Guide to business rates

Guide to business rates

If you run a business in the UK, you’ll need to pay business rates on your business property. This guide takes you through what you need to know!

What are business rates?

You’ll need to pay business rates if you use a non-domestic property. This includes properties like:

  • Offices
  • Shops
  • Pubs
  • Warehouses or factories
  • Holiday rentals or guest houses

Some properties are exempt from business rates, like if a property is used for the welfare of disabled people.

How are business rates calculated?

Business rates are calculated based on your property’s 'rateable value'. Rateable value is its open market rental value on 1 April 2015, which is based on an estimate by the Valuation Office Agency (VOA). This is then multiplied by the correct ‘multiplier’ which is set by the government.

You don’t need to calculate your business rates yourself, as the council will send you a bill. But, if you want to know what to expect, you can estimate your rates using this HMRC guide.

When do I pay business rates?

In February or March each year, you’ll get a bill from the local council for the following tax year.

You might get business rates relief from your local council to lower your bill. There are different kinds of relief rates which usually depend on what type of business you have. It can be automatic or you’ll need to apply. The process also depends on whether you’re in England or Wales.

Business rates for business types

There are some types of business that have different kinds of rates, like pubs and working from home.

Running a pub

Business rates are calculated differently for pubs. In England and Wales, VOA bases your rateable value ‘fair maintainable trade’. Fair maintainable trade is based on the annual level of trade that a pub could have if it’s run in an efficient way (excluding VAT). You’ll also need to provide your details of all your sources of turnover.

Here’s what fair maintainable trade is based on:

  • Type of pub or licensed premises
  • Area
  • Services offered

Rents and turnovers to work out a figure, then a percentage is used to get the rateable value. The percentages are agreed with the British Beer and Pub Association

Working from home

If you have a home business you normally don’t need to pay business rates. But, there are some exceptions:

You do not usually have to pay business rates for home-based businesses if you:

  • Your property is part business and part domestic, like living above a your shop
  • Goods and services are sole to people who visit your property
  • Employees work at your property
  • Your home has been modified for your business needs

If you need to pay business rates on your home business you’ll still need to pay council tax too.

Manage your finances with Bokio

Choosing the right accounting software can help make managing your finances simple.

With Bokio accounting software, you can do your bookkeeping, invoicing, and manage your finances in one place. We have everything you need to help you prepare for your Self Assessment tax return, submit your VAT Return for Making Tax Digital and keep the right financial records. If you need an extra hand, we can help you find an accountant to work with.

Accounting is kept simple with Bokio, so you have more time to spend running your business.