Small business rates relief: eligibility, thresholds, how to apply

Published • 01/07/2024 | Updated • 01/07/2024

Taxes

Small business rates relief: eligibility, thresholds, how to apply

Published • 01/07/2024 | Updated • 01/07/2024

Taxes

Running a small business means getting to grips with a range of taxes. You’ll have to factor in Income Tax, National Insurance and VAT if you pass the relevant income thresholds, while limited company owners will also need to understand the ins and outs of Corporation Tax.

And if you have a dedicated physical location for your business, there’s another one to add to the list: Business Rates.

A tax on properties used for commercial purposes, Business Rates can apply whether you have a cosy café, a busy office, or a boutique retail outlet. Like Council Tax, it’s intended to help local authorities fund services like police and street maintenance.

The good news is that many enterprises qualify for a tax break called small business rate relief, which is commonly referred to as small business rates relief. It can significantly lower your tax burden, improving your cash flow and freeing up money to spend on things like hiring employees or diversifying products and services.

Here, we’ll break down how small business rates relief works and how it’s applied across different parts of the UK, so you can understand what’s available to your enterprise and how to make the most of these valuable savings.

Even if you’re only currently exploring how to make money from home, it’s well worth knowing about Business Rates, as the financial impact of the tax can have a bearing on any business growth strategies you roll out later on in your entrepreneurial journey.

What is small business rates relief?

Small business rates relief (sometimes shortened to SBBR) allows small businesses to save money on Business Rates. A variation of the scheme is available in England, Wales, Scotland, and Northern Ireland, though there are slight differences in how it’s applied and potential savings.

Do home-based businesses qualify?

You usually won’t have to pay Business Rates if you’re exploring business ideas from home and only use part of your property. For example, if you’re getting some side hustle ideas off the ground in your spare room, or selling goods by post.

However, Business Rates may be due if you make substantial changes for your business or if your property is both business and domestic, like living above your shop. In this case, you can benefit from SBBR if you meet the eligibility requirements.

Do online businesses qualify?

If you’re thinking about how to start an online business from home, you won’t usually have to worry about paying Business Rates at all.

But if you rent a physical office or a warehouse to support your online business ideas, Business Rates will likely be due on those properties. As with home-based businesses, you can benefit from relief if the property meets the eligibility requirements.

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How does small business rates relief work?

Let’s look at how Business Rates and small business rates relief work across the UK.

England

In England, Business Rates are determined by the Valuation Office Agency (VOA). The VOA works out the “rateable value” of your property, which is an estimate of how much it would cost to rent for a year. This value is multiplied by one of two multipliers set by the government.

In 2024 to 2025, these are:

  • Standard multiplier of 54.6p – For businesses with rateable values of £51,000 and over.

  • Small business multiplier of 49.9p – For businesses with rateable values under £51,000.

For example, if your property has a rateable value of £20,000, you’ll use the small business multiplier. So, you multiply £20,000 by 0.499, resulting in a bill of £9,980.

It should be noted that in the City of London, the standard multiplier is 56.4p and the small business multiplier is 51.5p.

Do I qualify for small business rates relief in England?

Small business rates reliefis available to businesses with occupied properties that have a rateable value of under £15,000. 

If your property’s rateable value is under £12,000, and it’s the only premises you use, you won’t pay Business Rates at all. For rateable values between £12,001 and £15,000, relief decreases gradually from 100% to 0%. For instance, if your property’s rateable value is £13,500, you’ll get 50% off your bill.

Can you claim small business rates relief on two properties?

Thinking about how to scale a business by adding a second property? The good news is you’ll still get the relief on your main property for 12 months.

Even after that, you can keep the relief as long as none of your other properties have a rateable value above £2,899, and the total rateable value of all your properties stays under £20,000 (£28,000 in London).

To get small business rates relief in England, you should reach out to your local council,as the process can vary slightly depending on your location.

Wales

Calculating Business Rates in Wales is similar to England, with the VOA setting property’s rateable values. However, Wales uses a uniform multiplier (currently 56.2p), with no reduced rate for lower-value properties.

Do I qualify for small business rates relief in Wales?

Small business rates reliefis available to businesses with occupied premises that have rateable values of under £12,000. Businesses with properties valued up to £6,000 receive 100% relief, and those valued between £6,001 and £12,000 receive tapered relief from 100% to 0%.

Wales limits the number of properties eligible for relief to two per business per local authority. For example, let’s say you’re in the food and drink industry, running burger bars. You’ll be able to get relief for two locations, but any additional properties won’t qualify.

Certain categories are excluded from this limit and also benefit from extra relief. For instance, post offices with a rateable value up to £9,000 get 100% relief, and those between £9,001 and £12,000 get 50% relief. Registered childcare providers receive 100% relief until March 2025.

How to claim small business rates relief in Wales

Typically, you don’t need to apply for small business rates relief in Wales; it’s automatically applied to your bill if you’re eligible. However, you must inform the local authority if your business has more than two properties in the area.

The scheme has some exceptions. For instance, you can’t claim relief on beach huts, car parks, or properties used by charities.

Scotland

In Scotland, rateable values of properties are determined by assessors. As with England and Wales, Business Rates are calculated by multiplying a property’s rateable value by the appropriate multiplier.

In 2024 to 2025, these are:

  • Basic multiplier of 49.8p – For businesses with rateable values up to £51,000.

  • Intermediate multiplier of 54.5p – For businesses with rateable values between £51,001 and £100,000.

  • Higher multiplier of 55.9p – For businesses with rateable values over £100,000.

Do I qualify for small business rates relief in Scotland?

Small businesses in Scotland can benefit from non-domestic rates relief through the small business bonus scheme. Certain businesses, like car parks, betting shops, and payday lenders, are excluded. To qualify, you need to meet three conditions:

  • Your premises must have a combined rateable value of £35,000 or under.

  • Individual properties must have a rateable value of £20,000 or under.

  • Properties must be actively occupied.

If you use a single property, the relief scales based on the rateable value, providing 100% relief for properties valued up to £12,000 and tapering down to 0% for those between £12,001 and £20,000.

For businesses with multiple properties, if the total rateable value of all properties is £12,000 or under, you receive 100% relief. If the total value is between £12,001 and £35,000, you get 25% on properties valued up to £15,000, scaling down to 0% for properties valued from £15,001 to £20,000.

To apply for the small business bonus scheme, contact your local council and complete an application form. These are typically available on council websites.

Northern Ireland

Northern Ireland’s small business rate reliefscheme offers rate reductions based on a property’s net annual value determined by Land & Property Services. Your business rates bill is calculated by multiplying this value by the non-domestic regional and district rates for your specific location.

Do I qualify for small business rates relief in Northern Ireland?

If your business property has a value of £2,000 or under, you get a 50% rate reduction. For properties valued between £2,001 and £5,000, you get a 25% reduction, and for those between £5,001 and £15,000, the reduction is 20%.

If you run a business with more than three premises or are part of a chain, you won’t qualify for this relief.

Do I need to apply for small business rates relief in Northern Ireland? 

Relief is applied automatically to your annual bill if your business is eligible, so there’s no need to apply. However, some properties are excluded, like unoccupied properties, ATMs, car parks, advertisements, and government buildings.

If you think you’ve been wrongly awarded or missed out on the relief, it’s a good idea to contact the Land & Property Services to sort it out. They offer guidance and support through email, phone, and text relay services to help you with any issues or questions you might have.

How to manage Business Rates better

Managing Business Rates well can help free up funds to boost your business. Whether you’re focused on customer retention or intending to invest in advertising your business, here are five tips to help you stay as tax efficient as possible.

1. Use accounting tools

Keep on top of small business expenses like Business Rates with handy accounting tools for small business. This kind of software helps you track payments, set reminders, and manage cash flow. Diligent bookkeeping is key for small businesses to avoid missed payments.

2. Check for additional reliefs

Besides small business rates relief, other schemes might apply to your business. For instance, depending on where your premises are located, you could qualify for rural rate relief or hardship relief.

Additionally, if you’re operating a shop, restaurant, café, bar, pub, cinema, music venue, or hospitality and leisure business like a gym, spa, or hotel in England or Wales, you could qualify for retail, hospitality, and leisure relief.

If you’re eligible, you could get 75% off your business rates for 2024 to 2025 in Englandand 40% off in Wales – up to £110,000 per business per year.

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3. Conduct regular reviews

Regularly check your rateable value to ensure it’s accurate. If it seems off, challenge it through the appropriate agency to ensure you’re not overpaying:

  • England and Wales – The Valuation Office Agency (VOA)

  • Scotland – Scottish Assessors Association

  • Northern Ireland – Land & Property Services (LPS)

4. Plan for changes

If you’re expanding or making changes to your property, consider how it might impact your Business Rates. Knowing potential rate changes helps you plan your small business budget better and avoid surprises.

5. Keep business and personal finances separate

As an entrepreneur, it’s vital to separate your business and personal finances right from the start.

Whether you’re working as a sole trader or a partner, or setting up a limited company, having a dedicated business account will make it so much easier to clearly see what’s coming in and going out of your business coffers, and to always be sure you’ve got the money to cover your tax liabilities.

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Disclaimer: The contents of this page are intended for informational purposes only and should not be construed as professional advice. For matters requiring legal or financial expertise, it’s recommended to seek guidance from qualified professionals.

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