Running a successful business on the South Coast is an exciting venture. However, understanding the financial landscape is crucial for long-term profitability. One significant cost that can impact your bottom line is business rates. We know, it’s not the most exciting topic, but understanding it can save you a pretty penny.
What are business rates?
Think of business rates as your rent to the local council. It’s a tax based on the ‘rateable value’ of your commercial property. The higher the rateable value, the more you pay. Now, we know what you’re thinking, “Great, another bill to worry about!” But don’t panic, there are ways to manage it.
How are business rates calculated?
The calculation might sound a bit complex, but we’ll break it down for you. First, there’s the rateable value. This is essentially a figure that represents the rental value of your property if it were let on a hypothetical date. Then, there’s the business rate multiplier, which is set by the government. Multiply the rateable value by the multiplier, and voila, you have your business rates bill.
For Small Business Rate Relief (SBRR) in England, as of 19th August 2024, no business rates are payable if your property’s rateable value is £12,000 or less. If your rateable value is between £12,001 and £15,000, you’ll receive partial relief.
So, let’s say you own a small shop in Brighton with a rateable value of £15,000.
Rateable value = the estimated rental value of your property. In this case, it’s £15,000.
Multiplier = a figure is set by the government. For the financial year 2024/25, the standard multiplier for England is £0.499.
Business rates = £15,000 x £0.499 = £7,485
So, your annual business rates would be £7,485.
It’s important to note that all the figures above can change. Always check the latest government guidance or contact your local council for the most accurate information.
Understanding your rateable value
Your rateable value is a crucial factor in determining your business rates. It’s an estimate of the rental value of your property if it were let on a specific date. This value is set by the Valuation Office Agency (VOA).
To find your rateable value, you can check your business rates bill or use the VOA’s online checker.
It’s pretty important to understand how your rateable value was calculated. Factors that can influence it include:
Property size: Larger properties generally have higher rateable values.
Location: Properties in prime locations tend to have higher rateable values.
Property condition: The condition of your property can impact its rental value.
Use of the property: The purpose of your business can affect the rateable value.
If you believe your rateable value is incorrect, you can challenge it. This process is known as a valuation appeal.
Reduce the burden
Luckily, there are a few ways to reduce your business rates burden. We’ll focus on a couple of common ones:
Small business rate relief (SBRR)
If your business has a low rateable value, you might qualify for this. Low rateable value means the annual rental value of your property is below a certain threshold set by the government. The amount of relief you get depends on your property’s rateable value.
As we mentioned above, no business rates are payable if your property’s rateable value is £12,000 or less.
Empty property relief
Empty Property Relief is a temporary exemption from paying business rates on a commercial property that’s unoccupied. The goal of this relief is to incentivize property owners to re-occupy their buildings quickly. If your property is empty, you might qualify for relief. However, there are conditions, so it’s worth checking.
Local reliefs in East and West Sussex
Both East and West Sussex offer a range of reliefs tailored to support businesses. These include things like charitable rate relief, retail hospitality and leisure relief, disability relief and rural rate relief.
Check out your local council’s website for more guidance and the most up-to-date legislation.
Final tips for business owners
- Check your rateable value. Ensure it’s accurate. If you think it’s wrong, you can challenge it.
- Understand your reliefs. Make sure you’re claiming everything you’re entitled to.
- Shop around. When looking for a commercial property, consider the business rates as part of your overall costs.
- Plan ahead. Budget for business rates as part of your financial planning.
Business rates can be a complex issue, and regulations can change. If you’re unsure about anything, it’s always a good idea to seek professional advice.
Jacobs Steel are estate and letting agents with offices in Worthing, Findon, Lancing, Shoreham-by-Sea and Hove. Our commercial sales & lettings team will guide you through the entire process, communicating with you every step of the way.
Disclaimer: While we aim to provide accurate information, this article is intended as a general guide and doesn’t constitute professional advice. Always consult with a qualified professional for specific guidance.