Limited Company Expenses: What You Can (and Can't) Claim

Every allowable expense your limited company claims reduces its profit — and therefore its Corporation Tax. Yet plenty of directors quietly overpay because they don’t claim everything they’re entitled to, or aren’t sure what counts. Here’s a clear guide.

The rule: “wholly and exclusively”

For a cost to be an allowable company expense, it must be incurred “wholly and exclusively” for the business. If something is part-business and part-personal, you can only claim the business proportion.

Get this right and your company pays tax only on its real profit. Our Corporation Tax calculator shows how your profit (after expenses) translates into tax.

Expenses a limited company can usually claim

• Salaries — your director’s salary and staff wages
• Employer pension contributions — highly tax-efficient (more below)
• Business travel and accommodation — not ordinary commuting
• Equipment, tools and software — including capital allowances on larger items
• Home office — a reasonable allowance, or the business proportion of household costs
• Professional fees — accountancy, legal, certain consultancy
• Business insurance — public liability, professional indemnity
• Marketing — website, advertising, branding
• Training — courses that maintain or develop skills for the business
• Phone and internet — the business proportion
• Bank charges and interest on business borrowing

The two that save the most

Two expenses are worth highlighting because they’re both deductible and tax-efficient personally:

1. Director’s salary — a deductible cost that also uses your personal allowance and builds your State Pension. See director’s salary and dividends.
2. Employer pension contributions — the company pays into your pension as an allowable expense, with no National Insurance and no income tax on you when it goes in (within annual limits). For many director-owners it’s one of the best uses of company profit.

Expenses you can’t claim

• Client entertaining — specifically disallowed for Corporation Tax
• Personal costs — anything not genuinely for the business
• Ordinary commuting to a regular workplace
• Fines and penalties
• Everyday clothing (uniforms and protective gear are different)

Keep the records

The difference between a complete and an incomplete expense claim is usually just record-keeping. Capture costs and receipts through the year — ideally in cloud software — so nothing is missed and everything is defensible if HMRC asks. Clean records also make your year-end accounts faster and cheaper.

Claim everything you’re owed

Knowing exactly what your company can claim — and structuring salary and pension contributions well — can save a meaningful amount of Corporation Tax each year. Our Accounts & Corporation Tax service makes sure every allowable expense is captured, and our accountants for limited companies keep your whole position efficient. It usually saves more than the fee. For the bigger picture on the tax itself, see what is Corporation Tax.