- A cost is allowable if it is spent wholly and exclusively for the business.
- A corporation tax deduction and a VAT reclaim are two separate things.
- Grey areas turn on the facts of your company, so get them checked.
A limited company can claim any cost incurred wholly and exclusively for the business, and getting the borderline ones right is where it helps to have an accountant for your limited company on the file.
The common categories are salaries and employer National Insurance, pensions, equipment, software, mileage, professional fees, insurance, marketing, stock, and a share of home working costs.
What it won’t cover is client entertaining, everyday clothing, fines, or personal spending on the company card. This is a working limited company expenses list with the condition on each one, and an honest note on what HMRC challenges.
What does wholly and exclusively actually mean?
The test that decides every allowable business expense in the UK is whether the cost was incurred wholly and exclusively for the purposes of the trade. It comes from the Corporation Tax Act and it is the spine of the whole subject. Learn it once and you can apply it to categories this page never mentions.
Wholly means the full amount was spent for the business. Exclusively means the business was the only reason for spending it. If there is a private benefit mixed in, the cost usually fails the test unless you can separate the business part cleanly.
Take two examples. A laptop you use only for company work passes: one purpose, business. A winter coat you wear to client meetings and everywhere else fails: it keeps you warm generally, so the purpose is not exclusively business, even though you do wear it to work.
Is a tax deduction the same as a VAT reclaim?
No, and mixing the two up is the single most common mistake business owners make with company expenses. They are separate reliefs with separate rules, and a cost can qualify for one, both, or neither.
A corporation tax deduction reduces your taxable profit. If your company pays corporation tax at 19% on profits up to £50,000, a £100 allowable cost saves you £19 in tax. At the 25% main rate on profits over £250,000, the same cost saves £25.
A VAT reclaim is separate and only applies if your company is VAT registered. It lets you recover the 20% VAT charged on a purchase, so on a £120 invoice (£100 plus £20 VAT) you reclaim the £20 through your VAT return. The £100 net cost still goes through as a corporation tax deduction on top. If you run VAT on a cash basis, the VAT cash accounting scheme changes when you reclaim, not whether you can.
What expenses can a limited company claim, by category?
The list below is ordered by how often each category applies, not by how much tax it saves. Every entry carries its condition, because the condition is what keeps you on the right side of an enquiry.
Salaries and employer National Insurance
Staff wages, directors’ salaries, and the employer’s National Insurance on top are all allowable. Employer NI is charged at 15% on earnings above the £5,000 secondary threshold, so budget for it as a real cost of employing anyone, including yourself.
Pension contributions
Employer pension contributions are allowable as long as they meet the wholly and exclusively test. For a director this usually holds where total pay and pension are commercially reasonable for the work done.
Home office costs
Because a director is an employee of their own company, the company can reimburse up to £6 a week (£312 a year) towards home working costs with no receipts and no tax, provided there is a genuine homeworking arrangement in place. Reimbursing more than that needs evidence of the actual extra costs, or HMRC can treat the excess as salary. The sole trader simplified expenses flat rates do not apply to a limited company director.
Mileage and travel
Where you use your own car for business, the company can pay approved mileage of 55p a mile for the first 10,000 business miles in 2026/27 and 25p a mile after that, tax free. Business travel, train fares, and accommodation on work trips are allowable, but ordinary commuting between home and a regular workplace is not.
Equipment and capital items
Laptops, tools, machinery, and office furniture are allowable, though larger items are usually claimed as capital allowances rather than a straight expense. The Annual Investment Allowance lets most companies write off the full cost of qualifying equipment in the year of purchase.
Software and subscriptions
Accounting software, design tools, cloud storage, and trade subscriptions are allowable where they are used for the business. A subscription you would keep for personal reasons anyway is harder to justify.
Professional fees
Accountancy, bookkeeping, and legal fees for the running of the business are allowable. Fees tied to buying a capital asset or to a personal matter are not.
Insurance
Business insurance such as professional indemnity, public liability, and employers’ liability is allowable. Employers’ liability cover is a legal requirement once you have staff.
Training
Training that maintains or updates a skill the business already uses is allowable. Training that gives you a genuinely new skill or qualification is treated as capital and usually is not, which is one of the grey areas below.
Phone and broadband
A mobile contract in the company name is allowable in full, even with some private use, because the rules treat one company mobile favourably. A personal contract or home broadband is only claimable on the business proportion.
Bank charges and interest
Business bank charges, loan interest, and finance costs on borrowing for the business are allowable. Interest on personal borrowing is not, even if you spend the money on the company.
Marketing
Advertising, website costs, branding, and the cost of pitching for work are allowable. This is one of the safest categories, so keep the invoices and claim it properly.
Stock and materials
The cost of goods you buy to sell, and the raw materials that go into what you make, are allowable against the profit they help earn.
Staff entertaining
Entertaining your own employees is allowable, and there is a separate exemption of up to £150 a head per year for annual events such as a Christmas party. Go a penny over £150 and the whole amount becomes taxable, not just the excess.
Company vehicles and smaller costs
A car owned by the company is allowable but brings a benefit-in-kind charge on the director, which often makes it more expensive than mileage, so weigh it up before you buy. Odds and ends that don’t fit a category, such as small office consumables, go through as sundry expenses as long as each one meets the same wholly and exclusively test.
What expenses can a limited company not claim?
Some costs never pass the test, and claiming them anyway is exactly what draws an enquiry. Keep these out of the company accounts.
- Client entertaining: taking a customer or supplier for lunch is not allowable, even though staff entertaining is.
- Everyday clothing: ordinary clothes are not allowable, even a suit bought only for work. Protective gear and branded uniforms are the exception.
- Fines and penalties: parking fines, speeding fines, and late-filing penalties are not deductible.
- Personal spending on the company card: this is not an expense at all. It creates a director’s loan, and an overdrawn balance can trigger S455 tax on an overdrawn director’s loan.
Which limited company expenses are grey areas?
These are the costs where the answer is depends, and the deciding fact matters. This is where a wrong call is expensive, because the reasoning behind each one is specific to your company rather than a rule you can copy.
Dual-purpose costs, anything with both a business and a private use, only give you the business share, and you need a fair, explainable basis for splitting them. Working from home beyond the flat £6 a week means apportioning real bills by room and by time, which is defensible if you keep the workings and risky if you guess.
Training that develops a new skill rather than maintaining an existing one is usually capital and not allowable, so the same course can go either way depending on what your business already does. The company car decision turns on the benefit-in-kind charge against the mileage alternative, which depends on the car, the mileage, and your other income.
None of these have a one-size answer, which is the honest reason directors end up asking an accountant. If you want them settled correctly the first time rather than unpicked at year end, that is the point to bring in help.
What records do you need to keep?
You must keep your company’s accounting records for six years from the end of the financial year they relate to, and longer if a transaction spans more than one period or an asset is expected to last beyond six years. HMRC can fine a company up to £3,000 for failing to keep proper records, and a director can be disqualified.
Records means the invoices, receipts, bank statements, and mileage logs behind every figure, not just the annual accounts. Digital copies are fine, and keeping keeping receipts in order through the year is far easier than reconstructing them under an enquiry. If you would rather not touch it at all, this is the sort of thing that comes as standard with accounting handled by qualified accountants.
What does HMRC actually challenge?
On an enquiry, HMRC does not usually argue about the clear categories. It goes after the costs where private benefit and business purpose blur together, because that is where the money is.
The usual targets are home office claims above the flat rate with no workings, motor and travel costs that look like commuting, entertaining dressed up as marketing, and drawings run through the company as expenses. A tidy set of records and a clear reason for each borderline claim is what turns a challenge into a short conversation. Claiming expenses cleanly is also one of other ways to reduce a corporation tax bill without straying into anything HMRC will pick apart.
How Sleek helps with limited company expenses
Knowing what your limited company can claim is one thing. Being sure the grey areas are right, and that the records behind them would survive an enquiry, is what actually protects the money.
Sleek pairs qualified accountants with AI that does the heavy lifting and shows its working, so every claim is checked by a real person and you can see what went through and why. If you want a review of what your company is currently claiming, we can take a look.
Want a review of what your company claims?
FAQs on limited company expenses
What can I claim if I work from home?
Your company can reimburse you up to £6 a week, or £312 a year, for home working costs with no receipts, as long as you have a genuine homeworking arrangement. To claim more you have to apportion your actual household bills by the space and time used for the business and keep the workings. The sole trader simplified flat rates do not apply to you as a company director.
Can I put my phone bill through the company?
A single mobile phone contract taken out in the company’s name is fully allowable, even if you use it privately as well. If the contract is in your own name, the company can only reimburse the business proportion of the calls and data.
Can I claim a laptop I bought before the company existed?
Yes, you can bring personal equipment into the business at its current market value on the date the company starts using it, not what you originally paid. Keep a note of how you arrived at the value in case HMRC asks.
Is taking a client for lunch claimable?
Client entertaining is not an allowable expense for corporation tax and you cannot reclaim the VAT on it either. You can still pay for it through the company, but it will not reduce your tax bill and it gets added back when your profit is worked out.
Can the company pay for my training?
The company can pay for training that maintains or updates a skill the business already uses, and that cost is allowable. Training that gives you a brand new skill or qualification is usually treated as capital, so it is not deductible in the same way.
Do I need a receipt for everything?
You need evidence for every cost you claim, and for most expenses that means the receipt or invoice. The flat-rate £6 a week home working allowance is the main exception, since it is designed to be claimed without receipts.
Can I claim mileage if the company does not own a car?
Yes, that is exactly what the approved mileage rates are for. When you use your own car for business the company pays you 55p a mile for the first 10,000 business miles in 2026/27 and 25p after that, tax free, and you keep a log of the journeys.
What happens if I claim something HMRC disallows?
HMRC adds the disallowed cost back to your profit and charges the corporation tax you should have paid, usually with interest. If it decides the error was careless or deliberate rather than an honest mistake, a penalty on top is likely, which is why the borderline claims are worth getting right up front.
