Limited company expenses checker
Search any cost your company pays for. You get a plain answer, allowable, partly allowable or not allowable, the rule it turns on, and the point where it becomes a taxable benefit for you as a director.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityA limited company can deduct a cost when it is incurred wholly and exclusively for the trade. Anything with a private element is either restricted, or allowed for the company and taxed on you as a benefit in kind, which is why entertaining, ordinary clothing and commuting are the usual rejections.
Treatment
Salaries and employer NIC
People. Wages, employer National Insurance and employer pension contributions are deductible for corporation tax in the period they are paid, provided the work is genuinely for the company. Watch: Pay to a family member must reflect real work at a commercial rate, otherwise HMRC disallows the excess.Director salary
People. A director salary run through PAYE is a company expense. Many directors take a salary around the National Insurance secondary threshold and the rest as dividends. Watch: Salary accrued but unpaid nine months after the year end is disallowed until it is actually paid.Dividends
People. Dividends are a distribution of profit after tax, not a business expense, so they never reduce the corporation tax bill.Employer pension contributions
People. Employer contributions paid into a registered scheme are deductible in the accounting period they are paid, subject to the wholly and exclusively test and the annual allowance for the individual.Home office use
Premises. A director can claim £6 a week without records, or a proportion of actual household costs supported by a licence agreement and a reasonable apportionment by rooms and hours. Watch: Charging rent to your company creates rental income on your Self Assessment return.Office rent and service charges
Premises. Rent, rates, service charges and utilities for genuine business premises are fully deductible.Travel to a permanent workplace
Travel. Ordinary commuting between home and a permanent workplace is never allowable. A workplace becomes permanent once you expect to attend it for more than 24 months.Business mileage in your own car
Travel. Claim HMRC approved mileage rates: 45p a mile for the first 10,000 business miles in a car or van, 25p after that, and 24p for motorcycles. Watch: Keep a mileage log with date, journey and purpose. Estimated round numbers are the first thing an enquiry picks up.Company car
Travel. The company deducts the running costs and capital allowances, but the director pays income tax on a benefit in kind based on list price and CO2, and the company pays Class 1A NIC. Watch: Fully electric cars carry a low benefit percentage and qualify for a 100% first year allowance when new, which is why most director cars are electric.Train, flight and hotel for business trips
Travel. Travel and overnight accommodation for a temporary workplace or client visit is allowable, along with reasonable subsistence while away.Client entertaining
Marketing. Entertaining clients, prospects or suppliers is never deductible for corporation tax, and the VAT cannot be reclaimed. Put it through the company by all means, it is simply added back in the tax computation.Staff entertaining and the annual event
People. Annual events open to all staff are exempt from tax up to £150 a head including VAT and travel. Go a penny over and the whole amount becomes taxable.Trivial benefits
People. Gifts under £50 that are not cash, not a reward for work and not contractual are exempt. Directors of close companies are capped at £300 of trivial benefits a year.Business gifts to clients
Marketing. Allowable only if the gift carries a conspicuous advert for the business, costs under £50 a person a year, and is not food, drink, tobacco or a voucher.Clothing and workwear
People. Protective clothing and branded uniforms are allowable. Everyday clothing, including a suit worn to client meetings, is not, because it also serves an ordinary purpose.Mobile phone
Technology. One mobile phone per employee is exempt from benefit in kind tax if the contract is in the company name. A personal contract reimbursed by the company is taxable except for identifiable business calls.Broadband at home
Technology. If you already had broadband personally, only the incremental business cost is allowable, which is usually nil. A separate business line in the company name is fully allowable.Laptops, monitors and equipment
Technology. Equipment bought for business use qualifies for the annual investment allowance, so the full cost normally reduces taxable profit in the year of purchase. Incidental private use by a director is ignored.Software and SaaS subscriptions
Technology. Accounting software, hosting, design tools and other subscriptions used to run the business are fully deductible.Website and app development
Technology. Ongoing content and maintenance is a revenue expense. Building a site or app that functions as an enduring asset is usually capitalised and written off over its useful life, with tax relief following the accounts.Accountancy fees
Professional. Fees for preparing company accounts, the CT600, payroll, VAT and bookkeeping are allowable. The part of the fee relating to a director personal tax return is strictly a benefit, so most firms bill it separately.Legal fees
Professional. Legal costs on trading matters such as contracts, debt recovery and employment are allowable. Costs on capital items, share issues or buying property are not, they are added to the cost of the asset.Fines and penalties
Professional. Fines for breaking the law, including HMRC and Companies House penalties, are never deductible. Interest on late paid tax is also disallowed for corporation tax.Professional subscriptions
Professional. Subscriptions to bodies on HMRC's approved List 3 are allowable and tax free for the employee. Anything else is a taxable benefit.Training and courses
People. Training that updates skills used in the current trade is allowable. Training that gives you a completely new trade or qualification is capital in nature and disallowed.Insurance
Professional. Professional indemnity, public liability, employer liability, cyber and business contents insurance are deductible business costs.Advertising and marketing
Marketing. Paid advertising, content, design, SEO and agency fees are allowable when incurred to win business.Charitable donations
Other. Qualifying donations to UK charities reduce taxable profit but cannot create or increase a loss. Sponsorship is allowable when the company gets genuine advertising in return.Bank charges and interest
Finance. Bank charges, card fees and interest on business borrowing are deductible under the loan relationship rules.Bad debts
Finance. A specific debt written off because the customer will not pay is deductible. A general provision across the ledger is not.Director loan write off
Finance. Writing off a director loan is not deductible for the company, and it is taxed on the director as a distribution with NIC consequences. An overdrawn loan outstanding nine months after the year end also triggers a 35.75% s455 charge.Subsistence while working away
Travel. Reasonable food and drink while travelling to a temporary workplace is allowable, using receipts or HMRC benchmark scale rates. Everyday lunches near your normal base are not.Eye tests and glasses
People. Eye tests required for display screen work are exempt. Glasses are only exempt if they are prescribed solely for screen use.Health insurance and medical cover
People. The premium is deductible for the company but taxable on the director as a benefit in kind, with Class 1A NIC on top. An annual health check and eye tests are exempt.Cycle to work bikes
Travel. A bike and safety equipment provided to an employee mainly for commuting is exempt from benefit in kind tax, and the company gets capital allowances and reclaims the VAT.Stock and cost of sales
Trading. Purchases of goods for resale are deductible, matched to the period in which the sale is recognised. Unsold stock sits on the balance sheet at the lower of cost and net realisable value.Subcontractors and freelancers
People. Payments to genuine subcontractors are deductible. In construction you must verify them and deduct CIS tax, and in all sectors you should be satisfied that the engagement is not really employment.Use of your own home as registered office
Premises. A paid registered office or mail forwarding service is fully allowable, and it keeps your home address off the public register.Startup costs before incorporation
Trading. Expenses incurred in the seven years before trading starts are treated as incurred on the first day of trade, so they still get relief. Keep the receipts in your name and reimburse yourself.Company formation fee
Trading. The cost of forming the company is capital in nature and disallowed for corporation tax, even though it is a genuine company cost.Wholly and exclusively, and the duality trap
The test for a company deduction is that the cost is incurred wholly and exclusively for the purposes of the trade. If a cost has two purposes that cannot be separated, business and private, none of it is allowable. That is why an ordinary suit is not deductible even if you only ever wear it to client meetings.
Where a cost genuinely splits, for example a phone bill or a room used for work, the business proportion is claimable provided you can show how you arrived at it. Keep the working, not just the receipt.
Company deduction and personal tax are two questions
A cost can be deductible for corporation tax and still create a tax charge on you personally. Private medical cover, a company car and a gym membership are all deductible for the company and all reportable on a P11D, with Class 1A National Insurance for the company.
The reverse also happens. Client entertaining is not deductible for corporation tax but is not a benefit in kind on you either. Getting these two questions confused is the single most common error we see in owner managed accounts.
The costs HMRC looks at first
Home working, travel and subsistence, motor costs, entertaining, training and anything routed through a director loan account are the areas that attract questions on an enquiry. Ordinary commuting to a permanent workplace is never allowable, and the 24 month rule can turn a temporary workplace into a permanent one part way through a contract.
Anything paid by the company for a director personally is a loan unless it is pay, a dividend, or a legitimate expense. An overdrawn loan account at the year end triggers a s455 charge, so keep personal spend off the company card.
Getting the records right
Keep the receipt, the reason and who was present for anything involving food, travel or entertaining. Digital records through your bookkeeping software satisfy HMRC and make the year end far cheaper.
If you are unsure about a specific cost, ask us. Basic questions about whether something is claimable are free, technical work such as a benefit in kind review or a director loan restructure is quoted before we start.
Common questions
Can my limited company pay for my lunch?
Only where you are travelling on business away from your normal workplace, or at a qualifying staff event. Everyday lunch near your usual place of work is a private cost, and paying it through the company creates either a benefit in kind or a director loan.
Can I claim working from home costs?
Yes. A director can claim the HMRC flat rate of £6 a week without evidence, or the actual proportion of household costs used for work if you keep the calculation. A formal licence agreement between you and the company can allow a larger claim but has its own tax consequences.
Is client entertaining tax deductible?
No. Client and supplier entertaining is added back for corporation tax and the VAT is not recoverable. Staff entertaining is different: an annual event costing up to £150 per head is exempt and deductible.
Can the company buy me a laptop or a phone?
Yes. Equipment used for the trade is deductible and usually qualifies for the annual investment allowance. One mobile phone per director, in the company's name, is exempt from a benefit in kind even with private use.
What about training courses?
Training that maintains or updates skills used in the current trade is allowable. Training that gives you a genuinely new trade or qualification is capital in nature and is not deductible, which is where new consultancy lines often trip up.