Digital and remote working expenses – what can your company claim?

With remote and hybrid working now firmly entrenched in the contracting world, many small company owners now use digital tools to collaborate, communicate, and fulfil their work duties.

But which costs can your company legitimately claim as tax-deductible, and how should you keep a record of them?

In this guide, Michael McCullion, founder of Bright Ideas Accountancy, outlines the main types of remote working costs that small limited companies can claim, how these are treated for tax purposes, and when to be cautious, particularly with services that have both business and personal use.

What are remote working expenses?

HMRC allows companies to claim costs as long as they are “wholly, exclusively and necessarily” incurred for business purposes. This includes a range of digital tools, subscriptions, and equipment used for remote working.

However, mixed-use (‘dual purpose’) items that are used both personally and for work must be apportioned, and you’ll need to retain invoices and justification for business use. If you are ever subject to an HMRC enquiry, good easily-accessible documentation is essential.

Claimable digital tools and subscriptions

Most software-as-a-service (SaaS) tools are allowable if used purely for your business. These are typically paid monthly or annually, and cover areas such as productivity, communication, compliance, and project delivery.

Examples include:

• Microsoft 365
• Google Workspace
• Zoom Pro or Teams Essentials
• Adobe Creative Cloud
• FreeAgent or Xero
• Trello, Asana, ClickUp
• DocuSign or HelloSign

You can enter these costs under “Software Subscriptions” or a similar category in your accounting software.

Make sure the service is genuinely used for business. If you share logins or subscriptions with others for personal use, you may need to apportion the cost or avoid claiming it altogether.

Cybersecurity and digital protection

If you work with client systems or handle sensitive data, taking basic cybersecurity precautions is often a contractual requirement. These costs are usually allowable if the tools are used to protect business data.

Typical examples:

• Antivirus and endpoint protection
• Password managers
• Firewall subscriptions
• Malware scanners

Avoid claiming personal-use bundles that cover all your household devices. These would not meet HMRC’s business-only test.

VPNs and remote access

A Virtual Private Network (VPN) is essential if you work on public WiFi, access remote systems, or use client environments with restricted access.

As long as your VPN is used solely for business purposes, the full cost is typically allowable. If you also use it for personal browsing or streaming, speak to your accountant about apportioning the cost appropriately.

Online backups and cloud storage

Storing files and client data in the cloud is increasingly common. These services are usually tax-deductible, provided they are for business use.

Common examples:

• Dropbox Business
• Google Drive (business plan)
• Backblaze or Amazon S3
• Microsoft OneDrive

Be cautious with accounts linked to your personal email address. Ideally, set up company accounts in your company name.

Remote work hardware

Laptops, webcams, headsets, and similar items can usually be claimed by your company, but are treated differently depending on their value.

If the cost is relatively low (under £1,000 depending on your tangible asset policy) then it may be treated as an expense and sit directly on the P&L. Talk to your accountant if you have any questions about this.

For higher-cost items, the asset is usually recorded on your fixed asset register and depreciated over several years. This is an accounting entry only and does not affect your tax calculation directly.

Instead, your accountant will claim capital allowances – such as the Annual Investment Allowance (AIA) – on your behalf when completing the Corporation Tax return.

Here are some examples:

• Laptop or MacBook
• External monitor
• Docking station
• Business-grade webcam
• Microphone or audio interface
• Adjustable desk or chair

Read this handy HMRC guide: Capital allowances explained.

Phone and broadband costs

You can only claim the proportion of your broadband or mobile phone contract that is used for business. This isn’t easy to justify unless you have a second line or SIM that is used exclusively for work.

If your company pays for a separate business line or mobile contract in its name, the cost is fully allowable, and personal use is not treated as a benefit in kind. This is the most sensible route for directors.

In mixed-use situations, it’s safer not to claim anything unless you can reliably estimate the business-use percentage and retain supporting evidence.

Read our guide to phone, mobile and broadband expenses.

Accounting software treatment

Online accounting software like FreeAgent, Xero or QuickBooks makes it easier to track digital expenses.

Within FreeAgent, for example, you can:

• Record software subscriptions under “Computer software” or “Subscriptions”
• Attach digital receipts or invoices
• Categorise any hardware purchases as capital assets
• Enable automated depreciation of capital items

Speak to your accountant about the best category for each type of cost.

Director responsibilities

As a company director, you are responsible for ensuring that all expenses claimed by your company are legitimate. This includes:

• Keeping digital or paper records of all subscriptions and purchases
• Avoiding personal-use items unless the cost can be split fairly
• Being able to justify business usage if asked by HMRC

Where possible, use your company debit card or bank account to pay for business services directly. Avoid subscriptions linked to personal accounts or paid with personal credit cards.

When claims may be disallowed

Some common pitfalls to avoid:

• Netflix, Spotify, or other entertainment services
• Personal antivirus bundles with child safety tools
• Cloud storage accounts used for personal photos or backups
• Paying twice for the same service (e.g. Dropbox and OneDrive)
• Claiming 100% of a cost when personal use is obvious

If in doubt, ask your accountant before committing to an annual subscription. HMRC takes a dim view of companies claiming personal-use tools as business expenses.

Quick-reference summary table