Table of Contents:
- Business rates calculation – basics
- How to work out business rates – step-by-step guide to calculating business rates
- Strategies to reduce business rates
- How to calculate business rates – summary
Business rates calculation – basics
Business rates are crucial for businesses occupying commercial properties, as they are a form of tax applied to most non-domestic premises such as offices, shops, and factories. The rateable value of a property, assessed by the Valuation Office Agency, reflects its open market rental value.
This value is then multiplied by a government-set figure (the "multiplier") to work out business rates owed. Understanding this system helps businesses manage costs and plan effectively, as these rates contribute significantly to operational expenses. Accurate calculation ensures that businesses aren't overpaying.
How to work out business rates – step-by-step guide to calculating business rates
There is no official, government-supported UK business rates' calculator, but merchants can estimate business rates using the Valuation Office Agency (VOA) website.
To calculate business rates, merchants should begin by finding their property's rateable value on the Valuation Office Agency (VOA) website. The rateable value is based on a property's estimated rental value on the open market.
So how is rateable value calculated? To find the rateable value of a property on the Valuation Office Agency (VOA) website, go to the VOA's business rates section. Use their search tool by entering the property’s postcode or address.
Once located, the system will display the property's rateable value, which is an estimate of its annual rental value.
This figure is used to calculate business rates. The VOA website also provides guidance on how rateable values are assessed and offers an option to appeal if the valuation is believed to be incorrect.
Next, apply the relevant multiplier, which the government sets annually—this could be the standard rate or a reduced rate for small businesses. Multiply the rateable value by the multiplier to determine annual business rates.
So, how business rates are calculated? For example, a property with a £20,000 rateable value and a 0.51 multiplier results in a £10,200 annual charge.
Estimating business rates varies slightly between the UK and Scotland, and both regions have unique approaches. Business rates' calculator in the UK (for England and Wales) involves using the property’s rateable value and applying the national multiplier.
In contrast, the business rates calculator in Scotland uses a similar process but with Scotland-specific multipliers and reliefs, which can differ from those in other parts of the UK. Regional differences in small business relief and revaluation timelines can affect how rates are calculated in each area.
Strategies to reduce business rates
To potentially reduce business rates, there are several options to consider:
Appeal the rateable value of a property if it’s believed to be too high.
Explore reliefs, such as:
Small business rate relief (providing reductions for eligible smaller properties)
Charitable relief (for nonprofits)
Look into regional reliefs, such as rural or enterprise zone relief, if the property qualifies.
Check for temporary exemptions, which may be available for businesses undergoing renovations or those affected by local disruptions.
Additionally, consulting with a professional can help ensure small businesses are aware of all the reliefs and reductions available to them. By taking these steps, merchants can ensure they’re not overpaying and make the most of every opportunity to reduce their business rates.
How to calculate business rates – summary
Understanding and estimating business rates is vital for controlling operational costs. From calculating rates using the rateable value and government-set multipliers, to exploring reliefs and appealing inaccurate valuations, there are several strategies for merchants to ensure they’re not overpaying.
By staying informed and proactive, small businesses can reduce financial strain and optimise their business operations. To further streamline their business, merchants should consider efficient payment solutions like those offered by Clover. Learn more about accepting payments here: Clover solutions.
