Businesses that are tied to physical locations often worry about the burden of business rates or non-domestic rates. If you own a salon, a clinic, an office space, a barbershop, you need to pay attention to the business rates system. It is important to understand how to incorporate these rates into your small business budget, especially if you are starting a new salon or barbershop.
What exactly are business rates/non-domestic rates?
Business rates are a tax levied on commercial properties used for business operations. These non-domestic rates play a pivotal role in funding essential local services such as healthcare and education.
Who pays business rates, and who has exemptions?
Most businesses that own or co-own commercial property are required to pay business rates. However, there are some exceptions to this rule, such as agricultural buildings like fish farms, establishments that cater to the welfare or training of disabled individuals, and buildings that are designated as places of worship. Empty buildings may receive exemptions from business rates for a specified period, and this relief may be extended based on the nature of the property.
Business Rates Relief in 2024
In a bid to bolster the struggling sectors, business rates relief has been extended for the 2024-25 financial year in England and Wales, after lobbying by NHBF. Eligible businesses can expect relief covering 75% of the chargeable amount in England, subject to a £110,000 cash cap, for chargeable days from 1 April 2023 to 31 March 2024.
Calculating Business Rates
Business rate valuations are determined based on predetermined rates or multipliers that depend on the size and usage of the property. These multipliers are linked to the Consumer Price Index (CPI) and are reviewed periodically, usually every three years, to reflect changes in the market. The Valuation Office Agency (VOA) is responsible for determining the rateable value of a property. (Note: VOA is only for England, Scotland and Wales).
Tailored Relief for Small Businesses
Small businesses may be eligible for small business rate relief if their property's rateable value is less than £15,000 and they operate from a single property. Even businesses with multiple properties can apply for relief, as long as their combined rateable value doesn't exceed £20,000 (or £28,000 in London), with no secondary property going beyond £2,899. Moreover, businesses with a rateable value below £51,000 benefit from the small business multiplier, regardless of their relief eligibility. Charitable businesses can even get discretionary relief of up to 80% or 100%.
How to Pay Business Rates
In England, business rates are paid to the local council, with bills typically posted annually between February and March. Payments can be paid online, and relief or disputes addressed via the local council or gov.uk website.
Business Rates in the Home Nations
Business rates frameworks in Wales, Scotland, and Northern Ireland echo the England model, albeit with their own variations.
Wales: Local councils in Wales issue annual bills, similar to England's system. However, the Welsh Government has kept a partial discount and frozen the business rate multiplier for the 2023 to 2024 tax year. You can find out more about business rates and relief in Wales here.
Scotland: The Scottish model uses different calculations, with relief typically available for properties valued under £35,000, and exemptions granted to those under £15,000. You can use the gov.scot business rates calculator to work out your own.
Northern Ireland: There are significant differences in the business rates system in Northern Ireland, particularly for home-based businesses. Rates may apply even for modest setups. Northern Ireland rates can be calculated here. More info on what is happening in northern Ireland here: Relief at just 4% increase in business rates in Northern Ireland (talkingretail.com)