All businesses with physical locations are subject to small business rate relief. These properties do not pay council tax since they are non-domestic. They pay commercial rates in their place.
Business rates can be expensive for small enterprises with thin profit margins, even though they are often less expensive than council tax. Thankfully, a lot of SMEs can reduce some of this expense by requesting small business rates relief.
What is small business rates relief?
The small business rate relief provides smaller companies with physical locations with financial support by reducing the rates they must pay.
This operates as follows in England:
Businesses may be eligible for rate relief of up to 100%, depending on the rateable value of the property.
If the property’s rateable value is between £12,001 and £15,000, small businesses in England may be eligible for business rate relief. Within this £3,000 range, relief is proportionate to the rateable value. Therefore, a property with a rateable value of £13,500 (the middle value between £12,001 and £15,000) will receive 50% relief.
If properties are rated at £12,000 or less, businesses receive a 100% rate reduction on their business rates.
If a company grows and builds a second location, it can still make a 12-month claim for a business rate reduction on its initial property. After a year, businesses may continue to receive rate reductions on this real estate if:
None of the company’s other properties are worth more than £2,899 in rateable value.
The total rateable value of all properties in London is less than £28,000, and it is less than £20,000 outside of London.
It is important to note that minor business rate relief cannot be given to a vacant property.
Read here: How to Avoid VAT with Two Businesses
Small business rate relief for Scotland
Small businesses in Scotland can apply for the Small Business Bonus Scheme which provides rates relief to help owners of non-domestic properties deal with the impact of coronavirus. The scheme activates based on different rateable values, but it functions similarly to business rate relief in England.
Business rate relief is calculated in the following increments based on the total rateable value of all properties used by the company:
- 100% relief on total rateable value up to £15,000
- Overall rateable value £15,001-£35,000 – 25% relief on all individual properties with a rateable value of £18,000 or less.
Small business rate relief for Wales
Small businesses in Wales can claim a 100% business rate reduction on premises with a rateable value of up to £6,000. The system then phases in relief for commercial properties with a rateable value between £6,001 and £12,000, resembling the English system. Each company is limited to two properties for rate relief by each local authority.
Rebecca Evans MS, Minister for Finance and Local Government, announced a further program of business rate relief in the fiscal year 2023-24 in late 2022. The new program provides eligible consumers with up to 75% reduction in non-domestic rates.
Small business rate relief for Northern Ireland
Northern Ireland businesses have their small business rate relief program. In this case, relief is provided in three tiers based on the Net Annual Value (NAV) of commercial property:
- Properties having a NAV of £2,000 or less qualify for a 50% tax break.
- Properties having a NAV of £2,000-£5,000 qualify for a 25% tax break.
- Properties having a NAV of £5,000-£15,000 qualify for a 20% tax break.
What should you do if you are not eligible for small business rate relief?
If your company does not meet the above conditions for small business rate relief, there is another alternative for enterprises in England.
If the rateable value of your business premises is less than £51,000, we use the small business multiplier of 49.9 pence to calculate your business rates. This is less than the 51.2 pence normal multiplier.
Rate multipliers for small businesses
The business rate multiplier refers to the number of pence paid in business rates per pound of rateable value before discounts or reliefs. Business rates have been stable since the fiscal year 2020-2021. The regular business rate is 51.2 pence for the fiscal year 2023-2024, while the small business rate is 49.9 pence.
How to Calculate Small Business Rates
Calculating your small business rates should be an important element of your financial planning. Fortunately, determining whether you qualify for business rate relief is a rather straightforward calculation:
- Through the government website, you can find the rateable value of your property. This is based on an estimate of its open market rental value on 1 April 2021 for the fiscal year 2023-2024.
- Employ the multiplier that corresponds to the size of your company (49.9p for rateable values of £50,999 or less, 51.2p for values of £51,000 or more).
- To calculate your rates payable, multiply the rateable value by the relevant multiplier.
- Deduct any rate relief you are entitled to based on the property’s rateable value.
See also: How to set up a successful Rental Property Business in 2023
FAQs on Small Business Rate Relief
Am I eligible for business rate relief?
The rateable value of your business premises determines your eligibility for a business rate reduction. The relief varies by country, but it is tiered in proportion to a property’s rateable value. Companies are eligible for a full rate reduction if the rateable value of their property is:
- A single property in England should cost no more than £12,000.
- £15,000 or less for one or more Scottish properties
- £6,000 or less for a single Welsh home
How can I claim small business rates relief?
Qualified businesses can apply for relief by completing a small business rates relief form available from their local municipality.
Who is eligible for a small business rates exemption?
Companies are eligible for 100% relief on business rates if the rateable value of their properties is less than £12,000 in England, £15,000 in Scotland, and £6,000 in Wales.
Certain properties, for example, are exempt from paying business rates:
- Worship areas
- Agricultural buildings
- Facilities dedicated to the welfare or education of disabled people
What exactly is the small business bonus program?
The small business bonus plan is Scotland’s known business rate reduction system. Unlike its counterparts in England, Wales, and Northern Ireland, it is based on the total rateable value of all properties utilized by the company rather than a single property.
Can I get small business rate relief for two businesses?
Rate relief is only available to a single person or business. Section 43 of the Local Government Finance Act 1988 defines the ratepayer as the person inhabiting the property. Hence, when a company occupies a property, the business is deemed as the legal entity liable for rates.
If a partnership owns a property, the partners are jointly responsible for rates and hence share rate relief. If a partner also occupies another property, you must include that property when asking for a small business rate reduction because partnerships are not normally independent legal persons
Can I appeal my business rates if I believe they are incorrect?
Yes. Every year, the government sets aside money for company rate rebates. The major reason a corporation may challenge its business rates is if the estimated rateable value of a property is incorrect. The Valuation Office Agency (VOA) is a government agency in charge of all audits and challenges. Contact the VOA if
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