Limited company expenses: 30+ allowable business costs

As a limited company owner, you can claim a wide range of business expenses, reducing the amount of profit your company pays Corporation Tax on. Here, we look at 30+ common limited company expenses, the main rules you need to follow, and some costs you cannot claim.

Limited company expenses – the ground rules

There are some fundamental rules you need to know when it comes to company expenditure:

1. For an expense to be allowable for Corporation Tax purposes, it must generally be incurred wholly and exclusively for the purposes of your company’s business. See BIM37000.
2. Beware of any expenses which have a duality of purpose, i.e., if they have joint personal and business use. See BIM37600.
3. Always keep all receipts and expense-related paperwork safe, as you may need to prove claims if challenged.
4. Most expenses can be offset against the company’s Corporation Tax liability, thereby reducing its tax bill. However, there are notable exceptions (such as business entertainment).

Company expenses or personally reimbursed expenses

Your company can pay for services and goods in two ways: directly (via your limited company bank account) or through your personal account, which allows you to later reclaim the costs from the company.

In each case, you must ensure that any costs your company claims against its Corporation Tax liability are legitimate.

30+ common limited company expenses you can claim

Here, we look at some of the most common expenses you will encounter as a limited company owner.

These rules apply to your company if your work is not caught by IR35 (see notes at the end).

Accommodation

Accommodation costs incurred while travelling for business can usually be claimed where the journey qualifies under the temporary workplace rules. For contractors working at the same location for an extended period, the 24-month rule may restrict relief. Read our guide to accommodation expenses.

Accountants and other professional fees

Accountancy fees (typically monthly), plus any one-off accounting charges. Note that completing your personal tax return is not a legitimate company expense. Other professional fees, such as hiring a solicitor to act on behalf of the company.

Annual events including Christmas parties

Your company can pay for an annual event, such as a Christmas party, without creating a taxable benefit if the qualifying conditions are met and the total cost does not exceed £150 per head, including guests. The £150 figure is an exemption rather than an allowance, so exceeding it can make the full amount taxable.

Bank and finance charges

Business bank account charges, such as monthly account fees and transaction charges. Your company may also be able to claim qualifying interest and finance costs on business loans and overdrafts. Read this guide to interest and related expenses.

Business gifts

You can provide gifts to business clients worth up to £50 per recipient, subject to very strict conditions. Different rules also apply if you provide gifts to your employees. Read more in our guide to gift expenses.

Childcare

Not generally a tax-deductible expense via your company. However, company directors may be eligible to claim personal tax relief via the Tax-Free Childcare Scheme. Read our guide to childcare expenses.

Clothing

Unsurprisingly, you cannot claim for normal work clothing. The only exception is if you need to buy any clothing specifically for business use, such as protective or safety-related equipment. Find out more here.

Company administration

Costs of ongoing company administration (e.g. the £50 fee for filing your annual Confirmation Statement online with Companies House).

Company formation (special note)

You can reclaim the cost of your company formation if you paid for it personally. However, the incorporation is a one-off ‘capital cost’, so your company cannot offset the fee against Corporation Tax.

Computer hardware and equipment

Equipment costs, such as PCs, laptops, and peripheral hardware. These purchases may be treated as capital expenditure, with tax relief available through the capital allowances rules.

Computer software

This includes any specific software required to perform your contract work, as well as commonly used products such as MS Word and antivirus tools.

Digital services / remote working

Costs of digital tools, software subscriptions, cloud storage, and home office equipment may be claimed if used wholly and exclusively for business. Care is needed for mixed-use services. Read our full guide.

Director and employees’ salaries

Salaries of all company employees (often for a single director, and sometimes a spouse or co-director).

Entertainment (special note)

Costs of entertaining clients may be reclaimed, but cannot be offset against the company’s Corporation Tax bill.

Eye tests

Costs of an annual eye test, and in some cases, the cost of corrective glasses. See our dedicated guide.

Income protection

Income protection policies (to provide income in case you cannot perform your contract duties) – premiums must be paid for via your limited company. Find out more here.

Insurance

Business insurance is often required by your contract terms. This usually includes business liability and Professional Indemnity cover.

Life insurance

Life insurance funded by your company – as long as it’s a relevant life policy. This can be up to 50% cheaper than personal life cover.

Magazines

Magazine subscriptions and periodicals, if related to your contract work, and allowed by HMRC. See our expenses guide to books, magazines and publications.

Marketing, PR and web

Advertising and marketing costs for your company, including website design and maintenance, professional CV / LinkedIn advice, online advertising, and social media promotion.

Medical costs

Many medical and health-related expenses. Depending on your circumstances, it may still be beneficial to fund Private Health Insurance via your company, even though it is not tax-deductible.

National Insurance Contributions

Employers’ National Insurance Contributions (NICs) on salaries paid to employees and directors above the current NIC threshold.

Office space rental

If you rent an office, the rental costs can be offset, although any deposit cannot – this remains on the company’s balance sheet until it is repaid in the future. Read our guide to office-related expenses.

Parking and congestion charges

Many contractors pay for parking, congestion charges and road tolls while travelling for work. Your company can usually pay or reimburse these costs if they relate to a qualifying business journey. Read our guide to parking and related charges.

Pension contributions

Employer pension contributions made by your limited company can usually be treated as a business expense for Corporation Tax purposes, provided they meet the relevant rules. Contributions also count towards the director’s annual pension allowance, which may vary depending on their circumstances. Read our guide to contractor pensions.

Relocation

You can claim relocation expenses of up to £8,000 (subject to fairly strict eligibility rules).

Smart devices

Smartphones – which are almost ubiquitous these days – follow the same rules as mobile phones, i.e., the contract should be in the company’s name. You are unlikely to justify offsetting the cost of other smart devices, such as smartwatches. See more in our guide to smartphone expenses.

Sponsorship

You can claim the cost of sponsorship (e.g. of a local sports team) as a business expense, but charitable donations which do not provide a direct benefit to your company in return are not treated as ‘expenses’ in your accounts, although they still can be offset against your Corporation Tax bill.

Stationery and peripherals

Costs of company stationery, business cards, postage, printing, etc.

Subscriptions

Subscriptions to professional bodies or trade organisations (e.g., BCS, IET) are allowable against Corporation Tax if wholly and exclusively for business purposes (e.g., CPD, networking, accreditation).

Mixed personal/business use may disqualify or trigger tax/NI. Personal-only memberships are not allowable. See our full guide.

Subsistence

Subsistence costs while away from home (subject to the ’24 month rule’).

Mobile phones, telephone and broadband

Telephone, Mobile, and Broadband costs, but only if the contract(s) are in your limited company’s name. Read our guide to telephone and broadband expenses. You can still reclaim the cost of individual business calls made on your personal phone/mobile account.

Training

Training costs can generally be claimed where the training is relevant to the work your company carries out and is incurred for the purposes of the business. Read our guide to training expenses.

Trivial Benefits

Small benefits costing up to £50 each can be provided to employees without tax or National Insurance if the trivial benefit conditions are met. For directors of close companies, there is also a £300 annual limit. Make sure you know the exclusions – read our guide to trivial benefits.

Travel

Costs of travel and parking expenses when travelling to sites other than your regular workplace. See our guide to reclaiming business travel expenses. If you use your own car or van for business travel, you can reclaim 55p for the first 10,000 miles, and 25p thereafter (24p for motorbikes regardless of the total number of miles). See HMRC’s current mileage rates. Find out more about car expenses here.

Working from home

Your company can pay you a flat £6/week (£26/month) for the additional costs of working from home, without you having to provide evidence of the extra costs. Alternatively, your company may reimburse qualifying additional household costs, or you can set up a commercial rental agreement with your company. See our guide to working from home expenses.

Common expenses you cannot claim for

There are some things your company cannot offset against its Corporation Tax bill – some are obvious, others less so.

• Anything you buy for your personal use (i.e. with no business use whatsoever).
• Personal health and medical expenses, aside from the exclusions listed above.
• Dividend payments to shareholders.
• Accountancy fees for completing your personal tax return. See our article here.
• Capital expenditure – such as computer equipment, plant and machinery – is treated differently from ordinary day-to-day expenses. Tax relief may instead be available through capital allowances, including allowances which can provide full relief in the year of purchase.
• See the difference between revenue and capital expenses here.

More useful information on expenses

• As long as certain conditions are met, you should be able to reclaim any expenses you paid for personally before your company was incorporated. See our guide to pre-trading expenses.
• If your company pays for services which benefit you personally, rather than the business, you and your company will be taxed on each ‘benefit in kind’.
• Examples include providing a company car or paying for your gym membership.
• Consult HMRC’s A-Z of expenses and benefits for employees for further examples.

How does IR35 affect expenses?

The expenses position is different if your contract is caught by IR35, and also depends on whether the ‘original’ IR35 rules or the off-payroll working rules apply.

Where your company is responsible for determining your IR35 status – typically because you are working for a small private-sector client, or in some cases an overseas client – a 5% allowance may be available when calculating the deemed employment payment. This is intended to cover the general costs of running your company.

The 5% allowance is not available where the off-payroll working rules apply, and the client or fee-payer is responsible for determining your IR35 status and deducting tax and National Insurance.

Separate rules apply to expenses such as travel and subsistence. In particular, you cannot assume that travel to and from a client’s workplace will qualify simply because you operate through a limited company.

If your work is caught by IR35, make sure you ask your accountant if you have any questions about expenses.

The rules governing expense claims are complex, so we recommend contacting an accountant if you have any concerns. Don’t rely solely on the information in this guide.