So you own a property and your limited company uses some of the space. Maybe it’s your home office, maybe it’s a unit you bought for the business, or maybe your company just uses part of your garage for storage. Here’s a question: should you charge your company rent for using your space? The short answer is maybe. And like most tax stuff, it depends on your specific situation.
How this actually works
The idea is pretty straightforward. Your company pays you rent (because you’re the landlord), and your company gets to deduct that rent from its Corporation Tax bill as a business expense. You receive the rent as property income, not salary or dividends. This can be a neat way to get money out of your business without triggering dividend tax – especially if your salary is low and you’re staying within your personal allowance.
When it makes sense
This works best when you own the property personally (not through the company), your company is genuinely using the space for business stuff, and you have costs you can offset against the rental income.
Think mortgage interest, insurance, maintenance costs – stuff like that. You’ll also want some kind of basic rental agreement in place. Doesn’t have to be fancy, but HMRC likes to see that you’re treating this like a proper business arrangement.
This is particularly useful if you’ve got a garden office, you own commercial premises that your business uses, or you’re subletting part of your home to your company.
The catches
Here’s where it gets interesting. If you don’t have a mortgage or other costs to offset, you’ll pay income tax on the full rent you receive. That might not be as tax- efficient as you think. Also, only mortgage interest is deductible, not the capital repayments. So if most of your mortgage payment is capital, this becomes less attractive. HMRC expects the rent to be reasonable for the space you’re using. Don’t try charging your company £2,000 a month for using the spare bedroom as an office. They’re not stupid. And if your company stops using the space, the rent arrangement should stop too. You can’t just keep charging rent for a room that’s back to being your personal study.
Is it still worth doing?
If you have genuine costs to offset, or you’re trying to structure your income to stay under certain tax thresholds (like dividend tax rates or Child Benefit limits), then yes, this can still be a smart move. But don’t just start charging rent because you heard it was a good idea. The tax savings might not be as big as you think, especially once you factor in the extra admin and potential complications.
What to do
Before you start charging your company rent, work out the actual numbers. What would you save in Corporation Tax? What would you pay in income tax on the rent? What are your actual property costs?
And definitely talk to your accountant first. They can run the numbers and tell you whether this actually makes sense for your situation, or whether there are better ways to structure things.
