Running a limited company comes with many tax advantages, but when it comes to expenses like rent, things can get a little complicated. If you work from home or rent office space, you might be wondering whether you can claim your rent as a business expense and reduce your tax bill. In this guide, Venton’s accounting experts break down the rules, what’s allowed, and how to claim rent correctly through your company.
Can My Limited Company Pay My Rent?
The short answer: it depends on how you use the rented space. The key factor is whether the expense is “wholly and exclusively” for business purposes. Here’s how different scenarios work:
1. Renting a Dedicated Office or Workspace
If your limited company rents a commercial office, co-working space, or workshop, this is a legitimate business expense. Your company can pay the rent directly to the landlord, and the cost is fully deductible from your corporation tax.
Allowed: Renting office space, co-working desks, or commercial units for business use.
Not Allowed: Claiming rent for an office that doubles as a personal living space.
2. Renting Your Home & Running a Business from It
If you rent a home but use part of it for business, you cannot claim your full rent as a company expense. However, you might be able to claim a portion of it based on the space you use for work.
- Option 1: Set Up a Rental Agreement Between You and Your Company
Your limited company could rent part of your home from you (e.g., a dedicated office space), but this must be done formally with a tenancy agreement. The rent you receive would be personal income and taxable, so this may not be tax-efficient. - Option 2: Claim a Portion of Rent as an Expense
Instead of renting your home to your company, you can claim a proportion of your rent as a business expense. This is usually calculated based on the number of rooms and hours of business use.
Allowed: A fair proportion of rent if working from home for business purposes.
Not Allowed: Claiming the entire rent for personal and business use.
How to Claim Rent as a Business Expense
If you work from home or rent a separate office, here’s how you can legally and tax-efficiently claim rent through your limited company:
1. If You Rent a Commercial Office
- Pay the rent directly from your limited company bank account.
- Keep a lease agreement in the company’s name.
- Claim 100% of the rent as a business expense.
2. If You Work from Home
- Calculate the percentage of your rent used for business purposes.
- Claim a proportion based on time and space used for work.
- Use HMRC’s simplified home office expenses if applicable.
3. If You Rent a Room to Your Limited Company
- Set up a formal rental agreement between yourself and your company.
- Ensure the rental rate is at market value.
- Declare rental income on your Self-Assessment tax return.
What Expenses Can I Claim If I Work From Home?
If you cannot claim full rent through your limited company, you can still claim other home office expenses, including:
- Utility bills (electricity, gas, water, broadband – based on business use)
- Council tax (if applicable and fairly apportioned)
- Office equipment (desks, chairs, computers
- Business phone and internet costs
Tip: Instead of calculating exact rent costs, you can use HMRC’s simplified home office expense rate, which allows limited company directors to claim £6 per week (£312 per year) without needing receipts.
Are There Any Tax Risks or Pitfalls?
Before putting rent through your limited company, be aware of potential tax consequences:
Benefit in Kind (BIK) Charges
If you rent your home to your company and it’s considered a perk, HMRC may treat it as a taxable benefit, increasing your personal tax bill.
Capital Gains Tax (CGT) Issues
If you own a home and formally rent part of it to your company, you may lose private residence relief, leading to CGT charges when selling your property.
Double Taxation Risk
If your company pays you rent, you’ll need to declare it on your Self-Assessment, meaning you may end up paying income tax on it.
So Is It Worth Claiming Rent Through My Limited Company?
If you rent a dedicated business space, claiming rent as an expense is straightforward and fully allowable. However, if you rent your home, you must be careful about how much you claim to stay compliant with HMRC rules.
Best Option for Most People: Instead of renting a room to your company, claim a portion of rent & home office expenses based on business use.
Need Tax Advice? If you’re unsure about claiming rent through your limited company, Venton’s accounting experts are here to help.
Useful Resources & HMRC Links
Check HMRC’s home office expenses guide – https://www.gov.uk/tax-relief-for-employees/working-at-home
Understanding Benefit in Kind tax rules – https://www.gov.uk/expenses-and-benefits-a-to-z
Simplified home working expenses for directors – https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home
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Need expert accounting advice? Get in touch with our team today to discuss how you can optimise your expenses and reduce your tax bill.