Limited Company Expenses: The Ultimate UK Guide for 2025/26

In this comprehensive guide, we cover everything you need to know about limited company expenses in the UK—what you can claim, what you can’t, how to record it, and the golden rules that make it all legitimate.

What Expenses are Allowable for Tax?

Understanding what expenses your limited company can claim is one of the most powerful tools for managing your business’s tax efficiency. Done correctly, it can save thousands of pounds annually in Corporation Tax, improve cash flow, and ensure you stay compliant with HMRC.

Limited company expenses are costs incurred by the business during its operations that can be deducted from revenue to reduce the company’s taxable profits.

Claiming the correct expenses:

• Reduces your Corporation Tax bill

• Keeps your business cash flow-healthy

• Helps ensure compliance with HMRC

In most cases, expenses must be incurred “wholly and exclusively” for business purposes to be considered allowable.

The “Wholly and Exclusively” Rule Explained

This is the fundamental principle set by HMRC for deciding whether an expense is claimable. It means the entire purpose of the expense must be business-related.

Key clarifications:

• Mixed-use expenses (personal + business) are disallowed unless a clear apportionment can be made.

• Incidental personal benefit (like enjoying the location of a business trip) does not usually invalidate the claim.

• Evidence and intent are crucial – written policies and detailed records support your claim if HMRC ever asks.

Allowable Expenses Categories (Full List)

Here are the broad types of expenses most UK limited companies can claim:

• Office equipment & software

• Premises costs (including home office)

• Salaries, NICs, and pensions

• Business travel & accommodation

• Vehicle expenses & mileage

• Legal, accountancy, and consultancy fees

• Telephone, internet & mobile

• Insurance policies

• Staff training and CPD

• Professional memberships & subscriptions

• Bank charges and interest on business loans

• Advertising & marketing

• Charitable donations and sponsorship

• Bad debts (accruals-based companies)

• Depreciation and capital allowances

Each has its own conditions, which we explore in detail below.

Detailed Breakdown of Common Expenses

1. Office Costs

Covers items like:

• Desks, chairs, monitors, filing cabinets

• Computers, printers, scanners

• Software (e.g., Microsoft 365, accounting tools)

• Office cleaning and maintenance

• Utility bills (if rented office)

All must be for business use. Where dual use exists (e.g., using a laptop for personal matters), apportion accordingly.

2. Salaries and Payroll Costs

Wages paid to:

• Directors (including yourself)

• Employees

• Apprentices

Also claimable:

• Employer’s NIC

• Employer pension contributions

• Payroll software subscriptions

• Employer's liability insurance

Make sure employment contracts and payslips are maintained to support claims.

3. Travel and Subsistence

You can claim for:

• Public transport (trains, flights, taxis)

• Mileage (see vehicle section)

• Overnight accommodation

• Meals during overnight business trips

• Toll charges, congestion zones, parking fees

Commuting costs (home to office) are not claimable.

4. Marketing, Advertising and PR

Examples:

• Business cards, flyers, signage

• Website design and hosting

• SEO or PPC advertising

• Sponsorship (if it promotes the company)

Ensure the expenditure is for the benefit of the business and properly evidenced.

5. Training and Development

Training must:

• Maintain or enhance current skills relevant to the business

• Not provide completely new skills

Examples:

• CPD courses for doctors, solicitors, therapists

• Technical certifications relevant to your trade

You cannot claim a course that qualifies you for a new trade or profession.

6. Telephone, Mobile and Broadband

Business-only contracts in the company name are fully allowable.

If a personal contract is used:

• You must apportion and only claim the business portion.

• You may reimburse yourself based on itemised bills.

7. Insurance

Claimable types include:

• Public liability insurance

• Professional indemnity insurance

• Employer's liability insurance

• Business contents insurance

• Cyber liability cover

Ensure policies are in the company’s name and relevant to your work.

8. Accountancy and Legal Fees

Allowable if:

• Services are purely for the business

• Includes year-end accounts, bookkeeping, VAT returns

You cannot claim:

• Personal tax return preparation

• Legal advice for personal matters

Apportion if necessary.

9. Bank Charges and Finance Costs

Claimable:

• Business bank account charges

• Loan interest (on business loans)

• Credit card fees (business only)

• Overdraft fees

Ensure the loan is in the company's name and used for trading activities.

10. Charitable Donations

You can claim donations to:

• Registered UK charities

• Community interest companies (CICs)

This must be a corporate donation, not a personal gift.

11. Software and Subscriptions

You can claim:

• Cloud-based subscriptions (e.g. Xero, Zoom)

• Industry magazines (if relevant)

• Trade body memberships

Cannot claim:

• Gym memberships

• Subscriptions to unrelated publications

12. Depreciation and Capital Allowances

• Capital items (like computers, machinery) are not expensed directly but claimed via Annual Investment Allowance (AIA) or writing down allowance.

• Depreciation is an accounting entry and not allowable for tax – we replace with capital allowances in your tax calculation.

Capital vs Revenue Expenses

Type of Expense	Description	Tax Treatment	Example
Capital Expense	Costs related to acquiring or improving fixed assets. Benefits last more than one year.	Not deducted from trading profits. May qualify for capital allowances.	Purchase of equipment, machinery, or a vehicle
Revenue Expense	Day-to-day operational costs that keep the business running.	Fully deductible against trading profits in the year incurred.	Rent, salaries, software subscriptions, stationery

Home Office Expenses

If you work from home as a director, you can claim:

• Flat-rate: £6 per week with no records required

• Proportional method:

  • Portion of rent, electricity, gas, water

  • Broadband and phone use

  • Council tax (if reasonable)

Always base on:

• Area used for business

• Hours per week

• Number of rooms in the home

Vehicle and Mileage Costs

You can either:

1. Claim approved mileage rates:

   • 45p/mile (first 10,000 miles)

   • 25p thereafter

2. Or, if the car is owned by the company, claim:

   • Fuel

   • Insurance

   • Repairs

   • Tax

   • Capital allowance

Company cars have benefit-in-kind (BIK) tax implications. Often not tax-efficient unless electric.

Entertainment and Gifts

Claimable:

• Annual staff events (up to £150 per person)

• Employee gifts under £50 (trivial benefit rule)

Not claimable:

• Client entertaining

• Business lunches with clients or prospects

Professional Fees, Insurance, and Subscriptions

Covered earlier, but always check:

• The service relates solely to your business

• Fees are not incurred for personal matters

• Subscriptions are to professional organisations approved for your trade

Employee Costs and Benefits in Kind

Provide benefits?

• Some are tax-free (e.g., mobile phone)

• Others (e.g., private health insurance) require a P11D form and may incur additional tax

What You Can’t Claim

Here’s what you must avoid:

Expense Type	Reason Disallowed
Client entertainment or hospitality	Disallowed for Corporation Tax purposes
Commuting (home to permanent workplace)	Not classed as business travel
Childcare or personal costs	Non-business and therefore not deductible
Luxury or extravagant accommodation	May not meet HMRC's "reasonable" test

How to Claim Expenses Properly

1. Pay via business account where possible

2. Keep VAT receipts and digital copies

3. Maintain mileage logs (vehicle expenses)

4. Clearly separate personal from business transactions

5. Use accounting software or a spreadsheet

Best Practices for Record-Keeping

• Store all records for at least 6 years

• Use cloud tools to digitise and archive receipts

• Back up data securely

• Organise claims monthly, not just at year-end

• Prepare audit trails and justification for borderline claims

Accountant vs DIY: When to Get Professional Help

Use an accountant when:

• You're close to Corporation Tax thresholds

• You employ staff or pay yourself via dividends

• You’re unsure about apportionment or capital claims

• You need help with payroll, pensions or VAT

Frequently Asked Questions

Q: Can I claim a business suit or uniform?
A: Uniforms or branded clothing, yes. General business attire, no.

Q: Can I backdate expense claims?
A: Yes, provided they fall within the company’s accounting period and you have supporting evidence.

Q: Can I reimburse myself for past expenses?
A: Yes, as long as they're legitimate and documented.

Q: Do I need receipts for small purchases?
A: Best practice is yes. Technically under £25 may not require one, but it’s still recommended.

Final Checklist for Expense Claims

✅ Is the expense wholly and exclusively for business?

✅ Is it supported by a receipt, invoice or log?

✅ Is there any personal use? If yes, is it clearly apportioned?

✅ Was it paid from a business or personal account?

✅ Has it been correctly recorded and categorised?

Conclusion

Managing limited company expenses correctly is both an art and a science. It requires:

• Detailed knowledge of HMRC rules

• Accurate and regular record-keeping

• A business-first mindset in decision-making

By following the guidance above, you’ll reduce your tax burden, stay compliant, and build a more efficient company.