Written by Ben Butler, Senior Policy Advisor at the Federation of Small Businesses
What are business rates and how are they calculated?
Business rates, also known as non-domestic rates, are taxes that local authorities in the UK charge on non-residential properties, like offices, shops, factories, and warehouses.
To calculate business rates, the Valuation Office Agency (VOA) estimates the yearly rent a property could fetch on the open market if it were in good condition and suitable for its intended use. This is called the rateable value, and it's used to determine the annual business rates bill. The government sets a multiplier called the national non-domestic rating multiplier that is applied to the rateable value to arrive at the final bill amount.
Certain types of businesses, like small businesses and charities, can apply for reliefs and exemptions that can lower or eliminate their business rates bill.
Please note, this article only applies to businesses in England. Business rates are handled differently in different parts of the UK.
Why are business rates bills changing now?
Many small businesses may recently have received communications about their business rates rateable value or bills changing as of 1 April 2023. You may be receiving information on the updated value of your property overall, rather than the amount owed.
There are usually changes each year to business rates due to budgetary decisions by the UK Government in Spring or Autumn financial statements. The difference this year is that the Valuation Office Agency has recently completed its 2023 revaluation of non-domestic properties, which has not been updated since 2017.
This revaluation determines the rateable value of business properties, subsequent multipliers and reliefs are then applied to this rateable value to give you your bill. As these rateable values have not been updated since 2017, many small businesses are seeing a bump in their property value.
There is more information on the 2023 revaluation via gov.uk here.
Make sure you’re getting the help and relief you’re entitled to
The rateable value isn’t what you owe. While the Valuation Office Agency is responsible for calculating how much your property is worth, but your local authority is responsible for calculating and collecting business rates.
The government decides which types of businesses are eligible for certain reliefs and business rate discounts. Local authorities are also responsible for determining which businesses are eligible for those reliefs.
The main reliefs which impact most FSB members are:
- Small Business Rate Relief, meaning that businesses get a 100% discount if their business has a rateable value of below £12,000
- Retail, Hospitality, and Leisure relief, meaning that up to 2024 these businesses get a 50% discount on their business rates
If you have been receiving Business Rates Relief but the revaluation has placed you over that £12,000 value, you may be entitled to transitional relief which staggers the increase in bills over three years.
There are also multiple types of relief available. For more information, see this full list of business rate reliefs via gov.uk here.
It is vital that you contact your local authority to let them know if you are not receiving a relief or discount you are entitled to. Find your local authority via gov.uk here.
What if your business rates are incorrect?
There are multiple reasons why your bill might not reflect the business rates you owe. The main types of checks and appeals you can make are:
- About your rateable value (property value) and how that is calculated – follow this link here to see what options you have via the Valuation Office Agency, or contact the VOA directly.
- About the reliefs you are entitled to – contact your local authority about this.
- About the definition and categorisation of your business (impacting rateable value or reliefs) – contact your local authority about this.
If you are unsure who your local authority contact is or are unsure who to approach for any questions, please search through the government website first to get the most up to date information. Your FSB contact is able to advise you if you cannot find contact information.
Supporting small businesses
At the Fedeartion of Small Businesses, we've been actively lobbying the UK Government to reform the business rates system in favour of small businesses. FSB views business rates as a regressive tax that hinders the viability and growth of small businesses, and as such, has been advocating for significant changes to the system. For more infomation about understanding business rates, watch our recent webinar with the Valuation Office Agency.
One of the main reforms that we have been pushing for is more frequent revaluations of properties. This would protect small businesses from large rises in rates and help ensure that the system is fairer. We've also been pushing for an increase in the threshold for Small Business Rates Relief (SBRR) from £12,000 to £25,000 rateable value. This change would benefit over 200,000 small businesses by lifting them out of the rate system altogether.
In the Autumn budget of 2022, FSB achieved a win with the scrapping of downward relief. This means that businesses that see a decrease in their rateable value will now benefit from an immediate reduction in their rates bill. This move was welcomed by FSB, as it helps to level the playing field for small businesses. Listen to the FSB podcast episode on business rates after the Autumn Statement 2022
We're always looking for case studies to highlight the difficulties that small businesses face with the business rates system. By providing concrete examples of how the system is harming small businesses, we hope to increase public awareness and push for further reforms. Get in touch with your local FSB team if you'd like to share your experience.