Allowable Expenses for Limited Companies: What You Can Claim

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Last updated 23 October 2026. Written by the Limited Company Accountant UK team, part of Accotax. Figures are for the 2026/27 tax year; always check GOV.UK for the latest rates.

Short answer: A limited company can claim expenses that are incurred wholly and exclusively for the purposes of the business, including software, equipment, travel, professional fees, marketing, insurance and a proportion of home running costs. Expenses reduce taxable profit and therefore Corporation Tax, but personal costs, client entertainment and fines are not allowable.

Key facts

Basic test	Wholly and exclusively for business
Mileage	55p per mile for the first 10,000 miles, then 25p
Trivial benefits	Up to £50 per person per occasion
Entertaining clients	Not allowable
Records to keep	6 years

The wholly and exclusively rule

Every expense claim comes back to one test: was the cost incurred wholly and exclusively for the purposes of the company’s trade? If a cost has a clear business purpose and no significant private element, it is allowable. If it has a mixed purpose, you can usually claim only the business proportion, and if it is mainly personal, you cannot claim it at all.

The rule is simple, but its application needs judgement. A laptop used only for work qualifies in full. A phone used 70% for business and 30% privately can be claimed at 70%, or the company can pay for a separate business contract. Document the reasoning when a cost is a grey area, because HMRC asks about the business purpose, not just the amount.

Everyday costs most companies can claim

A long list of ordinary business costs is allowable, and most limited companies will claim a good number of them every year.

• Accountancy, legal and other professional fees.

• Accounting, payroll and other business software subscriptions.

• Office costs such as stationery, printing, postage and phone and broadband costs for the business.

• Insurance, including professional indemnity, public liability and cyber insurance.

• Website, hosting, domain and marketing costs, including advertising and design.

• Bank charges and payment processing fees on the company account.

• Training and courses that maintain or update skills used in the existing business.

• Equipment such as computers, tools and furniture, claimed through capital allowances.

Keep the invoice or receipt for each and record it in your bookkeeping so it flows into the year-end accounts.

Travel, mileage and subsistence

Travel costs are allowable when you travel for business, but not for your ordinary commute from home to a permanent workplace. Trains, buses, flights, parking, tolls and taxis for a business trip are all claimable. If you use your own car, you can claim 55p per mile for the first 10,000 business miles in a tax year and 25p per mile after that, under HMRC’s approved mileage rates, instead of working out actual costs.

Subsistence, meaning meals and drinks while travelling away from your normal place of work, is allowable when the trip is genuinely for business. Everyday lunches near your usual workplace are not. Keep a mileage log with date, route, purpose and distance for every journey.

Working from home and premises

If you work from home, you can claim a proportion of the household costs that relate to your business use, or use the simplified flat rate of £6 per week without the need for receipts. A director who rents an office or co-working space can claim the rent and service charges in full. Business rates, utilities and cleaning for the premises are also allowable.

Do not claim for the whole of your home’s running costs unless a room is used solely for business. If you claim a proportion of mortgage interest or rent, check the effect on capital gains tax relief when you sell your home, because exclusive business use can reduce private residence relief.

Costs you cannot claim

Some payments look like business costs but are not allowable.

• Client entertainment, including meals, drinks and event tickets, even though it has a business purpose.

• Fines and penalties, including parking tickets and late filing penalties.

• Personal clothing, even if you wear it for work, apart from uniforms or protective clothing.

• Everyday commuting costs between home and a permanent place of work.

• Gifts to clients above a very small value, or gifts of alcohol, tobacco or vouchers.

• Personal expenses paid from the company account, such as groceries or a holiday.

Staff entertainment is different. Annual staff parties up to £150 per head and trivial benefits up to £50 can be allowable if they meet the rules.

Equipment and capital allowances

Long-lasting items such as computers, machinery and vans are not deducted in full as an ordinary expense. They are capital items, and the company claims relief through capital allowances. The Annual Investment Allowance gives 100% relief on up to £1 million of qualifying spending a year, and full expensing gives 100% first-year relief on qualifying new plant and machinery for companies.

In practice this means a laptop bought for £1,500 can usually be deducted from profit in the year you buy it, reducing the Corporation Tax bill by £285 to £375. Cars are treated differently and have their own rules based on CO2 emissions, so check before buying one through the company.

Keeping records and avoiding problems

HMRC can ask to see your records for six years, so keep invoices, receipts and bank statements in an organised way. Digital copies are fine. Most accounting software lets you snap a photo of a receipt and attach it to the transaction.

Pay business costs from the company account where possible. If you pay personally, record the amount in the director’s loan account so the company can reimburse you without tax. The more clearly you separate business and personal spending, the easier it is to defend your claims. If you are unsure whether an expense qualifies, ask before you claim, because wrongly claimed expenses can lead to additional tax and penalties.

Allowable expenses for common types of business

The best expenses to claim depend on the type of company. A contractor will often claim travel to a temporary site, accommodation, professional indemnity insurance and an accountant. An ecommerce seller will claim stock, packaging, marketplace fees, advertising and courier costs. A consultant will claim software, training, subscriptions, marketing and a share of home costs. A tradesperson will claim tools, protective clothing, van costs and public liability insurance.

Whatever your trade, the principle is the same. If a cost is needed to earn the company’s income and has no personal element, it is almost certainly allowable. Look through your bank statements once a quarter and ask whether any costs were missed, because the most common mistake is leaving money on the table.

Pre-trading costs and start-up expenses

Costs incurred before the company starts trading are not lost. Expenses in the seven years before trading begins can generally be treated as incurred on the first day of trading, as long as they would have been deductible had the company been trading. This includes website costs, early legal fees, market research and equipment bought for the business.

Keep the receipts for these costs and tell your accountant about them in the first year. They are often forgotten, because they pre-date the company bank account, and they can be paid back to you tax-free as a director’s loan repayment if you funded them personally.

Frequently asked questions

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