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Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.
Business rates apply to all businesses with physical premises. Because these properties are non-domestic, they do not pay council tax. Instead, they pay business rates.
While business rates are generally lower in cost than council tax, they can put a strain on the operating cash flow of small businesses with slender profit margins. Fortunately, many SMEs can offset some of this cost by claiming small business rates relief.
What is small business rates relief?
Small business rate relief is designed to help smaller businesses with physical premises to stay solvent by granting them relief on the rates they pay.
In England, this works as follows:
Depending on the rateable value of the property, businesses may be able to claim relief of up to 100% on their business rates.
Small businesses in England can claim relief on business rates if the rateable value of the property falls between £12,001 and £15,000. Relief is proportionate to the rateable value within this £3,000 margin. So, for instance, a property with a rateable value of £13,500 (the mid-point between £12,001 and £15,000) will gain 50% relief.
Businesses whose properties have a rateable value of £12,000 or less get 100% relief on their business rates.
If a business expands and opens a second premise, that company can still claim business rate relief on its original property for 12 months. Businesses may continue to gain rate relief on this actual property after 12 months if:
- None of the company’s other properties have a rateable value exceeding £2,899
- The total rateable value of all properties is less than £28,000 in London or £20,000 outside of London
Note that slight business rate relief cannot be applied to an unoccupied property.
Small business rate relief for Scotland
Scottish small businesses may apply for the Small Business Bonus Scheme which is functionally similar to the English business rate relief, although it is activated by different rateable values.
Business rate relief is based on the cumulative rateable value of all properties used by the company at the following increments:
- Total rateable value up to £15,000- 100% relief
- Total rateable value of £15,001-£35,000 – 25% relief on every individual property whose rateable value is £18,000 or less
Small business rate relief for Wales
Welsh small businesses can claim business rate relief of 100% for premises with a rateable value of up to £6,000. Relief is then tapered for business premises with a rateable value between £6,001 and £12,000 in much the same way as the English system. Rate relief is limited to two properties per company in each local authority.
In late 2022, Minister for Finance and Local Government Rebecca Evans MS announced an additional programme of business rate support in the 2023-24 financial year. The new programme means eligible ratepayers receive up to 75% relief on non-domestic rates.
Small business rate relief for Northern Ireland
Businesses in Northern Ireland receive their own small business rate relief programme. Here, relief is offered in a three-tiered system based on the Net Annual Value (NAV) of business property:
- Properties with a NAV of £2,000 or less receive a 50% rate of relief
- Properties with a NAV of £2,000-£5,000 receive a 25% rate of relief
- Properties with a NAV of £5,000- £15,000 receive a 20% rate of relief
What to do if you don’t qualify for small business rate relief
If your company does not qualify for small business rate relief using the above criteria, there is an additional option for businesses in England.
If your business premises has a rateable value of less than £51,000, your business rates are calculated via the small business multiplier of 49.9 pence. This is lower than the standard multiplier of 51.2 pence.
Small business rate multipliers explained
A business rate multiplier is the number of pence paid in business rates per pound of rateable value before discounts or reliefs are deducted. Since the 2020-2021 financial year, business rates have remained unchanged. For the 2023-2024 financial year, the standard business rate is 51.2 pence while the small business rate is 49.9 pence.
How to estimate your small business rates
Estimating your small business rates should be an integral part of your company’s financial forecasting. Fortunately, whether you qualify for business rate relief or not, it is a fairly simple calculation:
- Find the rateable value of your property on the government website. For the 2023-2024 financial year, this is based on an estimate of its open market rental value on 1 April 2021
- Use the appropriate multiplier for the size of your business (49.9p for rateable values of £50,999 or less, 51.2p for values of £51,000 or more)
- Multiply the rateable value by the appropriate multiplier to get your rates payable
- Deduct any rate relief to which you are entitled based on the rateable value of the property
Small business rates relief FAQs
Am I eligible for business rates relief?
Your eligibility for business rates relief depends on the rateable value of your business premises. Relief is tiered in proportion to the rateable value of a property, although this varies by country. Businesses may claim 100% rate relief if the rateable value of their property is:
- £12,000 or less for a single property in England
- £15,000 or less for one or more properties in Scotland
- £6,000 or less for a single property in Wales
How do I claim small business rates relief?
Eligible businesses can apply for relief by filling out a small business rates relief form from their local council.
Who qualifies for small business rates exemption?
Businesses qualify for business rates exemption in the form of 100% relief if the rateable value of their properties falls below the predetermined limit of 12,000 for England, £15,000 for Scotland or £6,000 for Wales.
Some properties are also exempt from paying business rates including
- Places of worship
- Agricultural buildings
- Premises dedicated to the welfare or training of disabled people
What is the small business bonus scheme?
The small business bonus scheme is Scotland’s business rate relief system. Unlike its equivalent systems in England, Wales and Northern Ireland, it is not based on a single property but the cumulative rateable value of all properties used by the company.
Can I claim small business rate relief for two businesses?
Only a single individual or company can be eligible for rate relief. Under section 43 of the Local Government Finance Act 1988, the ratepayer is the person occupying the property. So in the case that a company occupies a property, the company is considered the legal entity liable for rates.
If a partnership occupies a property, the partners share responsibility for rates and therefore share rate relief. If a partner also occupies another property, the other property must also be taken into account when applying for small business rate relief as partnerships are not usually separate legal persons.
Can I challenge my business rates if I think they are inaccurate?
Yes. The government sets funds aside every year for business rate rebates. The primary reason why a business may challenge its business rates is that the company deems the estimated rateable value of a property to be inaccurate. The Valuation Office Agency (VOA) is a government body that handles all checks and challenges. If you believe that the estimated rateable value of your property is inaccurate, contact the VOA.
