What Is Rateable Value: Meaning and Calculation

If you’re part of the property market in the UK and fall under the category of commercial property owners, an important thing to bear in mind is your annual business rates or non-domestic rates.

Your local council relies on something called rateable value or business rateable value to determine the payments you need to make as a company for the financial year.

In order to stay on track with your annual bill, it’s key to have an understanding of what rateable value is and how it impacts your business property. 

Here’s everything you need to know. 

Rateable Value: What It Means

Before we can go into detail about how rateable value is calculated and how it can impact your costs, it’s essential to start from the basics.

What is a rateable value in the first place?

In essence, all non-domestic properties have a rateable value, which is determined and assessed by the Valuation Office Agency – a significant part of HMRC. 

A property’s rateable value represents the annual rent or the rent value of the property if it were to be offered on the open market at a fixed valuation date. 

Local councils take into account a property’s rateable value to determine its business rates. 

How Is Rateable Value Calculated?

As noted above, all commercial properties have a rateable value. 

But how do you calculate it?

In general, it’s the open market rental value according to the estimate provided by the Valuation Office Agency. This estimation is based on provided property details like rent or floor space. This data is usually collected from property owners, tenants, or other occupiers.

The provided estimate is multiplied by a rates multiplier, resulting in the sum that must be paid. 

Here’s an example that can help you understand the calculation process better:

Imagine that your property could have been rented out for £80,000 per annum in 2019. Your rates bill will be determined by taking into account the £80,000 rental value and used together with a relevant multiplier from two multipliers:

• Standard multiplier: 54.6 pence (applies only to properties where the rateable value exceeds £51,000)
• Small business multiplier: 49.9 pence (applies only to properties where the rateable value is under £51,000)

By multiplying the rateable value by the appropriate non-domestic rating multiplier, you can calculate your annual bill. 

In some cases, with the help of transitional arrangements, you can bring down your overall annual bill via business rates relief structures. 

The Role of Rateable Value in Business Rates

When discussing rateable values it’s key to address their link to business rates.

Anyone who occupies business properties or non-domestic properties must pay business rates. This is similar to the concept of individuals paying council tax on their homes. 

They impact different business types that use specific non-domestic building structures to operate. For example, these could include shops, pubs, warehouses, factories, and others.

Certain businesses can be exempt from business rates. For instance, if the rateable value of your property is below £51,000, you’ll pay the lower multiplier and enjoy small business rate relief. 

At the same time, if your valuation details show that your rateable value is under £15,000 and you own a single property, you could enjoy exemptions from paying a portion or some of the costs. 

Properties with a rateable value below £12,000 are fully exempt from paying business rates, while those between £12,001 and £15,000 will have a decreased rate from 100% to 0%. 

Factors Influencing Rateable Value

Your non-domestic property’s rateable value can be influenced by a range of different factors:

• Тhe location of the property plays a significant role. Buildings, office spaces, or warehouses positioned in central locations or high-traffic commercial districts usually have higher rateable values as a result of higher market rents.

• Property size and layout are also factors that have a role in the final rateable value. For instance, commercial properties with more space and more efficient layouts that increase the usable area are normally valued higher. 

• Тhe usage of the property will also influence its rateable value. The rent value is partially dictated by the way the property will be utilised, meaning that office spaces will be worth a different rent price compared to retail outlets of warehouses. 

• Тhe condition and the age of the property are also key. In most cases, well-maintained and sophisticated properties will have a higher rental value when compared to older buildings. Not to mention that the amenities and facilities in proximity to the property, like public transport, parking, and others, can also have a role. 

Don’t forget that the time of valuation is also incredibly important. If the market is undergoing changes due to economic factors like supply and demand fluctuations, your property’s rental value may dramatically increase or decrease. New infrastructure projects, shifts, and zoning changes can also play a part. 

The Process of Assessing Rateable Value

To better understand rateable value, it’s essential to familiarise yourself with the assessment process carried out by the Valuation Office Agency. 

At the start of the rateable value assessment process, data is collected about the non-domestic property. Assessors gather information about the property’s location, type, size, usage, and condition. 

This data is usually analysed together with insights from the market, such as rental values, lease terms, and others.

Next, officers from the Valuation Office Agency visit the property physically for inspections. Their aim is to make sure that the provided details are correct. During the inspection, they evaluate any unique features that might influence the rateable value.

After the property is fully inspected, it’s time to compare it against other, similar properties in the area. This phase enables the officers to concentrate on the open market rental values as of a specific valuation date. 

Based on the type of commercial property, different valuation methods can be used, like the rental comparison method or the profits method. 

Once all of this information is collected and processed, the VOA establishes the rateable value of the property. The property owners can review the rateable values before their final version is published, enabling them to appeal if there are discrepancies. 

Finally, the rateable value of the property is published in the rating list. The property owners are informed that this value will be used to calculate their business rates. 

Impact of Rateable Value on Tax Obligations

As noted above, the rateable value of your non-domestic property will influence your annual business rates – a tax on commercial property. 

By being aware of your rateable value, you can plan your tax obligations better and make accurate estimates of what you’ll be expected to pay. This can enable you to allocate funds appropriately and prevent unexpected situations. 

Expert Tips for Managing Rateable Value

Now that we’ve covered the basics of rateable value, it’s time to consider all that can be done to ensure you’re managing this part of your business adequately.

By following these tips, you can rest assured that you’re in full control of your obligations related to rateable value:

• Make sure you regularly review your property’s rateable value and stay up to date with any changes.
• Take advantage of business rate reliefs that apply to your property. 
• Consider the implications of property improvements on your rateable value and plan properly.
• Stay up to date with information on upcoming revaluations.
• Ensure that all property records are up-to-date, including size, usage, layout, and others. 

If you think your rateable value is wrong or above your expectations and calculations, the good news is that you can appeal for a second rateable value check. All you need to do is log into your business rates valuation account and inform the VOA. In some cases, your property details might need changing. 

Keep in mind that rateable values are reassessed regularly over a certain period. Make sure to check your latest revaluation and don’t forget to notify the local authority about any business changes.

Frequently Asked Questions

What’s the difference between rateable value and rent?

A common misconception is that rateable value means the same thing as rent. The rateable value represents an estimate of the rental amount the property could be leased out for at a specific time. This is not the business rate that you’ll be paying. Instead, the value is multiplied by a “multiplier” to establish the business rates, which are very similar to council tax for domestic properties.

Can my property’s rateable value change?

Yes, the rateable value of a property can change due to a range of different circumstances, like improvements, property divisions, and more. This can have an impact on the overall value and therefore – your tax obligations.

How can I make sure that my rateable value is accurate?

You can make sure that your rateable value is accurate by maintaining up-to-date records of your property and regularly reviewing your rateable value, changes in local market trends, and communicating with property tax advisors where necessary.