Last updated: 16 October 2026
How does charging rent work?
If you own a property that your company uses, such as an office, workshop or yard, the company can pay you rent. The company deducts the rent from its profits, and you pay income tax on it as property income. Rent carries no National Insurance for you or the company, which makes it attractive compared with salary.
Rent versus dividends versus salary in 2026/27
| Method | Company tax relief | Your tax | National Insurance |
| Salary | Yes | 20%, 40% or 45% | 8% or 2% employee, 15% employer |
| Dividends | No (paid from taxed profits) | 10.75%, 35.75% or 39.35% | None |
| Rent at market rate | Yes | 20%, 40% or 45% on rental profit | None |
From April 2027 property income tax rates are due to rise to 22%, 42% and 47%, which will make rent slightly less attractive.
Worked example
Ian owns a workshop his company uses. The company pays him £12,000 a year in market rent. Ian’s costs on the workshop, including insurance, repairs and mortgage interest on the commercial property, are £3,000.
- Company saves corporation tax at 25%: £3,000
- Ian’s rental profit is £9,000, taxed at 40%: £3,600
- Net effect: £12,000 extracted for a combined tax of £600
If the company had paid £12,000 as dividends instead, it would first pay £4,000 of corporation tax on the £16,000 profit needed, and Ian would pay 35.75% dividend tax (£4,290), a combined £8,290.
Mortgage interest on commercial property
The restriction on mortgage interest relief for landlords only applies to residential property. Interest on a loan to buy a commercial property let to your company is fully deductible against the rent.
Watch out for these effects
- Business Asset Disposal Relief: if you later sell the property along with your shares, BADR on the property (an associated disposal) is restricted for periods when you charged rent.
- Inheritance tax: property you own that is used by a company you control only gets 50% Business Property Relief, and only if your shares qualify too.
- Market rent: the rent should be at a commercial rate. Excessive rent may be disallowed for the company.
- Lease: put a written lease in place, ideally excluded from security of tenure.
Renting part of your home
Some directors charge their company for use of part of their home. This is residential, so it is less straightforward, and exclusive business use can affect Private Residence Relief. Many directors use the £6 a week home working allowance instead.
Reporting the rent
You report the rent on the property pages of your Self Assessment return, deducting allowable costs such as insurance, repairs, business rates you pay as landlord and loan interest. The company records the rent as an expense in its accounts and needs an invoice or lease as evidence. If the company has not paid the rent but owes it, the amount can be credited to your director’s loan account instead.
Frequently asked questions
Is VAT due on the rent?
Not unless you have opted to tax the property.
Can I charge rent and still pay dividends?
Yes. Most directors use a mix.
Does the company need to deduct tax from the rent?
No, unless you are a non-resident landlord.
Should the property go into the company?
Transferring it can trigger CGT and SDLT, so it is often better to keep it personally.
Related: planning your profit extraction, use of home calculations and buying property personally or via a company.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with profit extraction for directors. See our limited company accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
