Running a limited company in the UK? You must understand it comes with many costs, from travel and office equipment to professional fees and software subscriptions. Understanding claim expenses limited company can help reduce your company’s Corporation Tax bill and ensure you stay compliant with HMRC rules.
Many directors are unsure how to claim expenses as a limited company and how reimbursements work. This blog post explains how to claim expenses as a limited company and highlights the most common allowable expenses limited company can deduct.
What Are Allowable Expenses for a Limited Company?
Allowable expenses for a limited company are business expenses incurred wholly and exclusively for running the company. Normally, these costs can be deducted from your company’s income before Corporation Tax is calculated.
Common Claim Expenses Limited Company
Some of the most common HMRC allowable expenses include office rent and utilities, accountancy fees, software subscriptions, advertising and marketing costs, business travel, professional training related to the business, and office equipment and supplies.
What Expenses Can a Limited Company Claim?
Here are some of the common limited company expenses that you can claim:
Travel Expenses
Travel expenses for a limited company can include train tickets, flights for business trips, hotel accommodation, parking fees, and business mileage. For personal vehicles, you can claim HMRC’s approved mileage rates.
Staff Salaries
Salaries paid to employees for work carried out for the company. These wages must be genuine and processed correctly through payroll.
Employer National Insurance
National Insurance contributions paid by the employer on employees’ earnings are also included in claim expenses limited company. These expenses are deductible for Corporation Tax purposes.
Home Office Expenses
If you work from home, your company may compensate a reasonable portion of household costs such as electricity, internet, and business phone usage. Limited companies can reimburse directors for certain additional household costs or use HMRC’s homeworking allowance where applicable. The simplified expenses method is generally intended for sole traders rather than limited companies.
Merchant Fees
Charges from card payment providers for processing customer payments are fully deductible as a business expense.
Business Software
Costs of accounting software, productivity tools, and CRM systems used for business operations are generally allowable.
Professional Fees
Professional fees are also included in claim expenses limited company. These expenses often include accountancy fees, legal fees for business matters, business consultancy costs, and payroll services. Usually, these expenses are fully deductible for Corporation Tax purposes. Thus, personal purchases should not be paid through the company unless properly recorded through the director’s loan account where appropriate.
Equipment Expenses
Your company can usually claim the cost of laptops and computers, monitors, office furniture, printers and mobile phones used for business. As these are often treated as capital assets, they may qualify for capital allowances. Since April 2023, most qualifying plant and machinery purchased by companies may qualify for Full Expensing or the Annual Investment Allowance, depending on the asset and eligibility.
Training Expenses
Training expenses are also allowable if they improve skills relevant to the existing business. For example, a marketing course for a company director running an information technology business may qualify to claim expenses limited company.
Insurance
Limited companies buy various types of insurance policies to ensure the business is protected from dangers like cyber attacks, robbery, and fire. The types of allowable expenses a limited company can claim are public liability insurance, cyber insurance, employers’ liability insurance, and product liability insurance.
Pensions and Payroll
Pensions and payroll expenses such as Payroll software subscriptions, employer workplace pension contributions, outsourced payroll processing fees, and auto-enrolment compliance costs are included in claim expenses limited company.
Professional Indemnity Insurance
Insurance that protects your business against claims for negligence or professional mistakes is usually allowable when the cover is for business activities.
Can Directors Be Reimbursed for Expenses?
Yes, in the UK, company directors can be fully compensated for business expenses. When you pay for a business-related cost out of your personal pocket, the company can repay the exact amount.
In most cases, this compensation does not count as salary or a dividend. Provided the reimbursement is for genuine business expenses and supported by appropriate records, it is generally not subject to Income Tax or National Insurance. In addition, the company may be able to claim corporation tax relief on the expense.
However, if the company reimburses personal or non-business expenses, the payment may be treated as earnings or a benefit in kind. This payment may also become taxable.
How to Claim Expenses Through a Limited Company?
To claim expenses limited company must ensure the costs are incurred wholly and exclusively for business. Expenses can be paid directly by the company or reimbursed to directors or employees. Here are the steps to follow to claim correctly and accurately:
Know What You Can Claim
First, you must identify the allowable expenses that you can claim, such as business travel and mileage, home-working costs, software, rent, professional subscription and office costs. You can also claim employer pension contributions, accountancy fees, business legal fees, business insurance, and hotels and overnight subsistence for business trips.
Keep Receipts and Invoices
To claim expenses limited company must retain an itemised VAT invoice or receipt for every purchase. Keep in mind that bank statements alone are rarely enough for an HMRC audit. You must store paper or digital evidence for every business cost.
Check the Expense Is Business-Related
Always distinguish between personal and business-related expenses. Claim only business expenses and avoid claiming personal costs. Claiming personal expenses may lead to HMRC penalties.
Record the Expense in Your Bookkeeping
Use accounting software or your company records. It is advisable to use modern accounting software as it can help you manage your UK tax bill, ensure HMRC compliance, and maintain healthy cash flow.
Reimburse the Director If They Paid Personally
If a director paid for a business expense using their personal card or bank account, the company can repay them.
Include the Claim in Company Accounts
Lastly, to claim expenses limited company must safely store all business expense receipts. By law, you must store them for at least 6 years from the end of the relevant tax period.
What Expenses a Limited Company Cannot Claim?
You cannot claim expenses that are not incurred “wholly and exclusively” for business purposes or that have a personal element. Common expenses that you cannot claim include:
Client Entertainment
Client entertainment is generally not deductible for Corporation Tax purposes, although there are limited exceptions.
Personal Travel & Commuting
Ordinary commuting between your permanent workplace and your home is unclaimable. Also, personal holidays cannot be disguised as business trips.
Personal Use Items
Any goods or services bought for personal use, including personal health care, groceries, and everyday clothing or business attire, do not qualify to claim expenses limited company. Only protective clothing or uniforms are normally allowable.
Personal Legal and Accountancy Fees
Fees for your personal legal disputes or personal Self Assessment tax return cannot be billed to the business.
Fines and Penalties
Regulatory fines, penalties for late tax submissions, and parking tickets cannot be used to reduce your corporation tax.
Trying to claim expenses limited company for personal costs, it can lead to additional tax charges from HMRC.
Allowable Expenses vs Capital Allowances
A limited company can use both capital allowances and allowable expenses to reduce the amount of tax you pay overall. Look at the table below for a quick comparison between these two:
| Allowable Expenses | Capital Allowance |
| It includes Everyday business running costs. | It includes relief on qualifying business assets. |
| Examples: Software, travel, rent, accountancy fees | Examples: Computers, equipment, office furniture. |
| Claimed in the company accounts | Claimed separately in the Corporation Tax computation |
What Records are Required to Claim Expenses?
To legally claim expenses limited company must keep complete evidence of every transaction. HMRC can audit the company’s records at any time, and if you cannot prove an expense, it will issue penalties. To support tax relief on business expenses, you must keep:
- Itemised Receipts or Invoices
- VAT Receipts
- Proof of Payment
- Bank statements
- Milage logs
- Accounting records
Additionally, a company must retain its records for at least 6 years.
The Final Thought
To claim expenses limited company must understand the distinct claim methods, core eligibility rules, and record-keeping laws of HMRC. Claiming your expenses is the most effective way to reduce taxable profits while staying compliant with HMRC rules.
Always claim allowable business expenses that are wholly and exclusively used for business purposes. If you claim personal expenses through your UK limited company, it may lead to HMRC penalties.
Keeping accurate accounting records can help you claim correctly. It can also help your business maximise tax relief on business expenses and avoid problems with HMRC.
How Accotax Can Help?
If you’re unsure whether an expense qualifies, seek professional advice before including it in your Corporation Tax return.
At Accotax, we have the best accountants who can help you identify allowable expenses, prepare accurate CT600 filings, maximise capital allowances, and ensure your limited company remains fully compliant with HMRC rules.
Get a quote today to ensure you are claiming every tax deduction your company is entitled to.
Disclaimer: All the information provided in this article on “What Expenses Can Be Claimed As a Limited Company?“, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.
