What Are Business Rates?
Business rates are local taxes paid by occupiers of non-domestic properties, such as shops, offices, and industrial units, in England and Wales. The money collected helps fund local services like schools, roads, and waste management.
How Are Business Rates Calculated?
Business rates are determined by multiplying a property’s rateable value (assigned by the Valuation Office Agency, or VOA) by the business rates multiplier.
The multiplier, set annually by the UK government, adjusts in line with inflation and varies for small and standard businesses. Below are the current multipliers for 2025:
| Location | Standard Businesses | Small Businesses |
|---|---|---|
| England | 51.2p | 49.9p |
| Wales | 50.0p | Not Applicable |
| London | 53.4p | 51.2p |
Example Calculation:
For an investment property in Manchester with a rateable value of £20,000:
- Business Rates = Rateable Value × Multiplier
- £20,000 × 0.512 = £10,240 per year (before any reliefs).
Rateable Value and Revaluations
The VOA revises rateable values every five years to reflect changes in the property market and maintain fairness. The latest revaluation came into effect in April 2023.
Reliefs and Exemptions for Business Rates
Small Business Rates Relief (SBRR)
Eligible businesses can receive discounted rates:
- Properties with a rateable value of £12,000 or less: 100% relief (no business rates payable).
- Properties with a rateable value between £12,001 and £15,000: Relief on a sliding scale.
Businesses with a rateable value between £15,001 and £50,999 can use the small business multiplier for reduced rates.
Empty Property Relief
Unoccupied investment properties may qualify for temporary exemptions:
- Standard properties: Exempt for three months.
- Industrial properties: Exempt for six months.
- Properties with a rateable value of less than £2,900: Fully exempt until reoccupied.
Rural Rate Relief
Investment properties in rural areas with populations under 3,000 may receive 50% mandatory relief, including:
- The sole village shop or post office (rateable value up to £8,500).
- The only public house or petrol station (rateable value up to £12,500).
Local councils can increase this relief to 100% at their discretion.
Charitable and Community Exemptions
Certain investment properties are exempt, including:
- Places of worship and church halls.
- Agricultural buildings and land.
- Buildings used for the welfare of disabled people.
- Properties owned by charities or community amateur sports clubs, if the property’s next use aligns with their primary purposes.
Transitional Relief
Transitional relief helps businesses manage sudden changes in rateable values after revaluation. It phases increases or decreases over time and is automatically applied by local councils.
How to Check and Challenge Business Rates
To review or dispute your investment property’s rateable value:
- Visit the VOA website to check the current listing.
- If you believe the rateable value is incorrect, you can appeal through the VOA’s official process.
Why Understanding Business Rates Matters
Business rates can significantly affect the profitability of your investment property. By understanding how they are calculated and what reliefs are available, you can optimise your costs and enhance your returns.
Key Takeaways:
- Always check the rateable value of a property before purchasing or leasing.
- Take advantage of available reliefs and exemptions to reduce costs.
- Monitor revaluations and government updates to stay informed about changes.
For further assistance, consult with a business rates advisor or property consultant to ensure compliance and maximise savings.
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Disclaimer
The Content above is for guidance purpose only. While we make every effort to keep the information current and correct, we do not make representations of any kind. Professional advice should be sought, before entering into any legal contract and purchasing a property.