Owners know that expenses are a daily part of running a company. One of the expenses is called: business rates, which are taxes on property used for business. They are formed to help fund the activities of local authorities in a specific area. These are charged on properties like offices, shops, pubs, and also big warehouses. No matter if you have a startup or an established company it is always better to understand these rates. It will help you manage your finances and also avoid any unnecessary expenses.
Business rates are very important for owners because they affect the entire financial condition of the company. These taxes can be quite confusing in the budgeting and operation management of a company. Since the locations determine these rates, they also help business owners decide where to expand and begin operations. This guide will further help you understand everything you need to know about business rates, how they work, and key terms related to them.
What are Business Rates?
Business rates are taxes on property used for business such as offices, shops, and factories. It is calculated based on the overall yearly rental value of the property known as relatable value. These funds are mainly used for public welfare such as, maintaining roads, building new schools, and other community initiatives.
The main use of business rates is to provide revenue to the government. It supports local services and activities which benefit the community. It is important for businesses to pay these rates if they are working on a property. With better planning, businesses can manage expenses and also understand any schemes that can reduce their burden from these taxes.
Calculating Business Rates
Understanding how authorities calculate your business rates is important. It helps you manage your costs more effectively. Better-managed costs will allow you to control your finances and spend in a more effective manner. A set of formulae and rules calculate these rates to ensure that businesses contribute fairly to the local community.
In this part, we will understand the key components of calculating business rates. Here, we'll also learn about cost-saving opportunities for businesses.
Business Rates Formula
Business Rates = Relatable Value x Business Rate Multiplier
Key Components
- Relatable Value: The relatable value of a property is calculated based on the annual rent of the property. This rent would be the amount asked if the property was available to let on an open market. Relatable value is reviewed every five years.
- Business Rate Multiplier AKA Uniform Base Multiplier: It plays an important role in calculating business rates. It is the amount in pence (p) on every pound of the relatable value that a business should pay every year.
Example
The relatable value of the property is £20,000 and the business rate multiplier for the year 2024 to 2025 is 54.6p. This means that for every pound (£) of relatable value, businesses must pay 54.6p.
- Relatable Value: £20,000
- Business Rate Multiplier: 54.6p
- Business Rate = £20,000 x 54.6p = £11,000
With that result, the business rate for the property will be £11,000.
Overview of Business Reliefs
Managing a business can often cause a financial burden. To make it simple, the government offers different relief schemes for businesses. They ensure businesses have flexibility and reduce the overall amount of business rates. For any business, understanding these reliefs can make a huge difference in their extra costs. Let us look at some of these reliefs:
- Small Business Rates Relief
- Supporting Small Business Relief
- Retail, Hospitality, and Leisure Relief
- Charities and Community Amateur Sports Club Relief
- Rural Relief
- Improvement Relief Scheme
- Newspaper Relief
- Empty Property Relief
- Film Studio Relief
- Rate Relief and Subsidy Control
Applying for business relief can help you get off the financial burden. They support businesses in different situations. With the help of these reliefs, you can ensure your business is financially strong and ready for success.
Managing and Paying your business rates
Managing and knowing how to pay business rates correctly is important for the financial health of a business. These are recurring costs, and the first step is to understand your bill. Every bill mentions the relatable value, business rate multiplier, and any relief or discounts. Reading this brings accuracy and also helps to further reduce the bill. The next step is to set up a payment plan. Monthly direct debits are the easiest way and it can ensure that the payments go on time.
It is also important to look for any reliefs or discounts to minimise your expenses. Staying informed about any changes in the values is also important. As this can also impact your final amount. At last, making a budget for business rates can make sure that your business is financially stable.
What should you do if you do not agree with your business rates?
If you believe authorities have calculated your business rate wrongly, start by reviewing your bill and ensuring all the details are correct. You also need to check the relatable value and the business rate multiplier to match up with current market conditions. If anything is wrong then you can ask the local council for a recheck.
If the relatable value is still high then you can appeal to the Valuation Office Agency (VOA). Also, you will need to submit a formal request to have the value assessed. The VOA will further review the information and check if the value needs any adjustments. It is important that you should keep paying your business rates during the process to avoid any penalties. Any professional advice can also help make the appeal stronger.
Conclusion
Summing up, understanding, and managing business rates is very important for every business. Without enough details, it can be hard to understand. They play a vital role in giving back to the society. By understanding how the authorities calculate them and the formula behind them, business owners can ensure they meet all legal requirements without feeling pressured. There are also steps to follow if you think your business rates are too high.
Having proper information about business will not only help you manage business expenses but also allow you to be more financially stable. You will also be able to take advantage of available discounts and relief in order to minimise your costs. Which will allow you to invest more in your business. The College of Contract Management offers detailed courses to help you gain a better understanding of them and be more confident. So, take the first step to learn and take control of your money!
