Allowable Expenses for Limited Companies 2026/27

A cost is deductible if it is incurred wholly and exclusively for the business. It does not have to be necessary, just for business purposes. At 25% corporation tax, a missed £8,000 of expenses costs £2,000 in avoidable tax. Keep every invoice and receipt, ideally in cloud bookkeeping software.

The costs most often missed are: accountancy fees, advertising and website costs, motor and travel costs, insurance, stationery and postage, utilities, rent, staff costs, bank charges, phone and broadband, software subscriptions, stock and packaging. Review your bank statements against this list before each year end.

If you use your own car for company business, the company can pay you tax-free mileage of 45p a mile for the first 10,000 business miles in the tax year and 25p after that (24p for motorcycles). The payment is deductible for the company and free of tax and National Insurance for you. Example: 12,000 business miles gives £5,000 tax-free (£4,500 + £500). Keep a mileage log with dates, destinations and purpose.

The company can deduct the travel it pays for. But if it pays for a director's or employee's ordinary commute to a permanent workplace, that is a taxable benefit with Class 1A National Insurance. Trips to clients, suppliers and temporary workplaces are fine, and there is no rule that you must take the cheapest option, so a first-class rail fare is allowable. Contractors working inside IR35 through their own company cannot claim home-to-work travel.

Everyday clothes are not deductible, even if you only wear them for work. A uniform or protective clothing is. Clothing carrying your company logo counts as a uniform, so a branded polo shirt or fleece becomes deductible and advertises the business at the same time.

Courses that update existing skills, or add new ones related to the current business, are deductible. That includes ancillary skills such as bookkeeping or IT. Training paid by the company for work-related skills is also tax-free for the employee. Training for a completely new line of work is not deductible.

Entertaining clients is not deductible, but entertaining staff is. An annual event open to all staff, such as a Christmas party, is also tax-free for employees if it costs no more than £150 a head (including VAT) across all such events in the year. Go £1 over and the whole amount becomes taxable, so budget carefully.

Client gifts are generally not deductible. The exception is a gift carrying a conspicuous advert for the business, such as a branded diary, mug or pen, costing no more than £50 per recipient per year. Food, drink, tobacco and vouchers never qualify. Free samples given to the public are also deductible.

Companies prepare accounts on the accruals basis, so an invoice counts as income when issued, even if it is never paid. Write off specific debts that have gone bad, such as a customer entering insolvency, and the write-off is deductible. If you are VAT-registered, you can also reclaim the VAT once the debt is six months overdue.

Annual fees to professional bodies on HMRC's approved list (List 3), such as ICAEW, ACCA, RICS or the Law Society, are deductible for the company and not a taxable benefit for you. If you pay personally and the company reimburses you, the reimbursement is tax-free as well.

If the business depends on one person, key person insurance protects it against lost profits if they die or fall seriously ill. Premiums are deductible when the sole purpose of the policy is to replace lost trading income. They are not deductible if the policy protects a capital asset, such as the value of the shares.

"Put it through the business" is a myth that leads to HMRC enquiries, penalties and interest. Personal spending paid by the company is either a taxable benefit or a debit on your director's loan account, and VAT on it cannot be reclaimed. Keep separate business and personal bank accounts so nothing gets mixed up.