiply the rateable value for your business with the multiplier set by the Government.

Between 1 April 2022 and 31 March 2023, the Government has set two multipliers: the small business non-domestic rate multiplier at 49.9p, and the national non-domestic rate multiplier at 51.2p. The City of London and Wales each have different multipliers.

How to estimate your business rates

To help plan for your financial year ahead, it pays to learn how to estimate your business rates so that you know you're paying out the right amount. Find out how to calculate your own estimated business rates here. Keep in mind that Scotland and Northern Ireland both have alternative ways to calculate business rates, so read up accordingly.

When am I eligible for a small business rate relief?

If your business has a rateable value of less than £15,000 and only uses one property, you may be able to cut the costs of your bill by applying for small business rate relief via your local council. This relief reduces the amount of business rates you have to pay and sometimes can lead to your business being exempt from paying costs entirely.

Small business rates relief in England

Your property has a rateable value of £12,000 or less – You will not pay business rates on your property.

Your property has a rateable value between £12,001 and £15,000 – The rate of relief will go down gradually from a scale of 100% to 0%. For example, if your rateable value is £13,500, you'll get 50% off your bill. If it's £14,000, you'll get 33% off.

There are a few exceptions to how small business rate relief can be applied to your business.

If you use more than one property – After securing your second property, you can keep claiming existing relief on your main property for 12 months. After this period, you need to ensure that the rateable value of your additional properties doesn't exceed £2899 and that the total rateable value of all your properties is less than £20,000 (£28,000 in London).

Find out more about the relief of English business rates on the UK Government website here.

Scotland small business rate relief

In Scotland, there is the Small Business Bonus Scheme, similar to the business rate relief programme in England, but it is triggered at different rateable value levels.

Based on the total (cumulative) rateable value of all your non-domestic premises, the following relief is available:

total rateable value up to £15,000 - 100% relief (no rates payable) on each individual property

total rateable value of £15,001 to £35,000 - 25% relief on each individual property with a rateable value of £18,000 or less

You can apply for the Small Business Bonus Scheme through your local council by completing an application form. Find out more on the Scottish Government website.

Wales small business rates relief

The Welsh Government provides non-domestic rates relief to eligible small businesses.

eligible business premises with a rateable value of up to £6,000 will receive 100% relief, and

those with a rateable value between £6,001 and £12,000 will receive relief on a tapered basis from 100% to zero

Certain business categories benefit from an additional level of relief. For example, post offices and registered childcare premises. The number of properties eligible for SBRR is limited to two properties per business in each local authority.

Local authorities administer the scheme, which is automatically applied to the bills of eligible ratepayers. Fine, the full guidance from the Welsh Government website here.

What if I don't qualify?

If you're a small business owner and you don't qualify with the criteria listed above, don't worry – there is another option available to you if your business is based in England. If your property has a rateable value under £51,000, your business rates bill will be calculated via the small business multiplier (49.9p) rather than the standard multiplier (51.2p). This is the case even if you do not get small business rate relief.

Small business rate reliefs could help your company save big, letting you invest more of your money and time into making your business venture the best it can be. Estimating your business rates can be crucial to forecasting your business's financial future and strategy, so familiarising yourself with the ins and outs of this legislation could help your business reap the benefits.

How to challenge your business rates?

According to Small Business UK, each year, the government sets aside an estimated £1.5 billion for business rate rebates. To be sure that you're paying the correct business rates the rateable value must be based on the correct information about your property. If you think that any of the factual details about your property (such as number of floors or the description) held by the VOA are wrong you should tell them.

Rateable value Checks and Challenges are handled by the Valuation Office Agency (VOA). Business rates appeals are handled differently in England, Wales, Scotland and Northern Ireland.

While the process differs, everywhere, you should be prepared discuss your rateable value and clearly explain why you believe your assessment is incorrect. You may want to supply evidence to support any factual changes. This could include photographs, plans and rent agreements.

The VOA may accept your challenge and change the rateable value. If it doesn't, you may be able to appeal that decision.

Business rates calculator

To get an accurate idea of what your business rates bill will be, you'll need to find out your property's rateable value.

You can use the UK Government website to find out the right rate for England and Wales. For Scotland, you can find the rateable value of a property on Scottish Assessors Association website. You'll also find a breakdown of how a rateable value was calculated for most properties.

Once you know the correct multiplier, you should be able to use the available business rates calculators. Make sure you use the right calculator for the area that you live in.

⇒ Rates calculator for Scotland

⇒ Rates calculation guide for England and Wales

As always, if you're in doubt about how the rates apply to your business, consider consulting a professional to help you explore this further.