If you want to buy a holiday let, it’s important to understand the concept of ‘rateable value’. The rateable value of your holiday let property is based on the estimated annual rent it will generate, and the figure is key in calculating your business rates bill. In this rateable value guide, we’ll cover everything you need to know.
What is rateable value?
‘A property’s rateable value represents the rent the property could have been let for on a certain date set in law.’ This is the definition of rateable value, according to HMRC.
In other words, your holiday home will have a rateable value, which is based on the annual rental value of the property. If you’re wondering, ‘how do I find the rateable value of my property,’ you should know that it will be calculated by the Valuation Office Agency (VOA), which is part of HMRC.
Is rateable value the same as rent?
To put it simply, no! Rateable value is an estimation of the rent your commercial property could make in a year, but it might not be equal to the actual amount of rent that is paid.
How to calculate rateable value of holiday lets
As mentioned, it is the VOA who assesses the rateable value of holiday let properties. Upon application, the VOA issues a detailed form to holiday let owners to complete and once submitted, it makes its rental value calculation by examining extensive information about the property, such as its size, quality as a dwelling, and its location. The VOA will also consider various factors such as rental prices in the area and how often the property might be vacant during the year.
The rateable value is therefore not the amount of rent paid on your holiday let property, but a figure that’s used as a means to calculate your business rates bill.
Rateable value and business rates
If you are running a successful holiday let property business and welcome a high turnover of guests during the year, you will be subject to paying business rates.
Business rates vary from property to property, and this is where your holiday let property’s rateable value is important; it is used to work out the amount of business rates that you will pay.
Once the VOA has determined your holiday let’s rateable value, you can estimate your business rates bill online. To do this, you multiply the rateable value by the correct business rates multiplier (an amount set by central government).
Small business rate relief
Small business rates relief allows property owners to pay lower business rates or complete exemption from paying them and again, this depends on the property’s rateable value. If your rateable value is calculated to be less than £15,000, you will be eligible for small business rates relief.
If your holiday let property’s rateable value is less than £12,000, you will not have to pay any business rates. For properties with rateable values between £12,000 and £15,000, your business rates will be reduced from 100% to 0%.
If you own two properties, you may also be able to benefit from small business relief, depending on the properties’ separate and combined rateable values.
To conclude…
If you have found or bought your holiday home and are asking, ‘how do I find the rateable value of my property,’ it’s time to visit the Valuation Office Agency’s website, where you will be able to submit the necessary information and find out its rateable value.
For more information about how HCM can help to aid your holiday letting journey, contact us here.
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FCA disclaimer
The information contained in this article is accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time and so please speak to one of our Consultants to confirm the most accurate up to date information. Nothing in this article constitutes financial advice. You understand that by clicking any external links on this page that you will be leaving the website of Holiday Cottage Mortgages and we cannot be held responsible for the content of this external website. Please always consult your accountant or solicitor for all financial, taxation or legal matters.