In short
UK commercial rents are usually quoted per square foot per year, and the tenant normally also pays business rates, a service charge in shared buildings, and often VAT on the rent. In England and Wales a business tenant has a right to renew the lease under the Landlord and Tenant Act 1954 unless the lease is "contracted out" of it. Stamp Duty Land Tax is due on a new lease only when the net present value of the rent is over £150,000.
1. Work out the full cost
- Rent: quoted per sq ft per year (for example £25 per sq ft on 1,000 sq ft is £25,000 a year). Use our commercial rent calculator to turn it into a monthly figure.
- Business rates: a property tax on non-domestic property, normally paid by the occupier. Ask the council for the rateable value and check whether you qualify for relief.
- Service charge: your share of running the building in shared or managed premises.
- VAT: if the landlord has opted to tax the building, VAT is charged on the rent.
- Insurance and repairs: in a "full repairing and insuring" (FRI) lease the tenant pays for both.
2. Understand the lease terms
- Term and break clause: how long you are committed, and whether either side can end the lease early.
- Rent review: when and how the rent can change, and whether it can only go up.
- Repairs: an FRI lease can make you pay to put the building into good repair; a schedule of condition limits that to the condition you took it in.
- Use, alterations, assignment and subletting: what you may do with the space and whether you can pass the lease on.
- Rent deposit or guarantee: many landlords ask for one for a new business.
3. Security of tenure: the 1954 Act
In England and Wales, Part 2 of the Landlord and Tenant Act 1954 gives most business tenants the right to renew their lease when it ends; the landlord can refuse only on grounds set out in the Act, such as redevelopment or serious breaches. Landlords often ask to "contract out": the landlord serves a warning notice and the tenant signs a declaration giving up those rights before the lease is signed. Know which kind of lease you are signing. The Law Commission published a consultation on reforming the Act in June 2026; the current rules still apply.
4. Stamp Duty Land Tax on a lease
In England and Northern Ireland, SDLT on a new non-residential lease is worked out on the net present value (NPV) of the rent over the term. No SDLT is due on the rent if the NPV is under £150,000; above that, the rate is 1% on the part up to £5 million and 2% above. A premium is taxed separately. HMRC has a calculator for the NPV. Scotland (LBTT) and Wales (LTT) have their own taxes.
5. Before you sign
- Check the planning use class allows your business, and whether you need a premises licence (for example for alcohol or late-night food).
- Agree heads of terms (rent, term, break, rent-free period, repairs, deposit) before solicitors draft the lease.
- Commission a survey of an older building, and record its condition in a schedule of condition.
Checklist
- Full yearly cost worked out: rent, business rates, service charge, VAT, insurance
- Rateable value and any rates relief checked with the council
- Lease inside or contracted out of the 1954 Act: you know which
- Break clause, rent review and repair terms agreed in the heads of terms
- SDLT checked if the rent NPV may exceed £150,000
- Planning use and any licences confirmed
- Solicitor has reviewed the lease
Questions people ask
Who pays business rates on a rented shop?
Normally the occupier, so the tenant, not the landlord. The amount depends on the rateable value set by the Valuation Office Agency and any relief you qualify for.
What does contracted out of the 1954 Act mean?
The tenant gives up the statutory right to renew the lease when it ends. The landlord must serve a warning notice and the tenant must sign a declaration before the lease is entered into.
Do I pay stamp duty on a commercial lease in England?
Only if the net present value of the rent over the term is more than £150,000. The rate is 1% on the part above £150,000 and 2% above £5 million.
Is VAT charged on commercial rent in the UK?
Only if the landlord has opted to tax the property. Then VAT at the standard rate is added to the rent, and a VAT-registered tenant can usually reclaim it.
Sources
- SDLT on leases and the £150,000 NPV threshold: GOV.UK: SDLT on leasehold purchases and non-residential rates
- Landlord and Tenant Act 1954 reform consultation, June 2026: Ashfords; Law Commission
- Business rates: GOV.UK: introduction to business rates
Next steps
Commercial rent calculator · Search the map · List your space free · Post what you need
Guides for other countries: USA · Dubai (UAE) · Canada · Australia · Singapore · Hong Kong · India