- Allowable limited company expenses must be incurred wholly and exclusively for business, and claiming them reduces your Corporation Tax bill.
- HMRC requires you to keep expense records and receipts for six years from the end of the accounting period they relate to.
- Common claimable costs include office equipment, business travel, working-from-home costs, insurance, salaries, pensions, and trivial benefits up to £50 per gift.
Limited company expenses are business costs you can deduct from your company’s profits before Corporation Tax, provided they are incurred wholly and exclusively for the trade. Claiming them properly can reduce your tax bill by hundreds or thousands of pounds each year.
Most directors underclaim. They either miss categories like trivial benefits and pre-trading costs, or they overclaim on things like client entertainment and trigger HMRC pushback.
This guide covers what you can claim, what you cannot, the exact limits HMRC sets, and how to keep records that hold up under scrutiny. For wider context on the cost of running a company, see our guide on the true cost of running a limited company.
What counts as an allowable expense for a limited company?
An allowable expense is any cost incurred wholly and exclusively for the purpose of your trade. If the cost has a clear business purpose and no significant personal element, it reduces your taxable profit and therefore your Corporation Tax bill.
The “wholly and exclusively” test is HMRC’s central rule. If an expense has any meaningful personal benefit, it usually fails the test and cannot be claimed.
Three quick tests to apply before claiming any cost:
- Was the cost incurred to generate business income?
- Would you have paid it if the business did not exist?
- Can you evidence it with a receipt, invoice, or bank record?
If the answer to the first is yes, the second is no, and the third is yes, the expense is almost always allowable.
How do expenses reduce my Corporation Tax bill?
Expenses are deducted from your company’s turnover to arrive at taxable profit, which is then taxed at the current Corporation Tax rate of 19% to 25% depending on profit level. Every £1,000 of legitimate expenses saves your company between £190 and £250 in tax.
This is why underclaiming hurts so much. A director who misses £5,000 of allowable costs in a year is handing HMRC up to £1,250 unnecessarily.
What office and equipment costs can a limited company claim?
Office costs are one of the largest categories of allowable spend for most limited companies. Anything used wholly for the business, from a laptop to a desk to your accounting software subscription, can be claimed.
The main office and equipment expenses include:
- Computers, laptops, tablets, and monitors
- Office furniture such as desks and chairs
- Stationery, printer ink, and postage
- Software subscriptions including accounting, design, and project tools
- Mobile phones and contracts in the company’s name
- Business broadband when the contract is with the company
Equipment with a longer useful life, such as a laptop, is usually claimed through capital allowances rather than as a straight expense. The Annual Investment Allowance lets most companies claim 100% of the cost in the year of purchase up to £1 million.
Can I claim my mobile phone and broadband?
You can claim the full cost of a mobile phone contract if it is in the company’s name, even if you use the phone for some personal calls. This is one of the few HMRC concessions where dual use does not block the claim.
Broadband is treated differently. If the contract is in your personal name, you can only claim the business-use proportion. If it is in the company’s name and the line was installed for business purposes, the full cost is allowable.
What travel expenses can I claim as a limited company?
You can claim travel costs incurred while doing your job, but not the cost of getting to your normal place of work. The distinction between business travel and commuting is one HMRC actively polices.
Allowable business travel includes:
- Train, bus, taxi, and flight fares for client visits or temporary workplaces
- Mileage at HMRC’s approved rates when using your own car
- Fuel, parking, and tolls for company-owned vehicles
- Hotel accommodation and reasonable subsistence on overnight trips
- Visa and travel insurance costs for business trips abroad
HMRC’s approved mileage rates for cars are 45p per mile for the first 10,000 business miles in a tax year, and 25p per mile after that. Motorcycles are 24p per mile and bicycles are 20p per mile.
What is a temporary workplace for travel claims?
A temporary workplace is somewhere you attend for a limited duration or a task of limited duration, generally meaning under 24 months of continuous attendance. Travel to a temporary workplace is fully claimable.
A permanent workplace is the place you usually work from. Daily travel to a permanent workplace counts as ordinary commuting and is never claimable, even if you are a company director.
If you visit a client site three days a week for over two years, HMRC will likely class it as a permanent workplace and disallow the travel. Keep a clear log of locations and dates to defend any claim under enquiry.
How do working-from-home expenses work?
Directors working from home can claim a contribution towards household running costs, using either HMRC’s flat rate or a calculated proportion of actual bills. The flat rate is easier and needs no receipts.
The two methods compared:
Method | Amount | Records needed | Best for |
HMRC flat rate | £6 per week or £26 per month | None | Directors with modest home use |
Actual cost apportionment | Calculated share of bills | Full receipts and a usage calculation | Directors with significant home-office use |
The flat rate works out at £312 per year and covers things like heat, light, and electricity. The actual method usually produces a higher claim but requires you to apportion bills by the number of rooms used and time spent working.
You can also claim the business-use portion of dedicated lines such as a second phone line installed specifically for work.
What about insurance and professional fees?
Business insurance premiums and professional fees paid for the running of the company are fully allowable. These are some of the easiest expenses to claim because the business purpose is clear and the invoices are usually well-documented.
Allowable insurance and professional costs include:
- Professional indemnity insurance
- Public and employers’ liability insurance
- Cyber insurance and business contents cover
- Accountancy and bookkeeping fees
- Solicitors’ fees for business contracts and disputes
- Companies House filing fees and the confirmation statement fee
Life insurance for directors is more complex. Relevant Life Policies taken out by the company are usually allowable, while ordinary personal life cover paid by the company is not.
Can I claim my salary, dividends, and pension as expenses?
Your salary as a director is an allowable expense for the company, but dividends are not. This distinction is one of the biggest sources of confusion for new limited company owners.
The treatment of each:
- Salary: Fully deductible from company profits before Corporation Tax. Employer National Insurance on the salary is also deductible.
- Dividends: Paid from post-tax profits and not deductible. They are taxed personally on the recipient at dividend rates.
- Pension contributions: Employer pension contributions made by the company are deductible, subject to the wholly and exclusively test and the annual allowance.
Most directors pay themselves a low salary up to the National Insurance secondary threshold and take the rest as dividends, which is generally the most tax-efficient mix. Pension contributions made through the company are often the single most powerful tax planning tool available.
What entertainment and gift expenses are allowed?
Staff entertainment is allowable within strict limits, but client entertainment is not deductible at all. This trips up almost every new director.
The key rules on entertainment and gifts:
Category | Limit | Deductible for Corporation Tax | VAT recoverable |
Annual staff event (Christmas party) | £150 per head per year | Yes | Yes on employee portion |
Client entertainment | No limit but disallowed | No | No |
Trivial benefits to staff | £50 per gift, no more than £300 per year for directors | Yes | Yes if VAT charged |
Business gifts to clients | £50 per recipient per year, must carry company branding and not be food, drink, or tobacco | Yes | No |
The £150 staff event allowance is a per-head limit, not a per-event limit. If you exceed it by even £1, the whole amount becomes taxable as a benefit in kind.
Can I claim training and professional development?
Training that maintains or updates skills used in your current trade is allowable. Training to learn a brand new skill or qualify for a different profession is not.
Allowable training costs include:
- CPD courses required by your professional body
- Conferences and industry events relevant to your trade
- Online courses that update existing skills
- Professional subscription fees to bodies on HMRC’s approved list
The HMRC list of approved professional bodies covers thousands of organisations. If your subscription is on the list, it is fully claimable.
What pre-trading expenses can I claim?
You can claim costs incurred up to seven years before your company started trading, provided the expenses would have been allowable had the company existed at the time. This is one of the most overlooked claims for new directors.
Pre-trading expenses commonly claimed:
- Market research and feasibility studies
- Domain registration and website build costs
- Legal fees for setting up contracts and terms
- Equipment purchased in personal name and transferred to the company
- Travel to meet potential suppliers or clients
The expenses are treated as if incurred on day one of trading. You will need invoices in your name and a clear record of how each cost related to the business.
What expenses cannot a limited company claim?
A surprising amount of spend looks deductible but is not. Getting this wrong is one of the fastest routes to an HMRC enquiry.
Costs you cannot claim:
- Client entertainment such as meals, drinks, and event tickets
- Ordinary commuting between home and a permanent workplace
- Fines and penalties including parking, speeding, and HMRC late filing fees
- Personal clothing unless it is protective gear or a branded uniform
- Personal use of company assets without a benefit in kind charge
- Charitable donations through gift aid (these are claimed separately, not as expenses)
- Capital repayments on loans (only interest is deductible)
- The cost of incorporating the company itself
The clothing rule is worth flagging. A suit worn to client meetings, even if you only wear it for work, fails the wholly and exclusively test because it also provides warmth and decency. Protective clothing and uniforms with a permanent company logo are the only standard exceptions.
How long do I need to keep expense records?
HMRC requires limited companies to keep all expense records for six years from the end of the accounting period they relate to. This includes receipts, invoices, bank statements, mileage logs, and any working calculations.
Acceptable formats include:
- Digital copies of receipts (HMRC accepts photos and scans)
- Bookkeeping software records with attached source documents
- Bank and card statements showing the transaction
- Mileage logs with date, route, purpose, and miles
Under Making Tax Digital for Corporation Tax, record-keeping rules are tightening further, with digital records and quarterly submissions expected to become standard.
How Sleek helps with limited company expenses
Most directors are not underclaiming because they are lazy, they are underclaiming because the rules are scattered, the limits are easy to miss, and the line between allowable and disallowable shifts depending on the category. A good accountant pays for themselves several times over in tax saved.
Sleek’s accountants review every claimable category for your company, set up the right records from day one, and file your Corporation Tax return with every legitimate deduction included.
Disclaimer: The preceding information is not legal advice. This content is aimed to provide general guidance. For more formal or legal advice, contact Sleek directly.
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FAQs on limited company expenses
Can I claim food and drink as a limited company expense?
Only in specific circumstances. Subsistence is allowable when you are travelling on business to a temporary workplace or staying away overnight, covering reasonable meals and non-alcoholic drinks. Everyday lunches at or near your normal workplace are not claimable. Client meals fall under entertainment and are disallowed entirely, even if business is discussed during them.
Can I claim expenses paid personally before the company existed?
Yes, within a seven-year window. HMRC allows pre-trading expenses incurred up to seven years before incorporation, treated as though spent on day one of trading. You must hold the original invoices, prove the cost would have been allowable, and reimburse yourself from the company once it has funds. Keep a clear schedule showing date, amount, supplier, and business purpose.
Do I need receipts for every expense I claim?
Yes, for almost all claims. HMRC expects a receipt, invoice, or equivalent record for every expense, kept for six years from the end of the accounting period. The only routine exception is the £6 weekly working-from-home flat rate, which needs no receipts. Bank statements alone are not sufficient evidence on their own.
Can my limited company pay for my home office equipment?
Yes, when the equipment is used wholly for business. A laptop, desk, chair, or monitor bought by the company and kept at your home remains a company asset and is fully claimable, usually through the Annual Investment Allowance. Personal use must be insignificant or the cost becomes a taxable benefit in kind reportable on a P11D.
Are accountancy fees an allowable expense?
Yes. Accountancy, bookkeeping, payroll, and tax filing fees paid by the company are fully deductible against Corporation Tax. The fee for filing your personal Self Assessment is not deductible by the company unless it relates specifically to directors’ duties. Most accountants split the invoice so the company-related portion can be claimed cleanly.
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Can I claim mileage if I drive my own car for business?
Yes, at HMRC’s approved rates. You can claim 45p per business mile for the first 10,000 miles in a tax year and 25p per mile after that, with no need to track fuel receipts. The rate covers fuel, wear and tear, insurance, and depreciation. Keep a mileage log with date, route, purpose, and miles to support every claim.
Can my company pay my private health insurance?
Yes, but it creates a taxable benefit. The premium is deductible for the company against Corporation Tax, but HMRC treats it as a benefit in kind, meaning you pay personal tax on the value and the company pays Class 1A National Insurance. Relevant Life Policies and group income protection are usually more tax-efficient ways to provide cover.
