Surge In Rental Values Is Changing Business Rates
Dec 10 2015
Business rates in the UK are based upon what a property was worth back in April 2010. Since then, there has been a huge surge in rental values in fringe areas, such as Shoreditch, London Bridge, Southwark, Waterloo, Camden and Kentish Town to name a few.
In 2010, rents in these areas ranged from £15-£20 per square foot (psf), and in Shoreditch up to a maximum of around £45 psf. With the rise in popularity in these fringe locations and an upcoming rates review in 2017 (using April 2015 as the benchmark), occupiers of these properties are in for significant increases in their monthly outgoings, and there is nothing that they can do.
Anyone that has committed to a lease beyond 2017 in these particular areas should expect their business rates to increase substantially. This is because properties that were once old warehouses that no one wanted, have now become trendy 'hipster' studios suiitable for a plethora of industries.
Properties that were being rented out for £15 psf are now commanding rents of £60, and any property that has not had a rating assessment revaluation since 2010 will suddenly find that their rateable value will increase substantially. This is worked out by the Local Authority by multiplying the rateable value of your property by a multiplier (also known as 'poundage').
In England and Wales for 2015, this figure was set at £0.493p per pound (£). So, for example: If you have a property of 3,000 sq. ft. with a rateable value of £60,000, the amount that you would pay in business rates would be £60,000 x £0.493 = £29,500 per annum. In 2017, when the same property has its rateable value revised and increased to £150,000 - and let us assume that the multiplier remains the same at £0.493 - this would mean an increase in your rates bill to £73,950 or around £45,000 per annum an increase of over 150%.