Is rent
tax deductible?

Yes. Rent for business premises is an allowable expense (GOV.UK). If you work from home, a share of your home rent is allowable for the business use (GOV.UK), and a landlord who sublets can deduct the rent they pay (GOV.UK).

Rent is one of the largest costs for businesses with premises, and for home workers who rent, a share of it is often the most valuable part of a working-from-home claim. The rule is the same in both cases: the part of the rent that relates to the business is allowable.

Is rent tax deductible?

The HMRC rule

Rent, business and water rates, utility bills, property insurance and security for business premises are allowable. The rule comes from Office, property and equipment, If you work from home, Work out your rental income when you let property.

GOV.UK lists rent for business premises among the allowable rent, rates, power and insurance costs (office, property and equipment), and includes rent in the costs you can apportion when you work from home (expenses overview). The SA103F notes put rent in box 21 and say the private use of business premises, and the cost of buying premises, are disallowable (SA103F notes). For landlords, rents paid when subletting are an allowable property expense (landlords).

When you can claim it

• Rent for a shop, office, workshop, unit, studio or storage used for the business.
• A share of home rent for the business use of part of your home.
• Rent for a desk in a co-working space or a chair in a salon.
• Rent paid by a landlord on a property they sublet.

When you cannot

• The private share of premises also used as a home.
• Rent for your home when you do not use it for the business.
• A deposit held by the landlord, which is not a cost unless it is kept.
• Rent paid to yourself or to a company you own without a genuine arrangement.

What to claim instead

If you live and work in the same premises, such as a flat above a shop, apportion the rent between the business and private parts on a reasonable basis. If the premises are a small guesthouse or bed and breakfast where you live, the simplified expenses rate for living at business premises may be easier.

How to decide if you can claim it

1. Was it for the business? A cost is only allowable if you incur it wholly and exclusively for the business. If it also serves a personal purpose that cannot be separated, such as clothing that keeps you warm or a meal that keeps you going, HMRC disallows it.
2. Is part of it personal? Where a cost has a business part you can identify, such as the business calls on a phone bill or the business miles in a car, you claim that part and leave the rest out, on a reasonable basis you can explain.
3. Is it a running cost or something you keep? It is a running cost, so on the cash basis it counts when you pay it and on traditional accounting when you incur it. Nothing about it needs spreading over later years.
4. Is there a specific rule? For rent, the deciding rule is rent, rates, power and insurance for business premises: rent, business and water rates, utility bills, property insurance and security for business premises are allowable.

Worked example: a hairdresser renting a chair

A self-employed hairdresser rents a chair in a salon for £120 a week, £6,240 a year, and occasionally works from a spare room at home for colour consultations. The chair rent is allowable in full. For the home room, a small share of her rent based on time and space is also allowable, which she works out at £180 a year.

Rent paid in advance

On the cash basis, rent counts when you pay it, even if it covers future months. On traditional accounting, rent paid in advance is spread over the period it covers, so a quarter's rent paid in March for April to June belongs mostly to the next accounting period. For most sole traders on the cash basis, this is not something to adjust.

Lease premiums

A premium paid to take on a lease is capital, not rent. Where the lease is short, part of a premium can be treated as additional rent and deducted over the lease term, following the rules for the landlord's taxable part. This is technical; if you pay a premium, get the calculation right at the start.

Renting from family

Rent paid to a relative for premises you genuinely use is allowable if it is at a commercial rate and actually paid. The relative then has rental income to declare. Paying an inflated rent to shift income within the family is not wholly for the business, and HMRC can restrict it.

Co-working and virtual offices

A co-working membership, hot desk or meeting room hire is a premises cost and allowable. A virtual office service that provides a business address and mail handling is allowable too. Membership perks that are personal, such as a gym at the co-working space, are not part of the business cost.

Where it goes

Rent goes in rent, rates, power and insurance costs, box 21 on the full self-employment pages, and the premises running costs category in Making Tax Digital updates. A landlord's rent on a sublet property goes in box 24 on the UK property pages.

If you are a landlord

If you rent a property and sublet it, the rent you pay the head landlord is an allowable expense of your property business, alongside ground rent and service charges (GOV.UK). If you rent out a room in the home you rent, the Rent a Room Scheme may make the first £7,500 of income tax-free instead.

Where it goes on your return and in MTD

On the self-employment pages of your return, the claimable part of rent belongs in rent, rates, power and insurance costs (SA103F box 21). The same category is used in Making Tax Digital quarterly updates, so recording it in the right place once keeps both returns consistent.

For a landlord, it belongs in rent, rates, insurance and ground rents (property) (SA105 box 24 on the UK property pages), and in the matching category of a Making Tax Digital property update.

If your turnover was under £90,000, you can use the short self-employment pages (SA103S), which ask for a single figure for total allowable expenses rather than a box-by-box breakdown, and the full pages let you give just a total in box 31 too. The category still matters for your own records and for Making Tax Digital, where each quarterly update uses the same categories unless you choose to send one consolidated figure.

The accounting basis changes when a cost counts. On the cash basis, the default for sole traders since 2024/25, it counts when you pay it; on traditional accounting, when you incur it, with things you keep claimed through capital allowances.

How much an allowable cost saves

An allowable expense does not come back to you in full: it reduces your profit, so it saves tax at your marginal rate. For a sole trader in England, Wales or Northern Ireland that is 26p in the pound at the basic rate (20% Income Tax plus 6% Class 4 National Insurance) and 42p at the higher rate. The sole trader tax calculator works out the figure for your own profit.

What £1,000 of allowable expense saves a sole trader in 2026/27

• Basic rate (20% + 6%)£260
• Higher rate (40% + 2%)£420
• Additional rate (45% + 2%)£470
• Allowance taper band (60% + 2%)£620

Records to keep

Keep the lease or tenancy agreement, rent statements or bank records of payments, and for home rent, the calculation of the business share. For premises used partly as a home, note how the split was made.

If Making Tax Digital for Income Tax applies to you (qualifying income over £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028), the records must be digital, and each quarter's costs go into a quarterly update. Check your date with the MTD requirement checker.

Common mistakes

• Claiming the whole rent on a home that is only partly used for business.
• Deducting a lease premium in full as rent.
• Paying family members an inflated rent.

Related expenses

This item sits in the rent, rates, power and insurance costs category, alongside business rates, council Tax, garden office, home and landlord insurance, mortgage interest, service charges, solar panels and stamp Duty. The A to Z of expenses answers the same question for every other cost.

If you record your costs in TapTax, each one lands in the HMRC category it belongs to, with its receipt attached, so your quarterly updates and year-end return use the same figures.