Limited Company Tax Deductible Expenses: What You Can (and Can’t) Claim

Running a limited company is a balancing act—one hand on your company’s corporation tax bill, the other waving receipts at HMRC.

Get your expenses right and you’ll pay less tax, keep more of your company profits, and (almost) enjoy the admin. Miss a trick, and you’ll leave money on the table—or worse, face awkward questions from the tax office.

This isn’t just about saving a few quid on coffee runs. Claiming the right limited company tax deductible expenses can transform your bottom line—whether you’re a fresh startup or a seasoned small business. From overlooked deductions to the rules around record-keeping, it all adds up to smarter, more tax-efficient business.

Ready to make your next claim count? Let’s get into it.

What are limited company tax deductible expenses?

Limited company tax deductible expenses are the costs your business must pay to keep running—but there’s a silver lining: every allowable expense comes straight off your company’s taxable profits, trimming down your corporation tax bill.

What counts as a deductible expense?

The golden rule: the expense must be “wholly and exclusively” for business purposes. That means no mixing your personal life with your company’s credit card.

Here’s how this helps your bottom line:

• Reduces taxable profits: Every eligible business cost—from travel expenses to professional fees—comes off your final profit figure.
• Lowers corporation tax liability: Smaller profits mean a smaller tax bill at the end of the year.

How is this different for sole traders or the self-employed?

Sole traders and the self-employed follow similar “wholly and exclusively” rules, but the boundaries with personal spending can be blurrier—especially if you work from home or use your own car for work.

Limited companies must keep business and personal finances separate, and claims must be tied to the company’s activities (in the company’s name).

📌 Pro Tip: Good bookkeeping is your best friend. Accurate records make it easy to claim everything you’re entitled to—and keep HMRC happy if they come calling.

The golden rules: What’s allowable (and what’s not)

HMRC says you can deduct costs that are “wholly and exclusively” for business purposes. If it keeps your company running—think business travel, accommodation costs, travel costs, professional phone bills, public liability insurance, bank fees, and necessary legal fees—you’re on solid ground.

What’s not allowed?

Some expenses will never pass muster with HMRC:

• Private expenses: Personal costs, even if paid from the business account, are a no-go.
• Business entertainment: Meals, events, or client entertainment are rarely allowable—unless you’re charging for tickets, don’t expect a tax break.
• Anything not strictly business: “That new sofa for your home office” won’t fly if it’s doubling as your Netflix throne.

Why records matter (even more now):

With digital reporting requirements tightening in the current tax year, HMRC expects airtight bookkeeping. Keep clear records, receipts, and explanations for every claim—no exceptions.

📌 Pro Tip: Don’t mix business and personal on your phone bill or credit card. Separate accounts make life (and HMRC checks) much easier—and can save you headaches at tax time.

The full list: Types of expenses your limited company can claim

Claiming all legitimate and allowable business expenses is one of the best ways to cut your corporation tax bill and boost your profits. Here’s a comprehensive list of limited company expenses your business can typically claim:

1. Everyday business running costs

Running a business means paying for the basics that keep your company operating smoothly.

• Office costs: Rent for business premises, utilities, business rates, and cleaning services.
• Equipment: Laptops, computers, monitors, printers, office furniture, and other essential tech.
• Supplies: Stationery, postage, and consumables.
• Business insurance: Professional indemnity, public liability, and employer’s liability insurance.
• Bank charges and card fees: Fees related to your business bank account and company credit cards.
• Professional services: Accountancy, bookkeeping, payroll, legal, and consulting fees.

2. Staff and director expenses

The costs of employing staff (including directors) and looking after your team.

• Salaries and wages: Employee and director pay, including employer’s NICs and pension contributions.
• Trivial benefits and events: Staff gifts within the trivial benefit limit, and annual events like the Christmas party (within HMRC’s rules).
• Travel and subsistence for directors: Business-related travel and meals, but not your regular commute.
• Employer pension contributions: Payments into workplace pension schemes.

3. Home office and remote working

If you or your staff work from home, you can claim a portion of household costs.

• Home office costs: A share of heating, electricity, rent or mortgage interest, and broadband based on business use.
• Remote work equipment: Laptops, printers, and business software for home-working needs.

4. Travel and subsistence

Expenses when you’re on the move for business.

• Business trips: Trains, flights, taxis, parking, tolls, congestion charges, and business mileage for travel to temporary workplaces.
• Accommodation: Hotels or other overnight stays required for business trips.
• Meals on the road: Food and drink when travelling for work—keep it reasonable!

5. Tech, communications and other essentials

Keeping your company connected and up to speed.

• Mobile phone: One work phone per employee/director, in the company’s name.
• IT and software: Subscriptions, cloud storage, web hosting, and necessary apps.
• Maintenance and repairs: Fixing essential equipment or IT systems.

6. Other key claims

Don’t overlook these common deductions that often fly under the radar.

• Training courses: Relevant to your role or the company’s trade.
• Charitable donations: To registered charities (check HMRC conditions).
• Marketing and advertising: Website, digital ads, print marketing, branded swag, and promotional events.
• Networking and conferences: Industry events, trade shows, and seminars.
• Benefit in kind reporting: Declare any personal use of company assets or perks.

📌 Pro Tip: If you or your team use company assets (like a car) for personal reasons, report it as a “benefit in kind”—or you could face extra tax later.

Less-claimed and overlooked deductions

Even seasoned limited company directors miss some perfectly legit claims. Don’t leave money on the table—here are deductions many forget:

• Eye tests: If you or your staff spend a lot of time on screens for work, your company can pay for eye tests. If glasses are exclusively for work use, that cost can sometimes be claimed too.
• Professional subscriptions: Annual fees to HMRC-approved professional bodies (think industry associations or regulatory groups) are allowable—but double-check they’re on HMRC’s list.
• Staff parties and events: You can claim up to £150 per employee (including directors) each tax year for annual events (Christmas party, summer BBQ, etc.). This is not the same as the trivial benefits allowance. To keep the event tax-free, stay within the £150 limit per head, per year—including all costs (venue, food, drink, transport).
• Trivial benefits: For employees and directors only (not freelancers or contractors!), you can provide small gifts/perks tax-free, up to £50 per benefit, provided it isn’t cash or a cash voucher and isn’t in exchange for work performed. Directors of “close companies” (typically those with five or fewer shareholders) are capped at £300 per director per tax year.
• Capital allowances: Don’t forget to claim capital allowances on equipment, vehicles, and business assets—these can substantially reduce your company’s taxable profits.
• Business calls and public transport: Costs for business calls from personal phones and work-related travel on public transport are allowable—just keep detailed records.
• Professional indemnity insurance: Premiums for insurance policies covering claims against your professional advice or services are fully deductible.

📌 Pro Tip: Trivial benefits for directors have strict annual limits—track each director’s perks carefully. Going over the £300 cap even by £1 means the entire benefit becomes taxable, not just the excess. Keep records tight to keep benefits tax free.

What you can’t claim: Common pitfalls

HMRC pays special attention to benefit in kind and entertainment expenses, since these are often abused by businesses. To avoid income tax headaches (and unwanted questions from the tax office), make sure you steer clear of these common mistakes:

• Personal clothing: Everyday clothes—even if you wear them solely for work—aren’t allowable. Only uniforms or protective gear count.
• Non-business meals: Lunches and coffees that aren’t part of work travel or a genuine client meeting are not deductible.
• Gifts above trivial benefit allowance: Anything over £50 per benefit, or any cash/cash voucher gifts, cannot be claimed tax-free.
• Non-business mileage/commuting: Travel from home to your usual place of work isn’t deductible; only business trips to temporary workplaces qualify.
• Unapproved or excessive entertainment: Lavish client dinners or entertainment that’s not strictly business-related won’t pass muster as tax-deductible.

Keep your expense claims clean, well-documented, and strictly business-focused—HMRC is always watching for expenses that stretch the rules.

How to maximise your claims and claim tax relief

Mastering your company’s expenses is about more than receipts and checklists. Here’s how the pros squeeze every drop of tax relief from their business spend:

1. Know your categories (and the grey areas)

Go beyond the usual travel and stationery—explore whether training, professional subscriptions, relocation expenses, and employee perks qualify for tax purposes. Check if “dual use” costs (like broadband or phones) can be apportioned, and claim only the business share.

2. Use Annual Investment Allowance (AIA) strategically

Plan equipment and capital purchases to take full advantage of the current AIA limit (£1 million until March 2026). If your company is close to year-end and you’re considering a major investment, buying before the deadline can make the deduction count for this period—not next year.

3. Batch and bunch expenses for maximum relief

If you expect a dip in profits next year, bring forward qualifying expenses—such as maintenance, IT upgrades, or marketing spends—so they hit the books while profits (and your corporation tax rate) are higher.

4. Leverage director pension contributions

Employer contributions to your pension are deductible business expenses and aren’t subject to National Insurance Contributions (NICs). Maximise contributions (within annual limits) to reduce taxable profit and build retirement savings tax-efficiently.

5. Don’t miss pre-trading and start-up costs

You can often claim legitimate expenses incurred up to seven years before you officially started trading (as long as they would have been deductible if incurred when trading). Go back through your records to check for overlooked costs like website setup, research, or professional fees.

6. Systemise your expense evidence

Use cloud accounting software that integrates receipt scanning and auto-categorisation. Set rules for recurring costs, attach digital receipts to transactions, and flag items requiring director approval.

7. Claim for home working sensibly

Instead of the flat £6/week, calculate and claim a proportional share of actual home running costs if it gives a bigger (and still justifiable) deduction. Document your methodology and keep utility bills as backup.

📌 Pro Tip: Track mileage and the exact purpose of every business journey using an app—mileage claims are a favourite target in HMRC reviews, and detailed logs (with dates, locations, and clients) can turn a stressful inquiry into a routine box-ticking exercise.

Claiming expenses: The step-by-step process

Managing your limited company’s tax deductible expenses is about method, not magic. Here’s how to do it—from your first coffee receipt to final HMRC sign-off:

1. Log expenses in real time: Record every business cost as it happens. Enter the amount, date, supplier, and description into your accounting software or spreadsheet. Scan and save a digital copy of each receipt or invoice.

2. Keep business and personal money separate: Use a company bank account or company credit card for all business transactions. Don’t mix personal spending with business purchases—it’ll save you headaches and potential questions from HMRC.

3. Categorise for allowability: Label each expense by category (travel, insurance, professional fees, etc.). Double-check that every claim meets the “wholly and exclusively for business” rule.

4. Review annually for missed deductions: Before your accounting year ends, review your records for missed expenses—think subscriptions, insurance renewals, or annual memberships.

5. Claim on your Corporation Tax Return (CT600): Total your allowable business expenses and list them on your company tax return. These claims will directly reduce your taxable profit and, in turn, your corporation tax bill.

6. Know the difference: Self assessment vs. company claims: If you’re a limited company, all expenses go through the company and are claimed on the CT600. If you’re self-employed, expenses are claimed on your personal self assessment return.

7. Retain all evidence for six years: Store all supporting documentation—receipts, invoices, digital records—for at least six years in case HMRC comes knocking.

📌 Pro Tip: If you spot a missed expense after filing, don’t panic: you can amend your company tax return (CT600) within a year of the deadline and reclaim that tax. Always double-check before the clock runs out.

Make every expense count—and keep more of what you earn

Maximising your limited company tax deductible expenses isn’t just a box-ticking exercise—it’s your best move for boosting profits and staying stress-free when HMRC comes knocking. With smart claims, up-to-date records, and the right advice, you can sleep easy (and maybe afford a nicer coffee machine).

Annual reviews, good habits, and ongoing attention to your company books make all the difference—and so does staying up to date on tax tips.

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