What are business rates? The latest updates in 2024

While running your own business is one of the most rewarding ways to make a living and can give you the freedom to be your own boss, part and parcel of the deal is the accompanying homework you’ll be responsible for.

From understanding pension schemes to working out taxes and setting up payroll, there’s a lot involved behind the scenes that fuels the successful and above-board running of a business.

And one of those responsibilities is business rates.

So, in the interest of taking one thing off your plate and avoiding a headache, we’ll break down everything you need to know about them in this article.

What are business rates?

Business rates, also known as non-domestic rates, are a form of tax applied to properties used for business purposes. They’re statutory and are levied by the UK government on those responsible for commercial properties. Business rates are collected by your local council and form a vital source of income for local authorities to help fund services, maintain infrastructure, and improve communities.

Business rates are applied to nearly all non-domestic properties, including:

• Pubs
• Shops
• Offices
• Factories
• Warehouses
• Holiday rental homes

They’re based on your business’s rateable value (RV), which is an estimate of your property’s estimated value on the open market, determined by the Valuation Office Agency (VOA). The VOA previously conducted its revaluations of RVs every five years; however, in October 2021, it changed future reevaluations to a three-yearly revaluable cycle to make them more frequent.

The local council then applies a multiplier to a business’s RV to calculate the amount payable. The government sets the multiplier and reviews it yearly.

Business rates are payable by the occupiers of the property, whether they own or lease it, and are typically paid annually or in monthly instalments.

Do all businesses have to pay business rates, and are there exemptions?

While most non-domestic properties are subject to business rates, like the examples listed above, there are exemptions and exceptions.

Common examples of exemptions include:

• Agricultural land and buildings used for agriculture or forestry
• Properties with a rateable value below a certain threshold, £2,900 as of March 2024, which may qualify for Small Business Rate Relief (SBRR)
• Buildings used for training or welfare of disabled individuals
• Properties used for charitable purposes
• Properties that are designated for religious worship

Some properties may also be eligible for relief schemes. These are typically based on factors like property usage, location, or the sector in which the business operates.

How much will business rates cost me?

All the above jargon doesn’t really help you understand what your business rates will be, and we totally get that forecasting cost is important, so now we’ll cover how you can estimate your business rates.

Important: there’s a separate way to calculate your rates if you’re based in the City of London, Wales, Scotland, or Northern Ireland. The information below will help you estimate how much your business rates will cost if you’re a business in England outside of the City of London.

1. Rateable Value (RV)

The first step in calculating your business rates is determining the rateable value of your property. To find the VOA’s estimation of your RV, you can use the gov.uk’s checker here.

2. Multiplier

Once you’ve got your hands on this information, you next need to identify your ‘multiplier’. There are two types: the standard multiplier and the small business multiplier. The correct one to use is also dependent on your RV.

• Standard multiplier – You’ll use the standard multiplier to estimate your costs if your rateable value is £51,000 or more.
• Small business multiplier – The small business multiplier is used for businesses with a rateable value of less than £51,000.

In the 2023/24 tax year, the standard multiplier was 51.2p, and the small business multiplier was 49.9p.

As announced in the chancellor’s 2023 Autumn Statement, from 1st April 2024, the standard multiplier will rise to 54.6p for 2024/25 in line with September 2023’s CPI inflation rate of 6.7%. The small business multiplier will stay at 49.9p.

Here’s a breakdown of what these multipliers look like in action for the last few financial years.

Year	Standard multiplier	Small business multiplier
2024 to 2025	54.6p	49.9p
2023 to 2024	51.2p	49.9p
2022 to 2023	51.2p	49.9p
2021 to 2022	51.2p	49.9p
2022 to 2021	51.2p	49.9p
2019 to 2020	50.4p	49.1p
2018 to 2019	49.3p	48.0p

*Figures obtained from gov.uk on March 2024

Now you’re armed with all the numbers. To work out your business’s estimated business rates tax bill, simply multiply your rateable value by your multiplier.

The figure you come up with will give you a rough idea, but remember, you might be entitled to business rate relief, which will be deducted from your rates.

Let's imagine that Jane’s property has a rateable value of £20,000 in the 2024/2025 tax year, which means she’s eligible to use the small business multiplier applicable to properties in England.

Rateable Value = £20,000
Small business multiplier = £0.499

Jane’s estimated basic business rate is: £20,000 × £0.499 = £9,980

Business rates by industry

Pubs

The way rateable values are calculated changes for pubs; the VOA bases it on the level of trade annually (excluding VAT) a pub is expected to achieve if it runs in a ‘reasonably efficient way’.

They refer to this method as ‘fair maintainable trade’, and it’s based on three things:

1. The type of pub or licensed premises
2. The area it’s located in
3. The services it offers – for example, food, drink, sports screenings, gaming, etc.

That’s not all; the VOA also examines rents and turnovers when discerning the fair maintainable trade figure and then applies a percentage to create the rateable value.

Confused? We know it’s a lot to get your head around but you can learn more here.

Self-catering and holiday let accommodation

Suppose your business involves letting out your property in England for short periods, which total 140 days or more per tax year. It will be valued for business rates and rated as a ‘self-catering property’.

The VOA will calculate the rateable value of said property based on:

• Size
• Type
• Quality
• Location
• Likely income

Find out more about business rates on self-catering accommodation here.

Do I have to pay business rates if I work from home?

Whether you're a freelancer, consultant, or small business owner operating from your residence, you may wonder if you're liable to pay business rates.

If you're solely using your home for work purposes and it remains primarily a residential property, you're generally not required to pay business rates. However, there are exceptions:

• Business use – If you've converted part of your home exclusively for business use, such as a dedicated office or workspace, you may be liable for business rates on that portion of your property.
• Non-domestic activities – Engaging in certain non-domestic activities from your home, such as the manufacturing and storage of goods for sale or having customers visit your property for your service – like a hair salon – could make you liable to pay business rates.

The business rate rules if you work from home can differ across England, Scotland, Wales, and Northern Ireland. To make sure you’re compliant, it’s best to double-check the regulations in your area.

What to do if your business changes premises

If any of the following points apply, your business rates could change:

• You move premises
• You change your existing premises
• You sublet part of your premises
• You merge multiple (two or more) properties into one

If this is the case, you must inform the VOA as soon as possible to avoid a hefty backdated increase in your business rate bill.

Are business rates charged on empty properties?

You may not need to pay business rates on your property if it’s empty and unused for a certain period. Since 1st April 2008, vacant properties have been granted a three-month exemption from business rates upon becoming unoccupied. After those initial three months, however, owners must pay full business rates.

However, there are exceptions to this rule:

• Industrial and warehouse properties can qualify for an additional three months' exemption
• Listed buildings may be exempt until they are reoccupied
• Buildings with a rateable value under £2,900, until they’re reoccupied
• Properties owned by charities if their next use will be mostly for charitable purposes
• Community amateur sports club buildings if their next use will be mostly as a sports club

There has also been an update to business rates on empty properties in the chancellor’s Spring Budget 2024 announcement. Owners of empty properties can reoccupy them for six weeks to reset the statutory void period. However, from 1st April 2024, the occupation period is increasing from six to thirteen weeks to prevent property owners from claiming Empty Property Relief to evade paying business rates.

How can you pay your business rates bill?

In England, businesses must pay their business rates directly to their local council. Your local council will issue a business rates bill annually for the coming tax year, typically in February or March.

Businesses can pay their bill online via their local council’s website.

What business rates relief is available for businesses?

Business rates relief schemes aim to provide financial support to eligible businesses, helping reduce the burden of taxes and promote economic growth. Here's an overview of some common business rates relief options currently available (as of March 2024):

Small business rate relief (SBRR)

SBRR is designed to benefit small businesses with low rateable values. Eligible companies may receive a significant reduction or complete exemption from business rates, providing essential financial relief.

If your business property’s rateable value is less than £15,000 and your business only uses one property, you can get small business rate relief.

You will not pay business rates if your rateable value is £12,000 or less.

For those with a rateable value between £12,001 and £15,000, the relief rate will decrease gradually from 100% to 0%.

Confused? Let’s look at some examples.

• If your rateable value is £13,500, you’ll get 50% knocked off your bill thanks to small business relief rates
• A rateable value of £14,000 would result in a 33% discount

Transitional relief

This type of relief puts an upper limit on how much your business rates can change each year as a result of revaluation.

It doesn’t mean you won’t need to pay a higher rate, but instead, it means the change will be phased into your bill gradually, so you’re not hit with a big hike all in one go.

Your local council will automatically apply transitional relief to your bill if your rates change enough to meet eligibility criteria. Your transitional relief will end once your payment reaches the full amount outlined in the revaluation.

Rural rate relief

Rural rate relief is targeted at businesses operating in rural areas. Businesses can be eligible if they are situated in a location with a population of 3,000 or less and if they are the only:

• Shop or post office with a RV of £8,500 or less
• Pub or petrol station with a RV of £12,500 or less

Charitable rate relief

Charitable organisations and businesses may qualify for rate relief on properties used for charitable purposes. This could be an 80% reduction in business rates.

Enterprise zones

Businesses located within designated enterprise zones may benefit from business rates relief or other incentives to promote investment and economic growth.

Retail, hospitality, and leisure relief

Businesses in the retail, hospitality, and leisure sectors have been granted a number of business rates relief options, but the most common one has been due to the COVID-19 pandemic.

The Retail, Hospitality, and Leisure business rates relief scheme makes it possible for eligible businesses in England to get 75% off their business rates bill for the 2023/24 tax year, with a maximum deduction of £110,000 in a year. This has also been extended for 2024/25.

Can I appeal my business rates bill?

You have the right to appeal if you suspect that your business rates have been unfairly assessed, whether due to valuation discrepancies, multiplier errors, or other factors.

This process involves lodging a formal appeal with the Valuation Tribunal Service in England, outlining the grounds for your appeal and providing supporting evidence.

The key takeaways about business rates for small businesses

Jodie Wilkinson, Head of Strategic Partnerships here at takepayments, emphasises the importance of understanding and managing business rates for small businesses:

"Business rates are a significant financial consideration for small businesses across various sectors. Failing to navigate these obligations effectively could result in unnecessary financial strain or missed opportunities for relief.

Here are some things to consider:

1. Pay on time – Paying business rates shortly after receiving your yearly bill can mean avoiding penalties or enforcement actions, which could set you back further.

2. Budgeting strategies – Incorporating business rates payments into your financial planning process can help you to set aside a budget for when your next bill comes in the post. We’ve seen that the 2024/25 standard multiplier has been upped at a historic amount, delivering the biggest year-on-year increase to businesses since 1991. So, putting aside more than you think you’ll need could help businesses accommodate for future multiplier rises.

3. Explore relief options – The 6.7% increase in business rates announced in the chancellor’s 2023 Autumn Budget will have a profound impact on businesses, with the predicted cumulative growth in business rates estimated to be as much as £306.22 million. Small businesses below the threshold are eligible for the SBRR, so it’s crucial that they know what relief is available to them.”

 For more useful resources and comprehensive guides like this one, head to our dedicated blog to support small businesses.

Jodie Wilkinson

Head of Strategic Partnerships