How small businesses can cut their tax bill

published 6 March 2019

936_MW_P30_SB — Hammond (centre): a helping hand for small firms

Thousands of small shops, restaurants and pubs could miss out on valuable discounts on business rates as local authorities are applying new rules in different ways.

The confusion follows an initiative by the chancellor, Philip Hammond, to help retailers and other high-street outlets, which have seen a spate of closures in recent years amid pressures such as competition from online rivals and rising costs. In last October's Budget, Hammond said that many smaller retail businesses those whose properties have a rateable value of less than £51,000 for business-rates purposes would seetheir business-rates bills cut bya third in the 2019-2020 and2020-2021 tax years.

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That underlines the importance of checking that your overall business-rates bill is correct. In particular, if your business occupies a property with a rateable value of less than £12,000, it should be exempt from business rates entirely, while those in properties valued at between £12,000 and £15,000 pay lower bills, with the charge calculated according to a sliding scale. If you're above the £15,000 cap, but below £51,000, check that you're being charged the "small-business multiplier", the formula that local authorities are duty-bound to apply here.

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There is also help available for businesses in properties whose rateable values were revalued in 2017, with the government promising their bills will not increase by an unmanageable amount in one go. In 2019-2020, properties with a rateable value below £20,000 (£28,000 in London) should not face increases of more than 10% because of the revaluation (this limit is higher for larger rateable values).

In the longer term, small-business groups are continuing to lobby for wholesale reforms to the business-rates system, which they argue puts firms with physical premises at a disadvantage to rivals that trade entirely online. Such calls are backed by the Housing, Communities and Local Government Committee, which last month warned that high streets could become "ghost towns" without such reform.

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.