Locations

Understanding Business Rates

What are business rates?

Business rates, also known as national non-domestic rates or NNDR, are a tax payable on all business and non-domestic properties. 

Since their introduction in 1990, business rates have been a necessary evil for businesses of all shapes and sizes. However, it is a tax that is not always well understood. Let’s take a look at how business rates work, why they exist, and how you, as a business owner, can make sure you are only paying what you need to.

Who pays business rates?

Business rates are payable on non-domestic properties including offices, shops, pubs, restaurants, warehouses and factories. If you use any property for non-domestic purposes, whether you own or rent the property, you are likely to have to pay business rates.

Certain properties are exempt, such as agricultural land and buildings, those used for religious worship or for welfare of disabled people. There are reliefs on certain properties in rural locations, on small businesses and non-profit organisations.

If you run your business out of a room in your home, you will not be required to pay. Business rates also do not need to be paid on empty buildings for three months after they are vacated but, in most cases, after three months, they’re liable to pay full rates again.

Do tenants pay business rates on offices rented from Needspace?

Yes, Needspace? offices are subject to business rates, and in most cases they are the responsibility of our commercial tenants in our offices in Hammersmith, Clapham NorthClerkenwell, Islington and Horsham. 

However, we look after business rates for our offices in Earlsfield and Crawley, and clients here do not need to worry about them.

Who sets business rates?

Business rates are based on the current Rateable Value (RV) of the building you use for your business. The RV is set by the government’s Valuation Office Agency (VOA) which also sets Council Tax. To calculate your bill, the RV is multiplied by the National Rate Multiplier. For 2020/21 the multiplier is set at 52.1p in the pound. 

Business rates example for 2020/21

Rateable Value £20,000

Multiplier 52.1p    

Tax payable £10,420

Rateable Value £10,000

Small Business Multiplier 49.9p  

Tax payable £4,990

Your local council has no say over the figures, although it is responsible for collecting it on the government’s behalf. Your local council sends out your annual bill in February or March every year to cover the amount due for the following tax year (starting in April). The Rate Multiplier is set each year based on the Consumer Price Index (previously, it was set on the Retail Price Index). 

You can find the RV for individual premises in England and Wales here. The last revaluation of properties was in 2017, and future revaluations will of course change bills in the years to come. 

Are you paying the right business rates?

The Rateable Value is set by the Valuation Office Agency, a part of HMRC, and represents an open market annual rent as it would stand on the premises on a set date. This figure is not always entirely accurate, as it cannot necessarily take into account any individual factors that may affect the value of all premises. 

Occupiers and owners can, therefore, appeal against the Rateable Value of the premises if they believe it is inaccurate. To appeal, you need to contact your local authority. The grounds for challenging a valuation on properties in England include:

  • an inaccurate original valuation
  • a change to the property or surrounding area such as long-running roadworks
  • the property should be split or combined with others 
  • the property details are wrong or incomplete

Appeals can be made directly to the Valuation Office Agency, but need to be thorough and in line with the government’s guidance.

What is Small Business Rate Relief?

The good news for smaller businesses in a single property with an RV of £12,000 or less is that they are 100% exempt from business rates. If the RV is between £12,001 and £15,000, relief is tapered from 100% to zero.

For businesses in properties with a rateable value of less than £51,000, a slightly reduced multiplier of 49.9p is used to calculate the business rates bill.

See more about business rates relief here

What are business rates used for?

Business rates are an important part of financing local government and currently generate around £30 billion a year. Part of the funds raised through business rates are redistributed back to local authorities according to a formula based on the size of the local population. 

There is no shortage of debate about the rights and wrongs of the current system. No doubt business rates will continue to be in the news for years to come.  

Do tenants pay business rates on offices rented from Needspace?

Yes, Needspace? offices are subject to business rates, and in most cases they are the responsibility of our commercial tenants. However, we look after business rates for our offices in Earlsfield and Crawley, and clients here do not need to worry about them.  

If you would like to find out more about situating your business in an office where business rates will never be a concern, drop the team at Needspace? a line and we’ll be happy to chat with you about what’s available.

Get in touch today

Contact us





Press enter or esc to cancel