Premises utilities

Conditions

• Utility costs — heating, electricity, gas, lighting and water — for a dedicated business premises are allowable running costs. GOV.UK's self-employed expenses guidance lists 'utility bills (heating, electricity)' and 'business and water rates' as allowable premises costs (updated November 2024). HMRC's Business Income Manual (BIM46801) confirms that expenses connected with premises occupied by a trader for the purposes of their trade are normally allowable.
• This entry covers utilities for a separate, dedicated business premises such as a workshop, studio, retail unit or commercial office. If you work from home and apportion a proportion of your household utility bills, that is covered in the home-office entry — do not claim the same costs twice.
• Where a premises is used partly for private purposes — for example a live/work unit or a premises with attached residential accommodation — only the business proportion of utility costs is allowable. A reasonable apportionment by floor area, time or usage is needed.
• For a limited company paying utilities on business premises, the costs are an allowable deduction for corporation tax. Where the premises overlap with a director's home, the wholly and exclusively test applies and only the business proportion may be deducted.
• Employees cannot claim premises utility costs as a personal tax deduction. Their employer's premises costs are the employer's responsibility. An employee working from home is directed to the home-office entry for the (currently abolished for 2026-27) working-from-home relief.

Common mistakes

• Including domestic utility bills under this entry when you work from home — household utilities should go through the home-office apportionment instead.
• Claiming 100% of utilities where the premises has any private use without apportioning to the business element.
• Treating a major capital infrastructure upgrade — such as installing a new electrical supply to a building — as an ordinary utility bill; significant works to utility infrastructure may be capital expenditure.

What to keep

• Utility bills addressed to the business premises, showing the supplier, period and amount.
• Payment records.
• Where there is mixed business and private use, a written record of the basis for the business proportion.

Real-world example

A ceramicist rents a studio unit on an industrial estate used exclusively for her business. Her annual electricity bill for the kiln and lighting is £2,400 and gas for heating is £900. Both are allowable in full as the premises are used solely for the business.

Frequently asked

Related allowances