What are Business Rates? – Complete Guide


Business rate is a type of property tax the businessmen need to pay on the property they use for their business purposes. It is one of the oldest taxes that is collected by the UK government and was first collected in 1601 under the Poor-law.

Concept of Business Rates

Concept of Business Rates

50% of the annual rent of the property is considered as the business rent. In April 2013, special business arrangements after which the authorities keep a proportion of the funds for the local authority, the local authority uses these funds for providing services to its residents.

The government charges business rates on non-domestic properties such as offices, warehouses and shops. The government values all the commercial properties for tax on the same day. The rateable value is the specific value on which the business rates are based.

Businessmen need to understand the charging criterion properly as if they live in a building in which they have their office also. Then they will have to pay the business rate only for the floor on which they have their office. According to businessmen, business tax is a burden for them as it becomes one of the biggest overheads in their business.

Setting the Business Rates

The central government sets the Business Rates. The Valuation Office, an agency of HMRC specifically manages the tax rate. The VOA presents a list of rateable values and you can find the amount of business tax in front of your bill.

The values in the list are represented on yearly basis, and the owner and other interested parties can check the tax from that list. The law acts in their interest as if they find the tax amount wrong, then they can challenge the authority and the authority after verification will rectify the value in the list.

Calculation of Business Rates

Calculation of Business Rates

The business rates are reviewed and re-valued by the UK government every 5 years and they are calculated with the set rates. These set rates are called multipliers. These set rates depend on the size of your property.

The rateable value which is also used in the calculation of the business tax reflects the changes in business property every year. According to sources, London has the highest business rates in comparison to other places in the UK.

Procedure to pay Business Rates

The local authority sends the bill to the owners’ place every year in February or March and then the people of the UK need to pay the business tax to the local authority.

People can also pay the tax online. The tax rates and the amount to be paid by you are present on the website of the central government of the UK. They also provide you with the facility that if you have any relief or disputes about the business tax, then you can contact the local authority through their website.

To understand the concept and the procedure of paying business tax, there are various videos present on the UK government website. These videos provide detailed information on the business tax.

Exemptions to pay business tax

The businessmen who own or use any building for their business purposes need to pay the business tax but various business owners do not pay business tax for the building they use.

If the building is used for agricultural purposes, then the owners need not pay the business tax. There are various buildings where training for disabled people is provided or any welfare work for them. Such businessmen also are exempted from paying the business tax. Buildings that have now become religious worship places are also exempted from the business tax.

There are exemptions also if your building has been empty for a particular period. In the UK, if a building is empty for 3 months, then you do not need to pay the business tax. But after 3 months, the businessmen will have to pay the tax according to the fixed rate.

Although there are more exemptions also according to the type of your building as the warehouses have an exemption of 6 months while the properties used by charities need not pay any business tax when it is empty until the time it is reoccupied.

Also, properties whose rateable value is less than £2900 such properties need not pay any business tax while they are empty. Other than these, listed buildings until reoccupied need not pay any tax also.

Business Rate Relief for Small Businesses

The central government facilitates the small businessmen by providing them tax concessions. If the rateable value property of your business property is less than £15000 and if you own only one property, then you can get business tax relief from the VOA.

There are regulations fixed by the central government that if you have more than one property and the rateable value of any of the secondary properties is not more than £2899, then you can still enjoy the benefit of business tax relief.

If your business property is used for charitable purposes completely, then you can discretionary relief up to 80% or sometimes you can complete 100% relief. There is also an additional rule that if the rateable value of your property is not more than £51000, then you can still manage to get the business tax relief even if your business does not qualify for a small business.

Registration for Business Rates

Registration for Business Rates

There are several rating surveyors you can contact for the registration of your property for business tax. These surveyors will connect you to the local authority and after the assessment of your property; your business tax will be fixed by the VOA.

You can also your business tax on the website of the central government by comparing it with properties of the same size. But the government recommends contacting the local authority for the business tax as it involves various rules and regulations and has legal statutes so its calculation can become a difficult task for the residents leading to a mistake in calculating the task.

Business Rates are a source of earning for the local authority to provide various services to the residents but it can also be a burden for the businessmen.

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