Non domestic rates, commonly known as business rates, are a form of tax that businesses in the UK must pay on non-domestic properties. These rates are a significant expense for many businesses, as they can have a big impact on the overall cost of running a company. In this article, we will explore what non domestic rates are, how they are calculated, and provide some tips on how businesses can minimize their tax liability.
What are non domestic rates?
Non domestic rates are a tax on business properties in the UK. They are charged by local authorities and are used to fund local services such as schools, roads, and waste collection. The amount of non domestic rates that a business has to pay is based on the rateable value of their property, which is assessed by the Valuation Office Agency.
The rateable value is an estimate of the yearly rent that the property could be let for on the open market, assuming that the property is in a reasonable state of repair. The rateable value is then used to calculate the amount of non domestic rates that the business must pay each year.
How are non domestic rates Calculated?
Non domestic rates are calculated using a simple formula: rateable value x multiplier = annual bill. The multiplier is set by the government each year and is used to determine the actual amount of tax that a business must pay. The multiplier is currently set at 50.4p for small businesses and 49.3p for larger businesses.
For example, if a business property has a rateable value of £20,000, the annual bill would be calculated as follows:
£20,000 x 0.504 = £10,080
This means that the business would have to pay £10,080 in non domestic rates each year.
Tips for Minimizing non domestic rates
There are several ways that businesses can reduce their non domestic rates liability and lower their overall tax bill. Here are some tips on how to minimize non domestic rates:
1. Check the rateable value: It is important for businesses to regularly check the rateable value of their property to ensure that it is accurate. If a business believes that their rateable value is too high, they can appeal to the Valuation Office Agency to have it reassessed and potentially reduced.
2. Take advantage of reliefs and exemptions: There are several reliefs and exemptions available to businesses that can help to reduce their non domestic rates bill. For example, small businesses with a rateable value of less than £12,000 may be eligible for small business rate relief, which can provide significant savings on their tax bill.
3. Consider moving to a cheaper property: If a business finds that their non domestic rates are too high, they may want to consider moving to a cheaper property with a lower rateable value. This can help to reduce their tax liability and save money in the long run.
4. Invest in energy efficiency: Businesses that invest in energy efficiency measures such as solar panels or energy-efficient lighting may be eligible for discounts on their non domestic rates bill. These measures not only help to reduce tax liability but also have the added benefit of lowering energy costs.
In conclusion, non domestic rates are an important tax that businesses in the UK must pay on their business properties. By understanding how non domestic rates are calculated and taking advantage of reliefs and exemptions, businesses can minimize their tax liability and save money. It is important for businesses to regularly review their rateable value and explore ways to reduce their non domestic rates bill to ensure that they are not paying more tax than necessary.