Business rates, also known as non-domestic rates or business taxes, are a type of local tax that is paid by businesses in the United Kingdom. Although they are often overlooked by small business owners, they play a crucial role in the functioning of local authorities and provide essential services to the community.
But what exactly are business rates and how much do they cost? In this guide, we will answer these questions and more to help small business owners understand and navigate the world of business rates.
What are Business Rates?
Business rates are a type of tax that is paid by businesses to their local authorities. They are calculated based on the rateable value of the property that a business occupies. The rateable value is determined by the Valuation Office Agency (VOA) and is based on factors such as the size, location, and usage of the property.
Business rates are used to fund local services such as road maintenance, waste collection, and police and fire services, as well as to contribute to the overall budget of the local authority. This means that business rates are an important source of income for local councils and play a vital role in the functioning of the community.
How Much are Business Rates?
The amount of business rates that a business has to pay is dependent on the rateable value of their property and the multiplier set by the government. The multiplier is the percentage of the rateable value that a business has to pay in business rates. For the financial year 2021/2022, the standard multiplier in England is 51.2p and in Wales is 53.5p. This means that for every £1 of rateable value, a business will have to pay 51.2p or 53.5p in business rates.
Small businesses may be eligible for business rate relief, which can significantly reduce the amount they have to pay. For example, small businesses with a rateable value of less than £12,000 in England or £6,000 in Wales may be eligible for 100% relief, meaning they do not have to pay any business rates. Other types of relief, such as rural rate relief and charitable rate relief, may also be available to small businesses.
Do All Small Businesses Have to Pay Business Rates?
Not all small businesses are required to pay business rates. There are certain exemptions and reliefs available that can reduce or eliminate the amount of business rates a small business has to pay. For example, businesses that operate from home and do not have a physical business premises may not be required to pay business rates.
Additionally, certain types of businesses, such as agricultural land, fish farms, and religious buildings, are exempt from business rates. Small businesses that operate in these types of properties do not have to pay any business rates.
It is important for small business owners to familiarize themselves with the exemptions and reliefs that are available in their local area to ensure they are not overpaying on their business rates.
In Conclusion
In summary, business rates are a type of local tax that is paid by businesses based on the rateable value of their property. They contribute to the funding of local services and are an important source of income for local authorities. The amount of business rates a business has to pay is dependent on the rateable value of their property and the multiplier set by the government. However, there are exemptions and reliefs available that can significantly reduce or eliminate the amount of business rates a small business has to pay.
As a small business owner, it is important to understand and stay informed about business rates to ensure that you are paying the correct amount. By taking advantage of available exemptions and reliefs, small businesses can save money and focus on growing and succeeding in their respective industries.