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 Are Limited Company Expenses?
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:
Claim approved mileage rates:
45p/mile (first 10,000 miles)
25p thereafter
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
Pay via business account where possible
Keep VAT receipts and digital copies
Maintain mileage logs (vehicle expenses)
Clearly separate personal from business transactions
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.