Allowable Expenses for a Limited Company

A while ago, a client proudly handed me a folder of receipts for a "business trip" that turned out to be a family holiday with one afternoon of vaguely work-related sightseeing squeezed in. He genuinely believed it qualified. It didn't — not even close. That folder is the perfect illustration of why this topic matters so much: the line between an allowable business expense and a personal cost dressed up as one isn't always where directors think it is, and getting it wrong is one of the fastest ways to end up with an uncomfortable HMRC enquiry.

The good news is that the actual rule is refreshingly simple to state, even if applying it correctly takes a bit more care. Every genuine business cost you claim reduces your company's taxable profit, which reduces your corporation tax bill — real money saved, legitimately, every single time you get it right. Miss claims you're entitled to, and you're simply paying more tax than you need to. Claim things you're not entitled to, and you're building a problem for later.

This guide covers exactly what a limited company can and can't claim, category by category, with the detail you actually need rather than a vague list of headings.

What Expenses Can a Limited Company Claim?

The "Wholly and Exclusively" Test

HMRC's test for every single expense is whether it was incurred "wholly and exclusively" for the purposes of the business. Two words, doing a lot of work. If a cost serves a genuine business purpose and nothing else, it's allowable. If it's mixed — partly business, partly personal — it needs a fair, defensible split, with only the business proportion claimed.

Why Documentation Matters As Much As the Rule Itself

I say this to every new client: the expense being genuinely allowable isn't the whole story. You also need to be able to show it, months or years later, if HMRC ever asks. A receipt, an invoice, a note of the business purpose — none of it takes long to keep at the time, and all of it becomes very hard to reconstruct after the fact. The clients who breeze through an HMRC check are, without exception, the ones with tidy records, not necessarily the ones with the biggest claims.

Claiming Expenses vs Company-Paid Purchases

There are two different routes worth distinguishing. Sometimes the company pays for something directly — a supplier invoice settled from the business account. Other times, a director pays personally and claims the cost back from the company. Both are legitimate, and both need the same underlying test applied, but the second route in particular needs a proper expense claim and receipt trail, or it can start to look uncomfortably like an undocumented director's loan.

Common Allowable Limited Company Expenses

Office Costs

Rent, business rates, utilities, stationery, and general office supplies are all straightforward, unambiguous claims — genuinely one of the easier categories to get right, provided the space in question is actually used for the business.

Telephone and Internet

A phone contract or broadband line used for business is claimable, but if there's meaningful personal use mixed in, that portion needs stripping out. A dedicated business line or a company mobile in the company's name sidesteps the apportionment problem entirely, which is why we often recommend it over reimbursing a personal contract.

Professional Fees

Accountancy fees, legal advice, and other professional services bought for the business are allowable in full — and, worth saying plainly, that includes the fees you're paying us. It's one of the few expenses that quite literally pays for itself.

Advertising and Marketing

Website design and hosting, print and digital advertising, sponsorship, and marketing agency fees are all deductible. This is one area where directors sometimes under-claim, simply because they don't think to log smaller, recurring marketing costs — a monthly ad spend here, a design tweak there — as carefully as they log bigger one-off purchases.

Business Insurance

Professional indemnity cover, public liability insurance, employer's liability where you have staff, and similar policies protecting the business are all allowable costs, and in several cases legally required in the first place.

Training and Professional Development

Here's where the rules get genuinely nuanced, and where I see the most confusion. Training that maintains or updates skills you already have — a refresher course, an industry update, continuing professional development required to keep a qualification current — is allowable. Training that gives you a brand new skill or qualification you didn't previously hold is treated far more cautiously by HMRC, and can be disallowed entirely. A bookkeeper training to become a chartered accountant is arguably acquiring a new skill set; the same accountant attending an annual update course is clearly maintaining an existing one. The line matters, and it's worth checking with us before committing to a significant course.

Business Travel

Journeys to see clients, travel between different work sites, and trips to a temporary workplace are all claimable. Your ordinary commute to a permanent workplace is not, and never has been, regardless of how the journey is dressed up.

Subsistence

Reasonable food and drink costs while travelling for a qualifying business journey are allowable, provided the journey itself meets the business travel test above. It's not a blank cheque for every meal you happen to eat while working — it's tied specifically to being away from your normal place of work on genuine business.

Mileage

If you use your own car for qualifying business journeys, HMRC's approved mileage rates let you claim a set amount per mile, tax-free, without needing to keep every individual fuel receipt. For 2026/27, that's 55p per mile for the first 10,000 business miles in a car or van — a significant increase from the 45p rate that had been frozen since 2011 — dropping to 25p per mile after that. The rate is designed to cover fuel, insurance, servicing and general wear and tear all in one figure, so if you claim mileage, you can't also separately claim fuel receipts for the same journeys — that's genuine double-claiming, and it's one of the more common errors we catch during a review.

Working From Home

This one changed meaningfully for 2026/27, and it's worth flagging clearly because a lot of information still circulating online is now out of date. Employees can no longer personally claim tax relief from HMRC for unreimbursed working-from-home costs — that route has been abolished from 6 April 2026. What hasn't changed is the employer side: your company can still pay you up to £6 a week (or £26 a month) tax-free, without needing receipts, to cover additional household costs from working at home, provided the arrangement genuinely reflects your working pattern. For most director clients, this means the payment should come from the company, not be claimed personally after the fact.

Equipment and Computer Costs

Laptops, monitors, office furniture and similar equipment used for the business are allowable, almost always relieved through capital allowances rather than as a straightforward expense — in practice, this usually means the full cost is deducted in the year of purchase under the Annual Investment Allowance, covered in more detail in our capital allowances guide.

Pension Contributions

An employer pension contribution made by your company on your behalf is one of the most valuable — and most underused — allowable expenses available. It reduces your company's taxable profit, avoids employer and employee National Insurance entirely, and sidesteps corporation tax and dividend tax on the amount contributed. We cover the full mechanics of this in our dedicated pensions guide, but it deserves a mention here simply because it so rarely comes up in a director's own list of "expenses" — it's usually filed mentally under retirement planning rather than tax planning, when really it's both at once.

What Expenses Can a Limited Company Not Claim?

Client Entertaining

This is the one that catches out even experienced directors. Taking a client to dinner, buying tickets to an event together, hosting a client at a hospitality box — all genuine, sensible business activity, and all specifically disallowed for tax purposes. Your company can still pay for it. It just can't reduce your corporation tax bill by doing so, which surprises people every single time I explain it, because it feels like exactly the sort of cost that should qualify.

Fines and Penalties

Parking tickets, speeding fines, late filing penalties — none of these are allowable, on the principle that the tax system shouldn't effectively subsidise breaking the law or missing deadlines.

Ordinary Commuting

Your regular journey between home and a permanent workplace is a personal cost, not a business one, however inconvenient or expensive that commute happens to be.

Personal Expenses Disguised as Business Costs

The folder of holiday receipts I mentioned at the start of this guide falls squarely here — as does the not-uncommon attempt to claim a family car, a personal wardrobe, or home renovations as business costs because "I sometimes work from that room." HMRC has seen every version of this, and the disallowance, when it comes, is rarely quiet or gentle.

Can My Company Pay My Personal Expenses?

What Happens When It Does

Your company can, mechanically, pay for almost anything — there's nothing stopping the payment itself. What it can't do is treat a genuinely personal cost as a tax-deductible business expense, and it can't hand you the benefit tax-free just because the company account happened to settle the bill.

Benefits in Kind vs Director's Loan

When a company pays for something personal on a director's behalf, it generally falls into one of two categories. If it's a recognised benefit — private medical insurance, a company car, and similar — it's reported and taxed as a benefit in kind, covered in full in our benefits in kind guide. If it doesn't fit that framework, it's usually treated as a director's loan instead, which carries its own tax consequences if it isn't repaid within nine months of your company's year end, as we've explained in our director's loan account guide.

Our Advice: Keep the Line Clear

The cleanest approach, by some distance, is to keep genuine personal spending on a personal card, and business spending on the company's. It sounds almost too simple to be worth saying, but it's the single biggest thing that keeps a set of company accounts easy to prepare, easy to defend, and free of the awkward conversations that come from untangling six months of mixed spending after the fact.

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Getting expenses right isn't about being maximally aggressive or maximally cautious — it's about knowing precisely where the line sits, and keeping the paperwork that proves you're on the right side of it. If you'd like us to review what your company is currently claiming, tighten up a category you're unsure about, or simply build better habits for the year ahead, get in touch with the team at Cannon Accountants. It's often a surprisingly quick conversation with a genuinely useful result.

Expenses are just one piece of managing your company's tax position well. For the complete picture — corporation tax, salary and dividends, director's loans, pensions, benefits in kind and everything else covered in this series — head back to our full Limited Company Tax Guide 2026/27: Corporation Tax, Dividends & Director Tax →.

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