Running a business may seem easy, but it is not. It demands tax responsibilities and financial decisions. One wrong move and it can cost you expensive penalties. Fortunately, there is an effective way to protect your profits, and that is to claim expenses as a limited company. So, as a limited company, you can lower your taxable profits by claiming valid business expenses. This directly reduces your company’s Corporation Tax liability.
However, you must know HM Revenue & Customs (HMRC) strict regulations on what counts as allowable expenses. If you add any incorrect expenses and claim them, you may face costly HMRC penalties and compliance audits.
This comprehensive guide helps you understand what business expenses you can claim as a limited company. It also explains what records you need to keep and which expenses require particular care.
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What Are Allowable Expenses for Limited Companies?
Before explaining how you can claim expenses as a limited company, let’s understand what limited company allowable expenses are. Allowable expenses are the costs that are related to running a business and are treated as necessary. These allowable business costs reduce the profit amount a company pays tax on.
Keep in mind that there is no single list that makes every business cost automatically allowable for Corporation Tax. The correct tax treatment depends on the nature and purpose of the expense and how it is used.
For many trading expenses, the relevant question is whether the expenditure is incurred wholly and exclusively for the company’s trade. However, different rules can apply to particular categories of expenditure.
Here is the common limited company expenses list that you can deduct when calculating your taxable profit:
Travel and the New Mileage Rates
When you are travelling for business purposes, certain travel and related costs are allowable. If you want to claim expenses as a limited company, you need to keep accurate mileage records. Also, you should ensure that the costs qualify under HMRC rules.
Business travel that qualifies as allowable expenses may include costs such as flights, train fares, taxis and accommodation. Ordinary commuting between a permanent workplace and a home is usually not considered an allowable business expense.
Visit the official HMRC guidance to learn more about mileage rates for 2026/27.
Office Expenses
Office-related expenditure is a common cost that you can claim as a limited company. Depending on your company’s circumstances, this can include costs associated with purchasing items needed to run the office.
However, some items, particularly certain equipment and other assets, may be treated as capital expenditure and dealt with under the capital allowances rules.
When an expense has both personal and business elements, the tax treatment depends on the circumstances. When you claim expenses as a limited company, you may sometimes claim an identifiable business proportion of an expense. However, a cost with an inseparable dual purpose may not qualify for a deduction.
Professional and Accountancy Fees
You may use accountants, solicitors and other professional advisers to manage your business operations. When you use these services solely for your business, the associated costs may be deductible, subject to the relevant tax rules.
Working from Home Costs
From 6 April 2026, employees can no longer claim Income Tax relief from HMRC for additional household expenses when working from home. However, the removal of employee tax relief does not affect the separate rules allowing employers to make tax-free payments to employees for working from home.
You can pay an employee £6 per week towards additional household expenses when they regularly work from home under homeworking arrangements. You do not need to ask for evidence of the extra costs, and the payment is not treated as a taxable benefit.
You may reimburse reasonable additional household expenses based on the actual costs incurred, provided you have supporting evidence. The payment must not exceed the additional costs reasonably incurred.
Furthermore, you can pay rent for an employee’s or director’s home. However, it creates complex tax and benefit implications, and you should take professional advice.
Software and Subscriptions
If you rely on accounting software and are thinking if you can claim expenses as a limited company, the answer is yes. Modern businesses use accounting software, cloud storage, and other subscriptions.
If a subscription is incurred for the company’s business, it can qualify as a deductible expense. However, if a service is used for both private and business purposes, the tax treatment depends on the circumstances.
Advertising and Marketing
Advertising and marketing expenditure can be an important part of running a business. Costs such as advertising campaigns and marketing services may qualify as deductible business expenses, provided they meet the relevant tax rules. Keeping supporting records can help you show the nature and business purpose of the expenditure, making it easy to claim expenses.
Staff and Director Costs
Salaries, wages, bonuses, and employer National Insurance Contributions (NICs) are all allowable expenses. If you are a director of your own limited company and you pay yourself a salary through the PAYE system, that salary is a deductible expense for the company.
Pension contributions made by the company into an employee’s or director’s pension scheme are also allowable, provided they are paid before the end of the accounting period. You can also deduct recruitment fees, staff training relevant to their role, and employee benefits.
Bank Charges and Finance Costs
Bank charges on your business account, loan interest for business borrowing, and finance costs directly related to the business are deductible. Be careful with loans that have a personal element; only the business portion is claimable.
Business Insurance
Premiums for business insurance are allowable expenses. Common types include professional indemnity insurance, public liability insurance, employers’ liability insurance, office or equipment insurance, and director and officer liability insurance.
How to Claim Expenses as a Limited Company?
A limited company can claim business expenses with ease if it keeps accurate records and supporting evidence for each expense, such as invoices and receipts. You can pay qualifying business costs directly from your company bank account.
Additionally, you need to make sure the expenditure has a genuine business purpose and is treated according to the relevant tax rules. You should include allowable revenue expenses in the company accounts when calculating taxable profit for Corporation Tax.
What Expenses Can I Claim As a Director of a Limited Company UK?
As a director, you may be able to have genuine business expenses reimbursed by the company, provided they are incurred for business purposes. The company can reimburse you for costs that meet the relevant tax rules.
You may be able to claim genuine business expenses, such as qualifying business travel and mileage, professional subscriptions relevant to your role, and other costs incurred wholly and exclusively for the company’s business.
Additionally, when you claim expenses as a limited company, remember that reimbursement and tax deductibility are separate matters. An expense reimbursed by the company may still need to meet HMRC rules to be deductible for Corporation Tax.
What Expenses Cannot Be Claimed by A Limited Company?
You must understand that not every business cost is deductible for Corporation Tax. Some expenditure is specifically disallowed by tax legislation, while other costs may fail the relevant tax tests.
- Personal expenditure
- Client entertaining
- Everyday clothing
- Costs without a wholly and exclusively business purpose
- Fines and penalties, such as a parking ticket or a speeding fine
Capital expenditure is generally treated separately and may qualify for capital allowances rather than being deducted as a revenue expense.
What Are the Common Mistakes You Make While Claiming Business Expenses?
When you claim expenses as a limited company, you can make several mistakes. Some of the common mistakes include:
- Claiming every company purchase, including personal expenses.
- Claiming ordinary commuting as a business expense.
- Counting capital expenditure as a normal expense.
- Failing to keep evidence like receipts and invoices.
Practical Tips for Managing Expenses
Keep Business and Personal Finances Separate
Always use a dedicated business bank account for your company. This makes categorising expenses significantly easier and gives you a clear audit trail if HMRC asks questions.
How Long Should You Keep Records?
HMRC requires limited companies to keep financial records for a minimum of 6 years from the end of the accounting period they relate to. This includes receipts, invoices, bank statements, and contracts. Digital records are perfectly acceptable, provided they are readable and accessible.
Director’s Loan Account
If the company pays for something personal, or you take money from the company that is not salary or dividend, it goes through your Director’s Loan Account (DLA). If you owe the company money at year-end (an overdrawn DLA), there can be a Corporation Tax charge of 33.75% under S455 if the loan is not repaid within 9 months of the year-end.
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The Bottom Line
To sum up, understanding how to claim expenses as a limited company is crucial as it helps you ensure compliance with HMRC rules while minimising your Corporation Tax liability.
However, you must ensure not to claim expenses that are not incurred for business purposes. Your expenses must meet the relevant tax rules and be supported by adequate records.
Working with an accountant can make it easier to claim expenses as a limited company. At Micro Entity Accounts, we help limited companies stay compliant. We can also ensure your Corporation Tax position is optimised.
