Introduction

There has been a lot of attention drawn to the forthcoming changes to business rates, much of it covering those businesses that will be hardest hit by the changes. While some businesses are facing large increases, this isn’t reflective of the picture overall. This briefing sets out what April’s changes to rateable values – the value of buildings used to calculate business rates – will mean for the business rates paid in cities up and down the country.

Context: What is changing?

The Valuations Office Agency (VOA) undertakes periodic revaluations of all commercial properties in England and Wales so that the business rates levied on a property reflect the rental value of it.1 The last revaluation was implemented in 2010, and the current revaluation will come into effect from 1 April 2017.

The valuation assigns a rateable value to each property. A multiplier is then used to calculate the business rates due on the property. For example, if the rateable value of a property is £40,000, and the multiplier is 48 per cent, then the business rates charged on that property for the year would be £19,200.

The multiplier is also changing as a result of revaluation. This is because by law the total amount of business rates collected remains fixed (except for adjustments for inflation and the cost of appeals). The result is that as valuations of properties change, then the multiplier must adjust too.2 There are a number of multipliers – ones for small and large properties, which are different in the City of London, the rest of England and Wales, and all are changing.

Furthermore, the thresholds for who pays what are changing too. Currently businesses in properties with a rateable value lower than £6,000 pay no business rates. This is increasing to £12,000. And the threshold for which business are subject to the small business multiplier is changing too – rising from 18,000 (£25,500 in London) to £51,000. This means that many more properties will be exempted from rates, while many more will also be subject to the lower small business multiplier.

Footnotes

  • 1 In some cases, such as pubs, the rateable value is decided determined on the trade that the pub does, rather than its floorspace.
  • 2 Sandford, M (2017), Business rates: the 2017 revaluation, London: The Stationery Office.