Operating a business from your own living room comes with a host of benefits, from no extra rent to conducting business surrounded by home comforts. However, depending on your business type, there are still some costs that you’ll need to pay regardless of where your business is based.
In the UK, business rates are a tax that must be paid on non-domestic properties and, as your home is a domestic property, this can often cause confusion over whether you need to pay this charge if you conduct business there. With this in mind, experts at Dojo have put together this quick guide to help you understand if you’ll need to pay business rates when working from home.
Do you have to pay business rates if you work from home?
In a nutshell, if you run your business in a small part of your home such as an office, you are not required to pay business rates.
However, there are some exceptions to this in which you will need to pay business rates despite working from home:
- If you live above your workplace, for example, the restaurant is underneath and living quarters are on the floor above.
- If you have employees working at your domestic property.
- If people are visiting your home to purchase goods or services.
- If you have made changes to your home to carry out your business (not including a desk and computer), for example, if you have converted a garage or outhouse for beauty appointments.
If you are ever in doubt about whether you should be paying business rates, contact the Valuation Office Agency.
How much are business rates working from home?
Business rates are calculated based on rateable value. If you’re working from a converted garage and, therefore, subject to paying business rates, this cost will be the estimated value of the part of your domestic property used for work.
You are only liable to pay business rates on the parts of your home that are deemed non-domestic. Council tax is paid on the remainder of your home and this may in turn be lowered if you are paying business rates on a part of your domestic property.
Read more information about small business rates relief in our guide.
When do you pay business rates?
Local councils will send a bill for business rates for the following tax year in February or March. You can estimate your business rates using this calculator so that you can be prepared for the costs.
Expanding and thinking of moving your business to a property outside the home? Get more information on what business rates mean for you as a small business.