What expenses can I claim through my limited company?

Understanding what expenses your business can legitimately claim is an integral part of running a tax-efficient limited company. UK small businesses lose out on thousands in unclaimed tax relief every year simply because directors are unsure about what qualifies as an allowable business expense.

Knowing where the opportunities lie ensures you keep your company compliant with HMRC while never overpaying Corporation Tax.

In this guide, our limited company accountants break down allowable expenses, clear up common tax misconceptions, and share practical ways to keep accurate financial records.

What is tax relief on business expenses?

Tax relief allows you to deduct eligible business costs from your company’s total revenue. These allowable expenses reduce your taxable profit, which directly lowers the amount of Corporation Tax your limited company pays.

For an expense to be tax-deductible, HMRC requires it to be incurred “wholly and exclusively for the purpose of the trade.”

Note on Personal Benefits: If your company purchases an item that gives you a personal benefit or is used for non-business purposes, it cannot be claimed as a standard business expense. Instead, it must be reported as a Benefit in Kind (BIK) on a P11D form, incurring personal tax for the director and Class 1A National Insurance for the business.

How to claim business expenses you paid for personally

When running a limited company, the line between personal and business spending can easily blur. However, legally, your limited company is a separate entity from you as an individual.

If you pay for a business expense out of your personal bank account or credit card, you can reclaim this money from the business:

1. Record the receipt: Log the transaction using digital receipt capture apps like Dext Prepare or AutoEntry, which integrate directly with your cloud accounting software. (HMRC mandates retaining records for at least six years).
2. Credit your Director’s Loan Account (DLA): The expense is logged as owed to you by the business.
3. Reimburse yourself: The company can transfer the exact amount back to your personal bank account tax-free at any time.

Company formation costs and accountancy fees

The initial costs incurred when setting up your business qualify as pre-trading business expenses. You can claim tax relief on formation fees, domain purchases, printing, and initial operational equipment.

Your ongoing accountancy fees are also fully tax-deductible trading expenses, provided the work relates purely to your corporate accounts, VAT, and company payroll. If your accountant also prepares your personal Self Assessment tax return, that specific portion must be billed separately or treated as a BIK.

Travel expenses and HMRC business mileage rates

You can claim tax relief on business-related travel, provided the journey is purely for business purposes. This excludes your standard daily commute between your home and permanent workplace.

Allowable travel expenses include:

• Public transport (train, bus, air, and taxi fares)
• Hotel accommodation and subsistence meals on overnight business trips
• Congestion charges, road tolls, and parking fees
• Vehicle breakdown cover, hire charges, and business fuel

Note: Parking tickets, speeding fines, and legal penalties are strictly disallowed by HMRC.

HMRC Approved Mileage Allowance Payments (AMAP)

If you use your personal vehicle for business travel, your company can reimburse you tax-free at HMRC’s statutory mileage rates:

Tracking mileage manually via spreadsheets can be tedious. Mileage tracking apps such as MileIQ automate journey recording using GPS to simplify expense reporting.

Working from home: Claiming home office expenses

If you regularly work from home as a limited company director, you have two options for claiming expenses:

1. HMRC Flat Rate Allowance

You can claim the standard HMRC flat rate allowance of £6 per week (£312 per year) without keeping detailed receipts. HMRC does not view this as a Benefit in Kind, so no personal tax is owed on this payment.

2. Rental Agreement Between You and Your Company

If your home office expenses significantly exceed £6 per week, you can draft a formal commercial licence agreement to rent a room in your house to your business. However, keep in mind:

• The rental rate must be reasonable and calculated based on proportional utility bills, council tax, and square footage.
• You must report the rental income on your personal Self Assessment tax return.
• Exclusive commercial use of part of your home could impact your Capital Gains Tax Private Residence Relief if you sell your property.

Office equipment and technology

Equipment required for your duties as a director—such as laptops, screens, printers, and office furniture (chairs and desks)—can be purchased through the company as allowable expenses. Under Capital Allowances, these assets can usually be deducted 100% against profit in the year of purchase.

Mobile phones, landlines, and broadband

Mobile Phone Contracts

If your company enters into a mobile phone contract directly in the business name, the full cost is an allowable business expense. Crucially, HMRC allows one mobile phone per employee/director tax-free, even if you make personal calls. If the contract remains in your personal name, you can only reclaim the specific cost of business calls made.

Broadband and Landlines

If your residential broadband was already in place, claiming the monthly bill through the business can trigger a Benefit in Kind charge unless you can strictly isolate extra business usage. Setting up a dedicated business broadband line contracted to the company is the cleanest way to claim 100% tax relief.

Staff training and professional development

Training courses that reinforce, update, or expand existing skills used within your business operations are allowable expenses. However, HMRC typically disallows training that qualifies you for an entirely new career or line of work (such as an unrelated degree course).

Business entertaining expenses

Entertainment for clients, prospects, or suppliers is not tax-deductible for Corporation Tax purposes, nor can you reclaim the VAT. While you can pay for client lunches out of your business bank account, your accountant will add these costs back to your profit calculation when filing your company tax return.

Annual Event Allowance Exception: Your company can spend up to £150 (including VAT) per head per year hosting an annual event (such as a staff Christmas party) for directors and employees without triggering a tax liability.

Summary Checklist: Claiming Limited Company Expenses

1. Apply the core test: Is the expense incurred “wholly and exclusively” for your trade?
2. Contract in the company name: Keep phone, software, and equipment agreements in the business name where possible.
3. Digitise receipt storage: Capture all expense documentation immediately using cloud bookkeeping tools.
4. Consult an accountant: Speak with a qualified tax team to ensure your expense strategy is compliant and optimised.

Frequently Asked Questions

Can I claim medical insurance through my limited company?

Yes, your company can provide Private Medical Insurance (PMI) for directors and employees. However, HMRC treats PMI as a Benefit in Kind (BIK). While the cost reduces your company’s Corporation Tax, you will pay personal Income Tax on the benefit, and the business must pay Class 1A National Insurance.

What happens if I accidentally pay for a personal item with my business card?

Don’t panic! Simply categorise the transaction in your bookkeeping software as a draw against your Director’s Loan Account (DLA). Ensure the balance is repaid to the business account to prevent overdrawing your loan account.