Business Rates – What are they and how are they calculated?

Many people think that Business Rates are a payment for services received from the Local Council. They are not:- Business Rates are a property tax. Just as individuals pay income tax based on the level of income that they receive, businesses pay Business Rates on the level of rental value of the premises that they either occupy or own, even if the property is vacant.

At present Business Rates are based on the rental value of a property as at the 1^st April 2008 which is unfortunate as the economy was somewhat more buoyant then, than it has been over recent years.

If the rental value of a property was £100,000 as at the 1^st April 2008 and the business rate is 50 pence in the pound then the amount of Business Rates payable would be £50,000 i.e. £100,000 x 0.50 = £50,000.

The assessment which is based on the rental value is known as the Rateable Value and the business rate is known as the rate poundage. Thus; in relation to the example in the paragraph above the Rateable Value would be £100,000. The rate poundage for the 2015 / 2016 rate year is 48.2 pence in the pound. The rates payable for this property would, therefore, currently be £48,200 i.e. £100,000 x 0.482 = £48,200.

There will soon be a Revaluation of all properties for Business Rates which will be effective from the 1^st April 2017. This will be based on the rental values of properties as at the 1^st April 2015. Therefore, anyone currently thinking about renting any commercial property at the moment will have to give serious thought as to the level of rent that is paid because this will determine the level of their Business Rate Liability and it will be seen from the above that, as a rule, this amounts to approximately half of the rental value!

Should you wish to discuss your business rates in greater detail then please do not hesitate to contact our rating expert Keran Lewis.