What is Rateable Value and Why is it Important?
If you own or lease a commercial property, you will have no doubt been hit by a barrage of terms, charges, and regulations that you may have previously been unaware of. Of course, if you are a seasoned investor in commercial property, you may be up to speed, but it does not always mean you fully understand why some of the things exist, or why they cost what they do.
In this edition of our blog, we look at rateable value, what it is, and why it is important.
What is rateable value?
The rateable value of your commercial property is the figure used to work out what your business rates will be. It is based on an assessment of what the annual rent would be if the property were on the open market at a specific valuation date.
Covering all properties not used for domestic purposes, the rateable value will help calculate the business equivalent of council tax. You can work out an estimate of your business rates yourself with a simple formula or use the Valuation Office Agency (VOA) to do it for you.
At present, the rateable value helps determine the amount you pay for your annual business rates charge, using 1st April 2021 as its property valuation benchmark. This was set in April 2023. Until 1st April 2023, business rates were determined by using rateable values from April 2015.
Are business rates and rent the same thing?
No, and it is important to remember this. Otherwise, you could find yourself falling behind on an expensive bill. Think of business rates as your council tax for the commercial property and rent, as rent.
How is rateable value calculated?
The rateable value is calculated by your local authority. In some cases, the method for working it out will vary between councils. However, business rates are worked out by using one of two multipliers as set by the government. Each one applies to a different property value. These change with inflation each year.
The VOA will value all business properties, using the 1st April 2021 valuation as its point of reference. Depending on how that property is valued will then determine which multiplier should be used.
For example, the VOA may say your business has a rateable value of £200,000. This would put it in the category of a standard multiplier. If the commercial property had a rateable value of just £30,000, it would be eligible for the small business multiplier to work out its business rates. And, if the property has a rateable value of £12,000 or less, no business rates will be payable. Unless there are multiple properties owned by the business.
Standard multiplier
The standard multiplier used for calculating your business rates is set at 54.6p and will apply if your commercial property has a rateable value of £51,000 or more. Therefore, to find your business rates, you would take your rateable value, let’s say, £100,000, and multiply it by 0.546.
£100,000 x 0.546= £54,600.
With this calculation, your annual business rates using your ratable value would be £54,600.
Small business multiplier
If your business has a rateable value of £50,000 or less, your business rates would be calculated using the small business multiplier. This is currently set at 49.9 pence. So, using the same as we did above, take your rateable value, in this case, £40,000, and multiply it by 0.499.
£40,000 x 0.499=£19,960
This means your annual business rates would be £19,960.
If though, your rateable value was to be less than £15,000, you could be eligible for rate relief which would reduce your business rates bill.
What if I think my rateable value is too high?
You can appeal your ratable value, which could help you see a reduction in your business rates, but much depends on how accurate the information held by the VOA is. They calculate the rates for each commercial property based on the information they hold. If you feel it is wrong, you can update the information on the government website, or call the VOA on 03000 501 501.
Will my rateable value change?
It can do. Revaluations occur when the VOA needs to adjust the rateable value of business properties to match the current property market. The most recent revaluation took place in April 2023. The next is set for April 2026.
The rate calculated on April 2023 is based on the amount of rent the property could have been let for on 1st April 2021.
If your rateable value changes, your business rates may also change. This can happen due to the revaluation increasing the value or if you amend the building. They could be cosmetic, or they could be due to the nature of the business changing. All changes must be reported immediately. That way, you pay the correct amount, and will not be stung by surprise, backdated charges when the next revaluation takes place, or when you update your information.
In some cases, you may also see a reduction put in place temporarily if severe disruption hinders your business. Flooding, roadworks, and COVID at its peak can all see temporary rate reductions introduced.
Presently, some businesses within the leisure, retail and hospitality sectors are benefiting from a 75% business rates relief for 2024/25. This is capped at £110,000.
What if the revaluation has increased my business rates significantly?
When a revaluation takes place, some businesses may see their rateable value or business rates decrease. Some may see them stay the same. Others may see them rise. Transitional Relief is in place to assist those with the rising rates. It limits the amount your bill can rise each year, meaning that the increases to your business rates bill will be gradual rather than instant.
Can I be exempt from business rates with a rateable value?
Yes. We touched upon the fact you will be exempt from business rates if you have a rateable value of less than £12,000 but further exemptions may also apply.
Farmland and buildings can be exempt as can properties used for training or welfare of people with disabilities. Church halls and other religious buildings may also be exempt too. Each of these building types must meet specific rules to remain exempt though so it is best to clarify with your local authority in advance.
You can also benefit from an exemption if the property is unoccupied. A caveat though is that the lack of occupancy must not be longer than three months. If it is, the full rate will apply.
Certain buildings may benefit from slightly longer periods though. Industrial properties can have a further three months without charge.
There are also exemptions for charities, listed buildings, and community sports clubs. Rules are subject to change though so consulting the government website or local authority would be advisable.
If you have found that your rateable value makes your business rates difficult to afford, you could consider selling a commercial property to Gaffsy. This rapid route to sale means you could sell your property fast and be set up in a more affordable location quickly. Operating as cash buyers, we can make an offer within minutes and should you accept, the entire process can be completed in as little as seven days. Furthermore, you do not need to worry about costly fees either as our service is free. With a guaranteed sale, it becomes easy to say goodbye to the high business rates you were experiencing, and hello to a new, more refined, more cost-effective base for your business. Contact us today to see how we can make it happen.
