Blog Post 13 – Tax Benefits – Business Rates Relief (Post 3 of 7)

What is Business Rates?

Business Rates are for businesses like council tax is for domestic properties. The amount of business rates to be paid depends on a number of things including size of the property and location. For Short-term lets, the rate is also based on the number of bed spaces in the property.

How is Business Rates calculated?

Business Rates are calculated by multiplying two factors:

  • Rateable Value (RV) – the amount your property is valued at for tax purposes.
  • Multiplier – also known as ‘poundage’ is the amount you multiply your rateable value by.

Example: Your short term let property has an RV of £8000 and the multiplier for National Business Rates is 48p (0.48). Therefore the amount of business rates payable is £8000 x 0.48 = £3840

What is Small Business Rates Relief?

A relief that is available to small businesses that can vary from a small reduction on the amount payable, to a complete reduction of business rates to zero.

Who is affected?

Business Rates are applicable to all businesses. This includes short-term lets as they are considered as a business by HMRC so long as they meet the requirements for FHL. 

Who is not affected?

Types of property that are excluded from business rates include those that are for domestic purposes, such as buy-to-let and Homes of Multiple Occupancy (HMO). These will instead be subject to council tax.

How does it work?

By visiting The City of Edinburgh Council (CEC), Scottish Assessors Association (SAA), or mygov.scot, you can find out more information on business rates and how to apply for business rates relief on all or part of the RV. Applications for Business Rate Relief can be made through the CEC website. As of November 2017 the following amount of relief is applied for Small Businesses:

  • 100% on one non-domestic property with a RV of £15k or less.
  • 25% on one non-domestic property with a RV greater than  £15k up to £18k
  • 25% on each non-domestic property if the RV of each is less than £18k and the total RV of the portfolio is less than £35k.

What Does This Mean?

Business Rates Relief correctly applied can make a massive difference to the profitability of your short-term let. With the potential to reduce your operating costs by thousands of pounds, it is an opportunity you really can’t afford to miss out on. Sadly many SA landlords remain unaware of this benefit.

Previous Post: Post 12 – SA Tax Benefits – Section 24 (Part 2 of 7)

Next Post: Post 14 – SA Tax Benefits – Capital Allowances (Part 4 of 7)

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