How Are Business Rates Calculated?

Business rates can be tricky for anyone to manage. But if you’re self-employed or you work from home, business rates can be particularly challenging.

This is your essential guide to business rates. We’ll explain what they are, how to calculate them, how to pay them, and how to find out if you’re eligible or exempt.

Business rates are a form of tax charged on property used to run a business

What Are Business Rates?

Business rates are a form of tax charged on any property that’s used for business purposes. This can be anything, from an office or shop, to a pub, factory or warehouse. So, for example, if you are a self-employed massage therapist and using your house as a place to conduct your work you may still have to pay business rates.

Do I Need to Pay Business Rates?

Any business that occupies non-domestic or commercial properties will have to pay business rates. This extends to domestic properties with areas that are used for non-domestic purposes. A good example of this is a shop or pub that might have a flat on the upper floors or a section of a house that’s used for business purposes.

If you work from home, you may have to pay business rates if you have a room that’s exclusively used for business purposes. You’re more likely to have to pay business rates if you’ve adapted part of your home for work purposes. So, if you have a home office or a workshop, you may have to pay business rates.

But don’t panic. Most people who work from home are exempt from paying business rates. We’ll explore exemptions in more detail below.

How to Calculate Business Rates

It all depends on a property’s “rateable value”. This is a property’s estimated value on the open market. You can find the rateable value of your business here.

To calculate your business rates, you’ll have to multiply your rateable value by a certain figure, called a multiplier. The multiplier tends to change with each tax year. If your rateable value is less than £51,000, then you’re classed as a small business. The small business multiplier for the 2019-2020 tax year is 49.1p. If your rateable value is more than £51,000, then you’ll have to use the standard multiplier. For the 2019-2020 tax year, the standard multiplier is 50.4p.

Once you’ve multiplied your rateable value by your multiplier, business rate reliefs apply. These are discounts offered by certain local councils. Examples include small business rate reliefs, rural rate reliefs, charitable rate reliefs and retail discounts. Your council will apply some reliefs automatically, such as the exempted building relief. But you’ll have to apply for any additional reliefs. Head here for more information.

Calculating business rates is complex, but many property experts offer free business rate calculators. Find one here.

How to Pay Business Rates

You pay your business rates directly to your local council. There’s a handy tool on the government’s website that will put you in touch with your local council. Just enter your postcode and you’ll find your business rate bill, and information about any business rate relief. This is also how you’ll pay your bill.

Find the government’s council lookup tool here.

Who and What is Exempt from Business Rates?

Certain buildings are exempt from business rates. These include agricultural buildings, buildings that offer welfare or training to disabled people, and buildings that are registered for public religious worship. For more information about exempt buildings, head here.

Do you need to pay business rates if you work from home?

According to government guidance, you’re exempt if you sell goods by post, or if you only use a small part of your home for your business. So if your bedroom doubles as an office, you’re probably exempt.

But if any of the following apply, you may have to think about business rates:

  • Your property is partially used for business and partially used for domestic purposes. If you live above a shop that you run, for example, you’ll have to pay business rates.
  • If you sell goods or services to people who visit your property, then you’ll have to pay business rates.
  • If you employ other people to work at your property, even if you’re still technically working from home, then you’ll have to pay business rates.
  • Have you adapted any part of your home for business purposes? If so, you’ll have to pay business rates. For example, you may have adapted your garage into a hairdressers, or your back bedroom into a workshop.

If you’re still unsure whether you need to pay business rates, you can contact the Valuation Office Agency for more information. Or if you’re based in Scotland, contact your local assessor.

Beyond Business Rates – Your Self-Employed Responsibilities

So if you work from home, you may be exempt from business rates. That’s a load off your mind!

But one thing you shouldn’t be without? Insurance.

Even if you’re self-employed, insurance offers essential peace of mind. If anything ever goes wrong, insurance will have you covered, and ensure that you’ll be able to continue trading.

At Tapoly, we have specialist insurance policies for self-employed, freelancers, SMEs and gig workers. Our cover starts at just 35p a day, with no hidden fees. Head here to get an online quote in just one minute.