Tax and leasing

Is leasing a domain name tax deductible in the UK?

Yes. A lease payment for a domain name used in your business is a rental payment, and it is 100% tax deductible. Buying the same name is treated differently. Here is how it works, with real daily figures.

See the daily rates

The short answer

A lease is rent. A purchase is usually capital.

Leasing a domain name

Regular payments that work like rent are revenue in nature. A lease payment for a name used in your business is 100% tax deductible and reduces the profit you pay tax on. Our leasing page explains the three ways to work with us.

Buying a domain name

Advisers report that HMRC normally treats the purchase price of a domain name as capital expenditure, and that companies often account for it as an intangible asset. Relief, if any, then follows a different route from a simple deduction against profits.

What the tax saving looks like in pounds

A deduction saves tax at your own rate, so the easiest way to see it is with a daily figure. Our rates are quoted by the day because that is how most people compare running costs. A name at £25 a day, such as DrivingLessons.co.uk, comes to £9,125 over a year. A name at £30 a day, such as MySolicitor.co.uk, comes to £10,950. A name at £16 a day, such as YourClinic.co.uk, comes to £5,840.

On the £25 a day name, a company paying corporation tax at 19 per cent saves about £1,734 over the year, and one paying 25 per cent saves about £2,281. A sole trader paying the basic 20 per cent rate of income tax saves £1,825, and a higher rate payer at 40 per cent saves £3,650. Those are illustrations using the published headline rates at the time of writing.

Deductible does not mean free. The lease still costs you the payment, and the saving only helps if the business makes a taxable profit. What it does mean is that the real cost is lower than the headline figure.

Why lease payments are treated as revenue

Accountancy bodies explain that regular payments for the use of something, akin to rent, are revenue in nature, and that a lump sum paid for something with an enduring benefit needs more analysis. The Association of Taxation Technicians guide to website costs sets out that approach, and notes that domain names are among the items HMRC normally treats as capital when they are bought. The wider test is the capital and revenue divide in the HMRC Business Income Manual.

A daily or monthly lease sits on the revenue side of that line. You are paying for the use of the name over a period, you do not own it, and the benefit ends when the lease does. That is the same logic as renting a shop or leasing a van, which is why the cost goes through your accounts like any other trading expense.

Who this suits

It suits any business that wants a descriptive address for customers without a large purchase. Solicitors and law firms look at the legal and professional names. Driving schools and garages look at the motoring and transport names. Practices and clinics look at the health and medical names. Firms that sell to other firms look at the business services names. You can browse every sector on the sectors page.

What deductible means for you

The lease goes through your accounts as a running cost, like rent on a shop or the lease on a van. The full amount reduces your taxable profit, so the real cost to the business is lower than the headline daily rate.

If you would rather work out the cost first, the full portfolio shows the daily rate on every name, and why domain names matter explains what a good name is worth. To talk through a specific name, contact us.

Common questions

Is a domain name lease tax deductible in the UK?

Yes. A lease payment for a domain name that you use in your business is a rental payment, and it is 100% tax deductible. It reduces your taxable profit by the full amount you pay.

Is buying a domain name treated differently from leasing one?

Yes. Advisers commonly report that HMRC treats the purchase of a domain name as capital expenditure, which is not deducted from profits in the same way. Periodic rental payments are revenue in nature, which is why a lease is deducted in full.

How much tax does a daily lease save?

A deduction saves tax at your own rate. At £25 a day the lease costs £9,125 over a year, which is worth about £1,734 in corporation tax at 19 per cent or £2,281 at 25 per cent, or £1,825 for a basic rate income tax payer. It lowers the real cost; it does not remove it.

Does the lease count as a business expense for a sole trader?

Yes. The payment is an allowable expense for a sole trader as well as for a company, and it is 100% tax deductible. The tax saved depends on your rate of income tax.

Is the whole lease payment deductible?

Yes. Every pound of the lease is a rental payment for the use of the name, so the full amount comes off your taxable profit. The car hire restriction that applies to some vehicle leases does not apply to a domain name.