Rent — business premises

Conditions

1. Rent paid by a trader for premises occupied for the purposes of the trade is allowable. HMRC's Business Income Manual (BIM46801) confirms that 'rent paid by a trader to the landlord for premises they use for business purposes' is an allowable deduction, and GOV.UK's self-employed expenses guidance explicitly lists 'rent for business premises' as an allowable cost (updated November 2024).
2. The wholly and exclusively test applies: the premises must be used for business, not personal, purposes. Where premises are used partly for private purposes the allowable deduction is restricted to the business proportion.
3. This entry covers a separate, dedicated external premises. If you work from home and claim a proportion of domestic rent or mortgage interest as a home-office cost, that is handled in the home-office entry — do not double-count.
4. Where the landlord is a connected party — for example a spouse, close relative, or a company controlled by the same person — the rent must be at arm's length, meaning no more than the open-market rate a third party would charge. Rent above the market rate paid to a connected landlord is liable to be disallowed; for a limited company it could also be treated as a distribution. If you have a connected-party tenancy, a comparable market-rate assessment is worth obtaining as evidence.
5. A lease premium — a one-off capital payment made to acquire a lease — is treated as capital expenditure, not as ongoing rent. Premiums are not deductible in the same straightforward way; there are some specific rules that can give partial relief spread over the lease term, so take professional advice if you have paid a significant premium.
6. Employees cannot claim rent on business premises as a personal tax deduction. Premises costs do not meet the employee test of being incurred 'wholly, exclusively and necessarily' in performing the employment duties — they are the employer's cost, not the employee's.

Common mistakes

• Paying above-market rent to a connected landlord such as a spouse or related company — only the arm's-length portion is deductible.
• Claiming rent for a home room under this entry rather than through the home-office apportionment or simplified flat rate.
• Treating a lease premium as ordinary rent and deducting it in full in the year paid.

What to keep

• Lease or tenancy agreement showing the rent, term and parties.
• Rent invoices, receipts or bank records evidencing payments made.
• Where the landlord is a connected party, evidence that the rent reflects the open market rate (for example a comparable rental assessment or local listings showing equivalent properties).

Real-world example

A self-employed photographer rents a studio unit on a commercial estate for £800 per month. The studio is used entirely for work so the £9,600 annual rent is allowable in full. A photographer working from a spare bedroom at home would instead use the home-office provisions to apportion a proportion of domestic costs.

Frequently asked

Related allowances