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What small businesses need to know about business rates

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As an SME or an inspiring business owner, there are plenty of things to think about. Premises, insurance, wages and stock are all vital. But so is paying business rates.

Business rates are a tax on properties used for business purposes. Offices, retail spaces, pubs, restaurants and warehouses, as well as the majority of non-domestic buildings are liable to pay the rates.

The amount each business pays varies, as it’s calculated by the property’s ‘rateable value’. Put simply, business rates are essentially the nondomestic equivalent of council tax. These charges are usually billed annually in March or April by your council.

This tax typically funds some of the services provided by local authorities and the government, such as the cleaning and maintenance of our streets, street lighting and our emergency services.

In 2017 and 2018, the government made changes to the business rates system in the UK. This saw many small businesses face a hike in their fees whilst others saw a reduction. But with no changes scheduled until 2021, it’s important for business owners or budding entrepreneurs to understand the tax and what it means for them.

How much will my business have to pay?

Business rates are based on the ‘rateable value’ of a property, which is calculated by the Valuation Office Agency (VOA) who estimate its value on the open market. You can work out what your premises may be charged here.

Are their any exemptions to business rates?

Certain properties are exempt from business rates such as agricultural land and buildings, properties used for the training or welfare of disabled people, and places registered for public religious worship or church halls.

If a business operates from someone’s home, the rates, including whether or not you need to pay any at all, will be different. Business owners can also avoid paying rates on empty buildings for up to three months, which can be extended under a few specific circumstances, such as if the building is listed or if it is owned by a charity. For more information on these, visit the gov.uk website here.  

Could my business be paying too much?

Start by working out your business rates using the calculator on the gov.uk website. If you think it’s too high, you can ask the VOA to correct the rateable value via the calculator.

Additionally, some businesses may be eligible for a relief on their rates, which can apply to rural, charitable or retail businesses; check with your local council to see if you’re eligible and whether you need to apply or if it is automatically applied.

Business rates are a key and unavoidable component for all businesses, no matter what size. Avoiding or missing payments may result in reminder letters, summons and could ultimately result in insolvency proceedings. Ensure you bear them in mind when you’re budgeting, setting up a company, or if you’re looking to expand, and don’t be afraid to challenge them if you think you’re paying over the odds.




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