Rating policy - Questions and answers

This page provides answers to frequently asked questions regarding rating policy in Northern Ireland.

What does a revaluation do?

A revaluation will not affect the total amount of money that is raised. Generally a revaluation exercise is revenue neutral and simply redistributes the same revenue burden in a different way.  

The impact on individual ratepayers of a revaluation depends on how much their individual values have changed since the last revaluation.

Many people are under the mistaken impression that reductions in value since the last revaluation would lead to corresponding reductions in rate bills.  This is not necessarily the case.  Even when values decline overall the Executive and district councils still need to raise the same amount of money to pay for public services and therefore the tax rate, or rate in the pound, is adjusted accordingly.  So, there are winners and losers.

The same principles apply to both sectors.

Why have rates bills continued to rise despite falling property values?

Many people are under the mistaken impression that reductions in rents or property values since the downturn should, or were a revaluation undertaken would, lead to corresponding reductions in rate bills.  This is not the case. Even when values decline the Executive and district councils still need to raise the same amount of money to pay for public services.

The Executive and district councils together raise over £1billion in rates. Even if, for example, property values were to decrease by 50 per cent it does not follow that rate bills would then be half what they were.  The Executive and councils could not manage to maintain essential public services by raising £500m less.  Conversely, when values doubled, rates liability and the total revenue raised did not double.

Rate bills are worked out after the total amount that needs to be raised is decided.  This is translated into individually assessed rate bills, by sharing the overall burden out in proportion to the estimated value of the property at a fixed point in time.  Regardless of shifts in values the rate poundage is adjusted to raise the revenue needed.  

A downward trend in values will not affect rate charges until there is a revaluation and even then it merely redistributes the same rates burden; it won’t decrease ‘the overall revenue take’.  Lower values at a revaluation would simply result in higher rates in the pound.

At a revaluation those whose property value has reduced in value by more than the average since the last revaluation would end up paying less rates. Those whose property values have reduced by less than the average, or indeed increased, would have an increased rates liability.

Does the Executive have any plans to carry out a domestic revaluation?

The Executive has no plans to carry out a domestic capital value revaluation during the current spending review period and life of the current Assembly. Furthermore, carrying one out would be difficult at the moment, as the evidence required to establish the values is not sufficiently reliable, given the low volume of sales and the continued volatility in the housing market.

Broadly speaking residential values have now returned to values that existed in January 2005, the base date for the existing domestic values.

The domestic revaluation works in the same way as a non domestic revaluation insofar as Executive and councils still need the same amount of money out of the system to pay for public services.  If a general revaluation of all domestic properties were to take place soon and it was found that all values had decreased below the 2005 levels, the tax rate or rate in the pound would simply have to go up.

The important issue in deciding whether to undertake a revaluation, however, is the extent to which some areas of the market have declined over this period relative to others.   Revaluation always creates winners and losers; houses that have reduced in value by more than the average since 1 January 2005 would end up paying less rates, those that have reduced by less than the average, or indeed increased, would have an increased rates liability.

When these relativities get significantly out of line, and the housing market is sufficiently stable and active to provide the underlying evidence, the matter can be reconsidered.

What is the small business rate relief scheme and what support can it give my business?

The small business rate relief scheme was introduced by the Executive in April 2010 to provided help to small business premises across a wide range of sectors.  

While the scheme has a general application, certain property types are excluded.  These are unoccupied or partially unoccupied properties, ATMs, property used for the display of advertisements, car parks, sewage works, telecommunications masts and properties occupied by public bodies.  Further information can be found in this small business rate relief fact sheet.

The relief is awarded automatically, on eligible properties, by Land and Property Services.  Small Post Offices get enhanced relief and this element of the scheme may require an application to be made in some cases.  Details of this scheme can be found in this factsheet.

In April 2012 the Executive agreed to the extension of the scheme, to be funded through a large retail levy.  The extended scheme is providing additional support of around £6m to up to 8,300 businesses ratepayers with a net annual value of £5,001 - £10,000 for three years.   

The small business rate relief scheme was expanded in 2012.  20 per cent relief is now awarded on eligible small business premises with a NAV of between £5,001 and £10,000.  This expansion applied for three years, through to 31 March 2015, when the small business rate relief scheme is due to end.

This also coincided with implementation of the general revaluation of non domestic properties, which redistributed the rating burden. Following revaluation some smaller business may end up paying more but more are expected to pay less.  It does of course depend on location and sector, as reflected in relative changes in rental values since the last revaluation in 2003.   

On 26 November 2012,  the Minister announced his intention to extend the small business rate relief.  This change came into effect on 1 April 2013.

In April 2013 as part of the Executive's Jobs and Economy Initiative, the scheme was further extended to provide additional support to a further 3,500 businesses with a net annual value of up to £15,000. 

Main Small Business Rate Relief Scheme – per cent relief
NAV   Relief
£2,000 or less  50%
£2,001 - £5,000  25%
£5,001 - £10,000 20%
Up to £15,000 20%

On March 10 2015 the Minister announced that the scheme would be extended allowing £20m worth of support  to business ratepayers to continue into 2015/2016.  The Minister is currently considering the recommendations of an independent evaluation of the scheme carried out by the Northern Ireland Centre for Economic Policy and will announce her decisions on the future of the scheme later this year following consultation with Executive colleagues.

What other measures, aside from small business rate relief, have been introduced to help businesses in Northern Ireland?

Industrial derating: Manufacturing rates continue to be held at 30 per cent through to 2016, saving those businesses around £56m per year compared to full rates liability.  It also provides certainty to our hard pressed manufacturing sector, crucial during the current economic climate.

Non-domestic vacant rating: Locally full rates on unoccupied properties remain at 50 per cent, compared to 100 per cent in England and Wales, while rates are not applied to vacant factories.  In Scotland the level of relief is to be reduced, to 10 per cent, after a three month period.

Regional rate increase: For 2015/16 the regional rate was frozen in real terms.  The continuing freeze in the regional rate means rates are lower than otherwise would have been the case.

Commercial rates package: As well as expanding the SBRR scheme the 50 per cent empty shops rates concession has been extended to 31st March 2016 allowing 50 per cent relief  where an empty retail premises becomes occupied.  The property must have been empty for at least 12 months.  

What help is provided to households with their rates?

Decisions by the Executive on the regional rate, plus the postponement of water charges, have provided much needed help to households across Northern Ireland.  In terms of rate bills households are better off than they would have been under direct rule had the previous trend increases continued.

Alongside lower bills the Executive has made significant progress in providing assistance to vulnerable households.  The lone pensioner allowance gives a 20 per cent discount to those aged 70 or over living alone.  The rate relief scheme helps those on low incomes, or just outside the housing benefit thresholds, with their rate bills.

Combined with housing benefit around a quarter of households have their rates bill paid for them in part or fully.

What does my rates bill consist of?

A rate bill consists of both a regional and district rate. District rates are fixed by each district council to meet its net expenditure on such functions as leisure facilities, economic development and environmental matters. District rates vary from district council to district council reflecting the rateable resources and spending policies of individual councils. The regional rate element is just over half of a typical rate bill and is set by Central Government.

What do rates pay for?

Rates are an unhypothecated tax, meaning that it is not linked directly or ring fenced to the provision or consumption of particular services.  Revenue from rates funds a wide range of public services including health, education, economic development, water, main roads and council functions.  While a contribution is made by each individual or non-domestic ratepayer towards funding regional public services, such as water and sewerage or education services, there is no specific proportion of any rates bill that can be linked to the availability or usage of any particular public service.  

In the case of the regional rate the amount collected from domestic and non domestic rate payers is added to the amounts received from the Treasury to provide a total sum available to the Executive for allocation to the public services for which it is responsible.  The same applies to the district rate element.  Rates therefore provide an overall contribution to the funding of a variety of local and central government services, for the benefit of all households across Northern Ireland.  

The rating system itself is based on an individual assessment of value for each and every privately owned or rented house in Northern Ireland. These individual assessments are based on valuations that naturally take into account all the general and unique advantages and disadvantages that a hypothetical purchaser would take into account if purchasing the house in its current state; at a fixed valuation date.  This includes the features of the house itself as well as locational factors, including access to services.

Further details can be found in this guide to rates.

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