Rent — business premises

Conditions

• 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).
• 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.
• 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.
• 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.
• 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.
• 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