Table of Contents

Who should read this?

UK limited company directors, especially first-timers or those unsure about tax relief, who want to legitimately minimize Corporation Tax through expense claims.

This guide provides HMRC-recognized categories, rules like wholly/exclusively, record-keeping tips, and pitfalls, empowering you to make accurate claims and maintain tax efficiency.

Key Takeaways

Allowable limited company expenses reduce Corporation Tax by lowering taxable profits.
Expenses must be 'wholly and exclusively' for business; keep records 6 years.
Claim mileage: 45p/mile (cars first 10k), home office £6/week tax-free.
Equipment, phone (business), accountancy, staff salaries/pensions are claimable.
Avoid client entertainment, fines, commuting; use business account for payments.

Claiming Allowable Expenses for Limited Companies

Running a limited company in the UK means you can claim a wide range of business expenses to reduce your Corporation Tax bill. Limited company expenses that qualify as "allowable" are deducted from your profits before tax is calculated, resulting in a lower tax bill for your business. Yet many directors miss out on legitimate claims simply because they do not know what qualifies. This guide walks you through the main categories of limited company expenses recognised by HMRC, how to record them properly, and what to avoid. Whether you are a first-time director or have been trading for years, understanding your allowable expenses is one of the simplest ways to keep your company tax-efficient.

How Limited Company Expenses Lower Your Tax Bill

Allowable business expenses reduce the profit on which your limited company pays Corporation Tax. The more qualifying expenses you claim, the less taxable profit you report and the less tax you owe.

To make a valid claim, the expense must appear on HMRC's approved list. You also need accurate company records for every transaction. HMRC requires you to keep these records for at least six years from the date you file your return. If your company is ever investigated, you will need to show clear evidence of each claim.

The "Wholly and Exclusively" Rule

HMRC's general rule is straightforward. An expense must be incurred "wholly and exclusively" for business purposes to qualify for tax relief. If an item has a dual purpose (part personal, part business), it may not be allowable unless you can clearly separate the business element.

HMRC also applies a test of "fairness and reasonableness." Excessive or unusual claims are likely to attract scrutiny. When there is any doubt about whether a cost qualifies, it is worth checking directly with HMRC or a qualified accountant.

Common Limited Company Expenses You Can Claim

Travel and Business Mileage

If you use a personal vehicle for business travel, such as visiting clients, travelling to a temporary workplace, or moving between work locations, you can claim mileage at HMRC's approved rates. For cars and vans, the rate is 45p per mile for the first 10,000 miles in a tax year, dropping to 25p per mile after that. Motorbikes attract a flat 24p per mile, and bicycles 20p per mile.

Vehicle	First 10,000 miles	Each mile after 10,000
Cars and vans	45p	25p
Motorbikes	24p	24p
Bicycles	20p	20p

You can also claim for public transport fares, parking fees, congestion charges, tolls, and hotel accommodation on overnight business trips. Meals during business travel are claimable too, provided the trip takes you away from your normal workplace. You cannot claim for ordinary commuting between your home and a permanent place of work.

Working From Home

If you regularly work from home, HMRC currently allows your company to pay you £6 per week (£312 per year) without the need for detailed records. This flat rate is not treated as a benefit in kind, so no personal tax applies.

From April 2026, employees will no longer be able to claim this relief directly from HMRC if their employer does not reimburse them. However, your limited company can still pay you up to £6 per week tax-free as an employer-paid homeworking allowance without requiring receipts. For costs above that amount, your company will need to reimburse actual additional household costs (such as electricity, heating, or broadband) for them to qualify as tax-free business expenses.

Equipment necessary for home working, such as desks, chairs, and computer hardware, remains an allowable operating expense.

Equipment and Office Costs

The cost of equipment essential for your role as a director qualifies for tax relief. This includes computers, printers, software, and office furniture. Minor purchases such as stationery, postage, and consumables are also claimable, provided they are used wholly for business.

Items recorded as fixed assets (laptops, business phones, furniture) attract capital allowances rather than being deducted as straightforward expenses.

Phone, Broadband and Internet

If a phone contract is in your company's name and used solely for business, the full cost is an allowable expense. For personal phones, you can only claim the cost of identifiable business calls. If you cannot separate business from personal use, no claim is possible under the duality of purpose rules.

Broadband follows similar logic. A dedicated business line is fully claimable. A residential connection already in place before you started working from home is harder to claim unless you can clearly split the business portion.

Accountancy and Professional Fees

Your company can claim the full cost of accountancy services, legal fees, and other professional fees, provided they relate entirely to the business. If your accountant also handles personal tax matters, that portion is treated as a benefit in kind and subject to personal tax and employer National Insurance at 15% for the 2025/26 and 2026/27 tax years.

Staff Costs and Salaries

Salaries paid to you as a director and to any employees count as allowable limited company expenses. This extends to bonuses, employer National Insurance contributions, pension contributions (up to £60,000 per year for 2025/26 and 2026/27), agency fees, and subcontractor costs. Training courses that improve existing skills used in your work are also claimable.

Author's tip: Pay your limited company expenses directly from your business bank account wherever possible. This creates an automatic audit trail and reduces the risk of missing a legitimate claim. If you do pay personally, log each reimbursement straight away so nothing slips through the cracks.

Expenses That Are Generally Not Allowable

Not everything qualifies. Client entertainment is the most common example. Taking a client to lunch or a sporting event is not deductible, even if the purpose is clearly business-related. Staff entertainment, however, is exempt from tax up to £150 per head per year (including VAT), provided the event is open to all staff. This is a strict limit, not an allowance: if the cost per head exceeds £150 by even £1, the entire amount becomes taxable, not just the excess.

Childcare costs are not allowable either, although directors may be eligible for the government's Tax-Free Childcare scheme in a personal capacity. Fines (including parking and speeding fines), non-business travel, and repayments on personal loans also fall outside the allowable list.

Need a registered office or service address for your limited company?

A professional Service Address product keeps your personal address off the public register and gives your business a credible presence from day one.

How to Record Your Limited Company Expenses

Good record-keeping is not optional. HMRC can investigate your company up to six years after you file a tax return, and you need every receipt to be accessible for that full period.

Keep paper receipts and back them up digitally. Receipts fade over time, so a photo or scan taken at the point of purchase is a simple safeguard. For business mileage, maintain a spreadsheet or digital log that records the date, destination, purpose, and distance of every journey.

Logging all limited company expenses promptly in accounting software or a spreadsheet ensures you always have dates and exact costs to hand if HMRC takes a closer look.

Keeping Your Company Tax-Efficient

Claiming every allowable expense is one of the most effective ways to manage your limited company's tax position. The key is accuracy: record everything, keep your receipts, and only claim what genuinely qualifies under HMRC's rules.

About the Author:

Connect:

Stuart Connolly is a corporate barrister in Ireland and the UK since 2012.

He spent over a decade at Ireland's top law firms including Arthur Cox & William Fry.

Tax

February 2026

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Frequently Asked Questions

What limited company expenses can you claim?

How do allowable expenses lower your tax bill?

What is the 'wholly and exclusively' rule?

What are HMRC mileage rates for business travel?

Which expenses are not allowable?

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