Business Rates

How much are Business Rates?

Business rates are an essential charge on business property including commercial shops, offices, warehouses, commercial apartments, public houses and it also applies to a section of a private house if you conduct your business out of there. In England and Wales most local authorities calculate business rates based on the current rateable value of the land and then multiplying this by a pre-agreed rate per pound called the business rates multiplier.

The purpose of this is to provide a transparent way for customers and other stakeholders to understand what they are paying for. There are three main factors to consider when calculating rates, these are: the land rate, the tenancy or lease rate and the business rates. Understanding how these vary will help you make an informed decision when looking to invest.

When deciding what are business rates, the local council will take into account all relevant circumstances, including any potential improvements which will make the land more attractive. This means that some areas will have higher rates than others. You need to check this with your local council as not all will have changed rates at the same time or for the same reasons.

One thing you can do is get a copy of the last few years’ property and sales data into your computer, then do some research into the likely local council figures. If they are slightly higher than expected then this could mean you have got some great relief. In some cases this can be enough to knock a couple of percentage points off the final bill.

The second factor to consider when trying to work out how much are business rates for non-domestic purposes is the average annual rent over the last twelve months. The rate for this is generally larger than the rate for domestic purposes because non-domestic premises such as shops and other similar businesses have higher annual rent. Of course, if you can prove an argument that the average rent over the last twelve months for your non-domestic premises was higher than the average rate charged by the council for domestic purposes then you will certainly have saved yourself money.

There are two main ways in which you can get this information from your local council – online or in person. If you choose to go online, you should still try and gather at least three quotations from as many local councils as you can. Of course when searching online you should bear in mind that it is not guaranteed that the quotes that you are given will be the same as the final business rates due to a variety of factors such as how much information you give to the company, how accurate the information you provide is and how much documentation you may need to provide with your application form.

A quick example would be if you want to know how much are business rates for a one month’s period inclusive of all bills. You would then need to provide the business rates with your request and in return they will calculate how much your premises will cost you for one month during the financial year. They will then break this down further into weekly figures which show how much it will cost to run the premises during this time. Then they can calculate the amount you will be billed at the end of the financial year based on how much your business profits were from those premises.

One of the main differences between business rates and other types of property tax is that business rates are charged on a turnover basis. This means that your rates will change with how long it takes you to pay them. Any time your land or premises is let out it will then be eligible to incur business rates. It is important that you understand how much these rates will be before you make any decisions. A good idea is to start calculating how much you will be charged with a commercial tenancy rate calculator.

A typical example would be that if you have a warehouse you may be charged different business rates than if you had only one or two storage units. The reason for this is because the warehouses are used more often by customers and they will be paying a higher rate as compared to regular store premises. Another good example of this is if you have offices in a building. These are also counted as business properties and will be charged different rates. Sometimes the prices charged will be based on the vacancy rate for that particular day.

A good idea to get a clearer picture of what are business rates and how they affect your property is to request a quote from the local authorities. By doing this you will be able to see at a glance what is being charged for various rates. If you want a better understanding of how these rates are calculated and what factors go into the calculation then it is advisable that you contact the local authorities directly.

Dan Lewis is a business and finance consultant who stared is career with Capital One and worked as a business and finance analyst for over 25 before leaving the corporate world to create this blog.