What Expenses Can a Limited Company Claim?

A client once asked me, entirely seriously, whether his company could claim the cost of a £4 flat white "because I always have it when I'm thinking about work." I had to tell him no, and then spend the next ten minutes explaining why a sandwich bought on a genuine client visit the same week absolutely could be claimed. Same category of spending, in his mind. Completely different outcome in HMRC's.

Expenses are where I get asked the most oddly specific questions, and this guide answers the ones that come up again and again: coffee, lunch, home offices, receipts, cars, and the rules that decide whether something reduces your tax bill or simply reduces your bank balance. I've written it as a set of straight answers, each with the reasoning behind it, so you can see not just what's allowed but why.

What Is the Most Overlooked Tax Break in the UK?

Employer pension contributions

If I had to pick one relief that genuinely gets missed more than any other, it's this. An employer pension contribution, paid by your company directly into your pension, is deductible against corporation tax, avoids National Insurance entirely, and isn't taxed as a dividend or salary on the way in.

Run the comparison. Take £10,000 of company profit and a company paying 19% corporation tax. Paid as a dividend to a higher-rate taxpayer, roughly £5,200 ends up in your pocket after corporation tax and dividend tax. Paid into your pension instead, the full £10,000 goes in.

Why so few directors use it

It isn't hidden. It's simply filed mentally under "retirement planning" rather than "expense claim", so it never comes up in the same conversation as mileage logs and software subscriptions. I've reviewed plenty of healthy, profitable companies that have drawn every pound as salary and dividends for years without a single pension contribution in sight, purely because nobody framed it as an option sitting alongside the rest. Our pension contributions guide has the full detail.

What Business Expenses Are Not 100% Deductible?

Client entertaining

This is the big one. Taking a client to dinner, buying event tickets together, or hosting a hospitality box is genuine, sensible business activity, and it's specifically disallowed for corporation tax. Your company can still pay for it. It just won't reduce your tax bill by doing so.

Mixed-use costs

A phone contract, a car, or a portion of your home running costs used for both business and personal purposes need a fair split. Only the business proportion is deductible, and HMRC expects that split to be genuine and reasonable, not optimistic.

Cars, depending on emissions

Cars sit outside the normal 100% relief available to most equipment. A new, unused electric car gets a 100% first-year allowance. A petrol or diesel car is relieved far more slowly, often at just 6% a year in the special rate pool. We cover this fully below.

What Expenses Are Not Allowed for Corporation Tax?

The full list

Beyond client entertaining and the mixed-use rules above, the main categories that simply don't reduce your corporation tax bill are: fines and penalties (parking tickets, late filing penalties), ordinary commuting between home and a permanent workplace, personal costs with no genuine business purpose, dividends themselves (they're a distribution of profit, not an expense), and capital spending claimed outright rather than through capital allowances.

Why "disallowed" doesn't mean "can't be paid"

Your company can pay for almost anything. What it can't do is treat every payment as reducing its tax bill. A disallowed expense simply gets added back to your profit in the corporation tax computation, so you still pay tax on it, even though the money has genuinely left the business.

Can You Expense Lunch With a Ltd Company?

Lunch with a client

No, not for tax purposes. However reasonable it feels to buy a client lunch while discussing a deal, it falls under client entertaining, and it's disallowed.

Lunch while travelling

Yes, if the journey itself qualifies as business travel. If you're away from your normal workplace for a qualifying period, a meal bought during that trip is treated as subsistence, and HMRC has specific benchmark rates for it, covered in full below.

Lunch at your desk

No. An ordinary lunch on an ordinary working day, at your normal place of work, is a personal cost like anyone else's. The qualifying factor is always the travel, not the meal itself.

What Is 100% Tax Deductible in the UK?

The Annual Investment Allowance and full expensing

Most qualifying equipment, up to £1 million a year, is deducted in full in the year you buy it, through the Annual Investment Allowance. Full expensing extends 100% relief beyond that limit for companies. New electric cars also qualify for a 100% first-year allowance. Our capital allowances guide covers both.

Ordinary running costs

Day-to-day expenses incurred wholly and exclusively for the business, such as software, office costs, and professional fees, are 100% deductible as ordinary expenses, with no special allowance needed.

Pension contributions

As above, an employer pension contribution is fully deductible, provided it meets the "wholly and exclusively" test and is broadly reasonable for your role.

What Can I Claim on Tax Without Receipts?

HMRC's benchmark scale rates

For subsistence while travelling, HMRC lets you use fixed benchmark rates rather than keeping every receipt: £5 for a qualifying journey of 5 hours or more, £10 for 10 hours or more, and £25 for 15 hours or more where the journey is still ongoing at 8pm. A £10 supplement can also apply if a shorter trip runs past 8pm without reaching the 15-hour mark. Since April 2019, HMRC no longer requires you to check actual spending against these rates.

Mileage

You don't need fuel receipts for mileage claims. A log showing the date, destination, purpose and miles travelled is enough, claimed at 55p a mile for the first 10,000 business miles and 25p after that.

Trivial benefits and the home-working payment

Small gifts and perks under £50 each, within the £300 annual cap for directors, don't need a formal receipt trail in the same way, though keeping a simple note is still sensible. The £6-a-week employer payment for working from home can also be paid without receipts, provided the arrangement reflects your actual working pattern.

Why "no receipt" doesn't mean "no record"

None of this means you can claim whatever you like and hope nobody asks. Keep a log for mileage, a note of the qualifying journey for subsistence, and a record of what trivial benefits were given and when. If HMRC ever queries a claim, "I was following the benchmark rate" only holds up if you can show the underlying journey or benefit actually happened.

What Are Some Examples of Allowable Business Expenses?

Day-to-day running costs

Office rent and utilities, stationery, software subscriptions, business insurance, advertising and marketing, and equipment such as laptops and monitors are all straightforward, allowable claims.

Costs tied to you as director

Mileage in your own car, professional fees including accountancy, training that maintains an existing skill rather than creating a new one, and employer pension contributions all sit in this category. Our allowable expenses guide runs through every category in detail.

What Are Non-Allowable Expenses?

The common culprits

Client entertaining, fines, ordinary commuting, and personal spending dressed up as business cost are the ones I see most often. The holiday with "one afternoon of sightseeing that was sort of work-related" does not become a business trip because of that afternoon.

The grey area: training

Training is worth a special mention because it's genuinely nuanced. Training that updates or maintains a skill you already have is allowable. Training that gives you a brand new qualification is treated far more cautiously and can be disallowed. A professional attending an annual update course is maintaining a skill. The same person training from scratch for an entirely different qualification is acquiring one.

What Expenditure Can You Show in a Ltd Company?

The difference between "showing" and "claiming"

Your company's accounts can show any payment it genuinely made, whether or not that payment is tax-deductible. Client entertaining appears in your accounts as a real cost. It just gets added back in the corporation tax computation, so it doesn't reduce the tax bill.

Keeping it clean

The cleanest companies I work with keep a simple separation in their own minds: "is this a cost the company genuinely incurred" and "is this a cost that reduces our tax bill" are two different questions, and the answer to one doesn't decide the other.

Can I Claim Home Office Expenses From HMRC for My Limited Company?

The £6-a-week flat rate

Your company can pay you £6 a week, tax-free and without receipts, towards the additional costs of working from home, provided the arrangement genuinely reflects how you work.

Claiming actual costs instead

If your actual additional costs are higher, your company can reimburse a fair proportion of them instead, calculated on a reasonable basis, such as the extra heating and electricity used because of home working. This needs proper evidence and a defensible method, rather than a rough guess.

What changed in April 2026

This is worth flagging clearly. Employees can no longer personally claim tax relief from HMRC for unreimbursed working-from-home costs, a route that was abolished from 6 April 2026. What hasn't changed is the employer side: your company can still make the £6-a-week payment directly. If you've been claiming relief personally on your own tax return, that route has closed, and the payment needs to come from the company instead.

Can I Claim Coffee as a Business Expense?

Coffee for you, alone

No. A coffee you buy for yourself during an ordinary working day, including the one my client asked about, is a personal cost, however closely tied to your working routine it feels.

Coffee for staff

Yes. Tea, coffee and similar refreshments provided in the workplace for staff, including yourself as a director, are a normal allowable running cost, in the same category as other welfare provisions.

Coffee with a client

No, this falls under client entertaining, and it's disallowed regardless of how small the amount is. The rule doesn't have a minimum spend exemption.

What Is HMRC's Daily Food Allowance?

The benchmark scale rates

There's no single "daily food allowance" as such. What HMRC actually publishes are the benchmark subsistence rates covered above: £5, £10, or £25, depending on how long a qualifying business journey lasts, with a £10 supplement for a late finish on a shorter trip.

What it isn't

It isn't a flat allowance every director or employee can claim regardless of circumstances. It only applies to a genuine qualifying business journey, and it's a maximum tax-free amount, not an automatic entitlement. Claim it on an ordinary day with no qualifying travel, and it simply doesn't apply.

Can You Claim Drinks as a Business Expense?

Soft drinks and water

Yes, when provided as ordinary workplace refreshments, or as part of a qualifying subsistence claim during business travel, in the same way as food.

Alcohol

This is where it gets genuinely grey. Alcohol bought as part of a client meal falls under client entertaining regardless, so it's disallowed either way. Alcohol bought as part of your own subsistence while travelling can sometimes be included within a reasonable claim, but it needs a sensible, defensible approach rather than an assumption that "it was with dinner" automatically covers it.

Staff events

Drinks provided as part of an annual staff function, such as a Christmas party, fall under the £150-per-head exemption for annual functions, covered in our [benefits in kind guide](/blog/benefits-in-kind-directors). Go a pound over that limit, and the whole amount, drinks included, becomes a taxable benefit.

Can You Write Off a Car as a Business Expense in the UK?

Electric cars

A new, unused, fully electric car bought by your company qualifies for a 100% first-year capital allowance, currently confirmed until 31 March 2027 for corporation tax purposes. The entire cost comes off your taxable profit in the year of purchase.

Petrol and diesel cars

These are treated far less generously. Depending on emissions, a petrol or diesel car typically sits in the main pool at 14% or the special rate pool at just 6% a year, meaning the relief trickles out slowly, often over a decade or more. On a £45,000 car, that's a difference of thousands of pounds in year-one relief alone between the electric and conventional options.

Mileage instead of buying

If you'd rather keep your own car and claim mileage, your company can reimburse 55p a mile for the first 10,000 business miles, then 25p, with no capital allowance question to work through at all. For moderate business mileage in a conventional car, this route often beats company ownership comfortably. Our company cars and mileage guide has a full worked comparison.

A Quick Test for Anything You're Not Sure About

Most of the questions above come back to the same underlying test, so it's worth having it in your head before you reach for the company card.

Ask yourself three things. Was this cost incurred wholly and exclusively for the business, with no significant personal benefit alongside it? Can I show, with a receipt, a log, or a clear business reason, why it was necessary? And would I be comfortable explaining this specific purchase to HMRC in plain English, without needing to reframe it first?

If the answer to all three is yes, you're almost certainly on safe ground. If you catch yourself constructing a slightly elaborate justification, that's usually the moment to either not claim it, or to ask us first. I'd always rather have that quick conversation in advance than untangle a disallowed claim, or worse, an HMRC enquiry, months later.

A Final Word on Record-Keeping

Every answer in this guide assumes you can back up the claim if asked. That doesn't mean a filing cabinet full of paper. A simple, consistent habit, whether that's a mileage app, a folder of scanned receipts, or a monthly five-minute tidy-up of your expense claims, is worth far more than a perfect understanding of the rules combined with no evidence to show for it. The clients who sail through a review are, without exception, the ones with tidy records, not the ones who claimed the least.

Expenses rarely go wrong through dishonesty. They go wrong because the rules are more specific than they look, and a cost that feels obviously business-related doesn't always meet HMRC's test. If you're unsure whether something qualifies, ask before you claim it, not after. Get in touch with the team at Cannon Accountants, and we'll tell you plainly, the way I told my client about his flat white.

For the wider picture of how expenses fit alongside corporation tax, salary and dividends, and everything else covered in this series, head back to our complete Limited Company Tax Guide 2026/27: Corporation Tax, Dividends & Director Tax →.

Disclaimer:

The content of this blog is for general informational purposes only and should not be considered professional tax advice. The information is correct at the time of publishing but may change following future UK budget announcements or updates to HMRC guidance. Individual circumstances vary, and tax obligations can differ based on your personal situation. We strongly recommend consulting with us or a qualified tax professional to receive advice tailored to your specific needs.