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Employment » Other Support for Workers » How To Reduce Your Business Expenses with UK Rates Relief

How To Reduce Your Business Expenses with UK Rates Relief

By IntFormalities
Published on June 17, 2024
Estimated reading time: 6 minutes

Applying for business rates relief can help your business get back on its feet and continue to serve its customers, clients, and patrons. So that you understand your options, we’ll be covering what business rates are, how to apply for relief, who you need to talk to, and the form in which the help will be given.

Image depicting a tax calculator concept, highlighting Business Rates Relief.
Businesses can significantly reduce expenses in the UK through available rate relief options.

What Is a Tax Credit?

A tax credit is a payment from the government that provides tax relief — as an individual you receive money directly into your account if you are on a low income. This is in the form of a credit designed to top up the income of lower earners in the lowest tax band. A similar scheme exists for businesses and is referred to as business rates relief. 

How Do Business Rates Work?

If you operate your business from commercial premises, you will typically need to pay business rates. This includes settings such as factories, holiday lets, pubs, office spaces and warehousing. 

A business rates calculator will show you the amount you have to pay, and it is worth noting that the rate is not in direct alignment with the resale value of the property. Instead, business rates are based on the ‘rateable value’ that assesses the commercial utility of the building, not just the current market value. 

The rateable value produces a monetary amount, with those less than £12,000 of rateable value paying nothing. Properties above £15,000 will pay the full amount listed by the calculation, while those in the £12,001 to £15,000 range are on a sliding scale of 0-100%. 

If your property is empty, you will be exempt from paying for the first three months. This period extends to six months if you have an industrial property or warehouse unit. 

How Much Help Can You Receive with Business Rates?

This will vary significantly on a case-by-case basis. Contacting your local council is the best way to start this process. Here are the key points you should be aware of: 

  • If you can provide evidence of financial hardship through health or loss of income, you could be made 100% exempt for 12 months 
  • Having a second property entitles you to keep the business rates relief on your main property for 12 months 
  • Additional help is available for isolated rural businesses on a case-by-case basis 
  • If you are closing down your business, you must sell all of your associated assets within three years to qualify for 100% business rate relief 

How To Apply for Business Rates Relief?

Speaking directly with your local council is the simplest way to request an exemption or apply for a reduction in your business rates. This advice applies to businesses of all sizes that use one or more commercial properties for work: 

  • Step 1: Ask your local council to provide details of the rateable value of your property
  • Step 2: Justify your application: prove a drop in income via three months of financial statements, plead hardship with a doctor’s note, or provide a notice of relocation if your property is currently empty, for example 
  • Step 3: Submit your application directly to your local council which will typically acknowledge it electronically within one working day 

Should you wish to challenge the judgement that is made, you can appoint an agent to work on your behalf. This will chiefly involve arguing that the rateable value the council has calculated is incorrect. 

Who Is in Charge of Issuing Business Rates Relief?

This is a fully devolved issue handled by local councils across the UK. There is no national body that handles business rates relief because it is seen as a purely local issue. 

Who Should a Small Business Contact for Rates Relief Support? 

Small business tax relief is handled by the local council covering the region where your business is based. If you own properties across more than one council area, approaching the council that governs the land on which your primary property stands is the place to start. 

How Do You Report a Change in Circumstances?

This needs to be done by communicating via phone, email, or writing with your local council. A failure to report a change in circumstances will result in additional charges you have failed to pay being backdated to the date on which you became liable for them. Changes in circumstances include: 

  • A change in business premises or associated operating arrangements 
  • A change in use of your commercial premises for the purposes of making money 
  • Any instance where your property is being left empty or is closed for renovations 

Can You Receive Other Benefits with Business Rates Relief?

Applying for business a reduction in business rates will not impact your entitlement to personal benefits, such as a Universal Credit, child allowance, or other tax credits. However, if your reduction results in your business being able to grow quicker than expected, you will need to report your new higher income if you are on any form of means-tested personal benefits. This can be done here.

Business Rates Relief Helps Support Businesses 

The idea behind giving a business a reduction in business rates is to give it the operating capital to be able to recover and grow faster than it otherwise would. While taxation is overseen nationally by HMRC, tax relief of this kind is a local issue undertaken at a council level as it is closely linked to council tax estimates. 

FAQ’s 

What happens if you fail to give notice of a change in circumstances?

You will be charged the full amount you owe backdated to the day on which your circumstances changed. 

How long does the current retail, hospitality and leisure business rates relief last?

75% relief on all eligible properties in these industries will come to an end on 31 March 2025. If your cash cap limit exceeds £110,000 before this deadline, your eligibility will come to an end upon passing this threshold. 

Do any industries automatically qualify for business rates relief?

Farm buildings and surrounding land are automatically exempt from business rates. The same is true of buildings used to promote the training and welfare of those with physical or mental disabilities. 

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