Running a business comes with many challenges, and business rates can often feel like an unnecessary financial burden. However, many businesses in the UK overpay on business rates simply because they are unaware of the reliefs available to them. Whether you’re a small business owner, a large corporation, or someone with an empty property, there are various ways to reduce your business rates liability. In this guide, we’ll explain the different types of business rates relief and how to apply for them to lower your costs in 2025.
What Are Business Rates and Why Are They Important?
Business rates are a property tax that applies to most non-residential properties, such as shops, offices, warehouses, pubs, salons, and holiday lets. These rates help fund local services, and if you own or rent commercial property, you’re likely paying them. The amount of business rates you owe is determined by the rateable value of your property, which is the estimated open market rental value as assessed by the Valuation Office Agency (VOA) for England and Wales. In Scotland, this is determined by the local Assessor, and in Northern Ireland, by Land and Property Services (LPS).
Once your rateable value is set, it’s multiplied by the government’s multiplier (also called the “poundage”) to calculate your bill. This multiplier is adjusted annually, with the latest review being in 2023.
Types of Business Rates Relief in the UK
There are several relief schemes available to businesses in the UK that can significantly reduce your business rates bill. Here’s an overview of the most common types of relief:
1. Small Business Rates Relief (SBRR)
- This relief is aimed at businesses with low rateable values. If your business property has a rateable value of £15,000 or less, you could qualify for SBRR.
- If your property’s rateable value is £12,000 or less, you’ll receive 100% relief. Properties with a value between £12,001 and £15,000 get a tapered relief, gradually reducing the amount.
2. Rural Rate Relief
- For businesses located in rural areas, you may qualify for 100% relief if you’re the only business of your type, such as a village shop or pub. Eligibility depends on the size of the population and the nature of the business.
3. Charitable Rate Relief
- Registered charities can claim 80% relief on their business rates, with an additional 20% relief potentially granted by the local council. Community Amateur Sports Clubs (CASCs) may also be eligible.
4. Retail, Hospitality, and Leisure Relief (RHL)
- Businesses in sectors such as retail, hospitality, and leisure may be eligible for up to 75% relief for the 2024-2025 tax year. This relief applies to businesses like shops, restaurants, cafes, hotels, and pubs, but it will reduce to 40% in 2025-2026.
5. Enterprise Zone Relief
- For businesses operating within designated Enterprise Zones, you may receive significant business rates reductions or exemptions as part of local regeneration efforts.
6. Empty Property Relief
- If your commercial property is vacant, you might still be liable for business rates. However, there are exemptions and reliefs available under certain conditions. For instance, properties with a rateable value under £2,900 are exempt in England, and other exceptions may apply for listed buildings or those with legal restrictions preventing occupation.
How to Avoid Business Rates on Empty Property
Vacant properties can still attract business rates unless you qualify for relief or exemptions. Here are some of the key exemptions to consider:
- Listed Buildings and Ancient Monuments: These properties are exempt from business rates until reoccupied.
- Low Rateable Value: Properties with a rateable value of under £2,900 are exempt from business rates in England.
- Prohibited Occupation: Properties that cannot be legally occupied due to health and safety regulations or other restrictions may qualify for an exemption.
- Charitable or CASC Use: If the next use for the property is intended for a registered charity or community sports club, you may be eligible for relief.
Business Rates Relief Across the UK
Business rates relief schemes vary across different parts of the UK. For example:
- Scotland: The Small Business Bonus Scheme provides up to 100% relief for properties with a rateable value up to £15,000 and partial relief for properties up to £35,000.
- Wales: Full relief is available for properties with a rateable value under £6,000, with tapered relief up to £12,000.
- Northern Ireland: Small Business Rate Relief offers relief based on the Net Annual Value (NAV), with up to 20% relief for NAVs between £2,001 and £5,000.
Other Business Rates Reduction Schemes
In addition to the reliefs mentioned above, several other reduction schemes can help lower your business rates bill:
1. Transitional Relief
- If the revaluation of your property leads to a significant increase in business rates, Transitional Relief limits the rate at which your bill can rise over a few years.
2. Hardship Relief
- If your business is experiencing severe financial difficulties, you may be eligible for Hardship Relief. Your local authority will assess your situation and determine whether relief can be granted.
3. Improvement Relief
- Improvement Relief is available for businesses that invest in improving their properties. If property improvements result in a higher rateable value, you may be granted 12 months’ relief from the increased rates.
How to Apply for Business Rates Relief
In most cases, business rates relief is not applied automatically. It’s crucial to apply to your local council for the reliefs you’re eligible for. Missing out on these benefits simply because you didn’t apply can cost your business thousands of pounds annually.
Keep Track of Your Business Rates
To ensure you receive all the reliefs you’re entitled to, keep accurate records of your property’s rateable value and business expenses. If your property is vacant or you’re considering making improvements, you’ll need to notify your local council as soon as possible to avoid unnecessary charges.
Conclusion
Business rates relief is an essential tool for reducing costs and supporting the growth of your business. By understanding the reliefs available and how to apply for them, you can ensure that you’re not overpaying on your business rates. Whether you run a small local shop, a hospitality business, or manage an empty property, there are options to ease your financial burden. Always consult with your local council to confirm your eligibility and ensure you’re taking full advantage of available reliefs.
