A-Z Guide to Business Expenses for Limited Companies
For limited companies, understanding what qualifies as a business expense is essential to remain compliant and maximise tax efficiency.
Differentiating personal and company expenses ensures the correct tax treatment, saving time and avoiding potential penalties. This comprehensive A-Z guide breaks down common business expenses, their tax implications, and provides HMRC references to support your claims. Clear record-keeping is key to staying organised and compliant.
A
Accountant
Claim tax relief for accountancy fees incurred for business purposes, such as preparing annual accounts, tax computations, and financial statements. Be cautious if personal tax returns are included—this would be a taxable benefit unless recorded as a deduction from the director’s loan account. Always request invoices that clearly separate personal and business fees.
HMRC Guidance
Advertising & Marketing
Advertising expenses wholly and exclusively for business purposes qualify for tax relief. This includes costs like social media ads, print campaigns, and digital marketing. However, certain activities, like client entertainment disguised as promotion, won’t qualify. Ensure expenses are clearly categorized.
HMRC Guidance
B
Bank Charges
Business bank account charges, such as interest and transaction fees, are tax-deductible. Charges incurred on personal accounts used for business purposes do not qualify, so it's crucial to separate personal and business banking.
HMRC Guidance
Broadband
Home Broadband: If used for both personal and business purposes, claim only the business-use percentage. Keep documented evidence to justify the split.
Office Broadband: If the contract is in the company’s name and used solely for business, the entire cost can be claimed.
HMRC Guidance
C
Charitable Donations
Limited companies can claim tax relief on donations made under Gift Aid, provided they meet HMRC’s requirements. Always maintain records for compliance.
Computer Equipment
For private and business use
If you buy new computer equipment that you’re going to use partly for work and partly for personal use, you have to work out how much you’re going to use it for business, and then include only that proportion of the cost in your accounts.
• For business use only
If you buy computer equipment that’s just going to be used for your business, you’ll be able to claim tax relief on the full cost of the equipment as a capital asset.
• Equipment brought into a business
If you already own equipment like a computer or office chair and want to use it for your business, you can claim tax relief based on its market value at the time you brought it into the business. Check platforms like eBay for similar items to estimate the value.
• Second-hand equipment
If you buy a piece of equipment second-hand, you can still claim it as a capital asset at the cost you bought it for because the equipment is new to you. Don’t forget that unless you have a VAT receipt and are VAT registered, you can’t reclaim VAT on second-hand equipment.
Remember, if you’ll still use the equipment for personal use, you’ll need to calculate the business usage percentage and only claim that portion in your accounts.
Childcare
Nice try, but claiming childcare for your own kids as a business expense won’t pass with HMRC. As much as parenting feels like a full-time job, sadly, it doesn’t qualify for tax relief!
Clothing
HMRC says no to clothing if your work clothes could double as your weekend outfit. That means buying a suit for work (even if you only wear it to meetings) isn’t claimable—if it can be worn outside of work, it’s not an allowable expense.
Council Tax
If you work from home, you can claim a proportion of your Council Tax cost.
Cycling
HMRC says that sole traders and partners can’t claim tax relief on business journeys undertaken by bicycle. If you employ anyone, then your employees can claim tax relief on business bicycle travel - but you can’t!
D
Dogs
Expenses for working animals, like guard dogs, may qualify for tax relief if the business can justify their necessity. Keep evidence of the animal’s role in business operations.
E
Electricity
Home Office: A percentage of home electricity bills can be claimed based on business use. Simplified HMRC rates may also apply.
Business Premises: Entire costs of electricity, heating, and lighting for business premises are allowable.
HMRC Guidance
Entertaining
Clients: Entertainment costs for clients, such as meals or events, are not tax-deductible.
Employees: Costs for employee events, like annual Christmas parties, are deductible if they meet HMRC’s criteria (e.g., available to all staff and within £150 per head).
HMRC Entertaining Rules
F
Flights
Business-related flights are tax-deductible. If the trip includes personal activities, apportion the expenses accordingly. Keep itineraries and receipts as evidence.
HMRC Travel Expenses
Food & Drink
While Travelling: Meals purchased during business travel are allowable. Retain receipts and travel details to support claims.
HMRC GuidanceAt home office: If you don’t have employees, you can’t claim tax relief on food and drink you buy for yourself while working from home or in your usual office. However, if you do have employees, you can provide basic refreshments like tea, coffee, and biscuits, as well as free meals in a canteen, and claim tax relief—as long as it’s available to all staff.
G
Gas
Home
If you work from home, you can claim tax relief on a percentage of your gas costs, based on how much you use your home for business. You can't claim both the percentage and the flat rate allowance, though.
Office
You can claim the full cost of heating and lighting your business premises for tax relief.
Gifts
To Employees
Small gifts under £50 (e.g., as trivial benefits) can be tax-free, provided they are not cash or vouchers.
To Clients
Gifts must be below £50 and carry company branding to qualify for tax relief. Items exceeding this threshold or without branding may not be eligible.
HMRC Guidance
H
Hotel Accommodation
Hotel stays for business trips are allowable. If combined with personal travel, claim only the business-related portion. Maintain receipts and records to avoid disputes.
HMRC Travel Expenses.
I
Insurance
You can claim tax relief on the full cost of insurance for business, such as contents insurance for an office or a specialist home business policy. However, you can’t claim tax relief for any insurance that has a dual purpose, such as private medical insurance for the business owner.
L
Laptops
See computer and electronics section.
M
Milage
If you’re self-employed and using your own car, the simplest way to claim tax relief for your running costs (including petrol or diesel) is to include your business mileage in your accounts at HMRC’s approved rates. You can use these rates even as a self-employed individual.
Another option is to work out your car running costs and claim a percentage, which may save you tax if you have a car that’s comparatively expensive to run.
Mobile Phone
See telephone section.
Mortgage
If you work from home and pay a mortgage, you may be able to claim tax relief for a proportion of the interest that you pay, but not the capital repayment.
P
Parking Fines & Speeding Tickets
Nice try, but no! You can’t claim tax relief on fines or speeding tickets—even if they happened during a business trip. HMRC won’t cover the cost of breaking the law!
Pension Contributions
Pension contributions to your own pension count as personal costs, so if you pay these from the business account, you can’t claim tax relief on them through your business accounts. Instead, you would claim tax relief on them by putting them into the ‘Tax Reliefs’ section of the main part of your tax return.
Petrol or Fuel
See Milage section.
Professional Fees
You can claim tax relief on professional fees related to your business, such as solicitor fees, unless they fall under certain exceptions. For more guidance see HMRCs website.
Professional Subscriptions
You can claim tax relief on the cost of annual subscriptions paid to a professional institute or society, if membership of that body gives you the right to use a qualification and you use that qualification in your business.
For example, a self-employed bookkeeper could claim the cost of their Institute of Bookkeepers subscription. You can also claim tax relief on the cost of subscriptions to trade associations such as your local Chamber of Commerce.
Properties to Your Home
If you work from home, you may be able to claim tax relief on certain property repairs. If a repair is solely for the part of your home used for business, you can claim the full cost based on the business use of that space.
For example, if your home office makes up one of ten rooms and you use it 90% for business, you could claim 90% of the repair cost. For whole-house repairs, like fixing the roof, you can claim a proportionate amount based on your business use. However, repairs to areas not used for business, like a kitchen renovation, aren’t eligible for tax relief.
R
Home
If you work from home and pay rent to a landlord, you may be able to claim a proportion of the rent for your business.
Office
If you rent an office solely for business use, you can claim tax relief on the full cost of the rent. However, rent deposits don’t qualify for tax relief, as they are recorded on your balance sheet rather than counted as an expense.
S
Solicitor
See Professional Fees section.
Stationary
If you buy stationery to use for the business, such as business cards or compliment slips, you can claim tax relief on the full amount of this cost.
T
Telephone
Home
If you work from home without a separate business phone line, you can claim the full cost of business calls (using an itemised bill) and a percentage of the line rental based on business use. However, if you’re using the flat rate allowance for home working, it doesn’t cover business calls.
Office
If you have a separate phone line or mobile for business, you can claim tax relief on all the calls and line rental for this phone.
Tolls and Car Parking
You can claim tax relief for the full cost of tolls and car parking fees you pay while travelling on business. If you are claiming tax relief using the mileage method see: Vehicle, you can claim tax relief on the costs of tolls and car parking in addition to the mileage. Remember, however, that you can’t claim tax relief on parking fines! See: Parking fines and speeding tickets for more detail.
Train Tickets
You can claim tax relief on train tickets if the trip was mainly for business. If the journey included both business and personal travel, you can only claim the business portion. If the costs can’t be separated, tax relief isn’t available.
Travel
HMRC doesn’t give any explicit guidance about what counts as a claimable business journey for sole traders. It only says that if the travel is “regular and predictable”, or between home and a “base of operations” such as a co-working space where you spend most of your working days, then the costs couldn’t be claimed.
Got a trip coming up? Speak to Finance Box about your specific requirements.Training Costs
Training Costs
If you're self-employed, you can only claim tax relief on training that refreshes or updates your existing skills. For example, a web developer taking a course on the latest industry trends can claim the cost. However, training that teaches entirely new skills or qualifications isn’t eligible for tax relief.
V
Vehicle
Claim tax relief on business mileage or the actual running costs of a vehicle used for business purposes. Mileage claims require detailed logs to substantiate reimbursement requests.
HMRC Mileage Rates
W
Water
Home
If your business relies heavily on water, like a car valeting service, you’ll need to arrange a separate business charge with your water company. In this case, you can claim tax relief on the full cost. However, if your business use is minimal, you won’t be able to claim any tax relief.
Office
You can claim tax relief on the full cost of water at your business premises.
Website Hosting
You may be able to claim tax relief on website hosting costs if your site is expected to generate more income than it costs to maintain. HMRC compares a website to a "shop window"—if it's essential for your business, the costs may be allowable.
Since there are no strict rules, you could consult Finance Box for further guidance.
X: Xmas Parties
Costs for Christmas parties are tax-deductible if they are annual events, open to all employees, and cost no more than £150 per head.
Z
Well… unless your business is a zebra sanctuary or you're using it as an office security system (good luck training it), HMRC is unlikely to approve. But if you can prove it's exclusively for business use, maybe as a company mascot, then we’d love to see you try.
Conclusion
Understanding what qualifies as an allowable business expense is vital for effective financial management and tax efficiency. Keeping thorough records and referencing HMRC guidance can save your business time and money while ensuring compliance. When in doubt, consult an accountant to clarify specific expense claims.