How to determine your council tax or business rates liability

You must find out if running your business from a property means you pay domestic Council Tax or commercial Business Rates. For a B&B, the answer depends on how much of your property is for personal use versus business use. The only way to get a definitive answer is to contact your local council or the Valuation Office Agency (VOA) and explain your setup.

What’s the difference between Council Tax and Business Rates?

Think of it like this: Council Tax is the domestic property tax you pay for local services like bin collection and libraries. Business Rates are the commercial equivalent, paid by shops, offices, and factories. A B&B can be a grey area because it's often both a home and a business at the same time.

The decision hinges on whether your property is considered to be mainly a domestic home that you let rooms out in, or mainly a commercial guesthouse that you happen to live in.

How is the decision made?

An officer from the Valuation Office Agency (VOA) will assess your property based on several factors to make a judgement. While there are no rigid rules, they generally look at:

• Guest Capacity: The most common rule of thumb is that if you can accommodate more than six people at one time, you will likely be assessed for Business Rates.
• Property Use: What proportion of your property is used by guests compared to what you keep private for yourself and your family?
• Your Presence: Do you live on-site? If the owner doesn't live at the property, it will almost certainly be subject to Business Rates.

Your step-by-step guide to getting an answer

1. Prepare your details: Before you call, have the key facts to hand: your property address, the number of guest bedrooms, the maximum number of guests you can host, and a clear idea of which areas are for guests and which are for your private use.
2. Contact the right authority: The best place to start is the business rates department of your local council. While the VOA in England and Wales (or the Scottish Assessors in Scotland) decides how your property is valued, your local council is responsible for billing and can give you the most practical advice.
3. Ask for a decision: Explain your situation and ask them to confirm whether your property will remain on the Council Tax list or if it will be moved over to the Business Rates list. They will then guide you through the official process.

A crucial tip: Don’t fear Business Rates!

Many new business owners panic at the thought of paying Business Rates, but you might not have to. If your property’s ‘rateable value’ is below a certain threshold, you may be eligible for Small Business Rate Relief, which could reduce your bill by up to 100%.

Getting this sorted early is essential. It’s a key running cost you need to factor into your budget, and being proactive shows you are a responsible business owner. Contact your council today to get the clarity you need.