How Do Business Rates Work?

Business rates are taxes charged on non-domestic properties in the UK. They’re applied to building such as shops, factories, warehouses, hotels and restaurants- basically, anything which isn’t somebody’s home.

The local council collects the money. Half is invested directly back into the community, and the rest is paid to the central government, where it is redistributed around the country in the form of grants.

Some buildings used for farming or charity received heavy discounts of up to 80%.

Business rates are calculated using a ‘multiplier set by the central government. In 2020 the standard multiplier was £0.54. There is a higher multiplier for more valuable properties.

The multiplier is applied to the ‘rateable value’ of a property, which is an estimate of how much a property could earn through rent in a year on the open market.

Businesses with a rateable value of less than £15,000 are sometimes eligible for tax relief.

So how do calculations look in practice?

Let’s imaging you have a shop with a rateable value of £12,000. The multiplier is £0.54.

12000 x 0.54 = £6480

Because your rateable value is less than £15,000, you may also be eligible for tax relief as a small business.