Why leasing appeals
The first attraction is simple. Leasing reduces your capital outlay. Buying a premium name can mean a large payment before it has earned anything. Leasing spreads the cost across the term, keeps your cash free for the build and for marketing, and lets you see the return before you commit further. You can read more about what a good name is worth in why domain names matter.
The second is tax. In the UK, rent or lease payments that a business makes wholly and exclusively for its trade are generally an allowable business expense, which means they reduce the profit the business pays tax on. That is what people mean when they say leasing is tax deductible. Three points keep that accurate.
Deductible does not mean free. A deduction saves tax at your own rate, so it lowers the real cost of the lease, but it does not remove it. It is also not a full deduction in every case. For example, HMRC disallows 15 per cent of the hire cost when a business leases a car with CO2 emissions above 50g/km, and the treatment differs for finance leases and hire purchase, where the asset is handled more like a purchase. The rules also differ between sole traders and companies, and for VAT.
A lease payment for a domain name that you use in your business is a rental payment, and it is 100% tax deductible. The car restriction does not apply to it. Our reference for the vehicle rule is the HMRC Business Income Manual on car hire restrictions.