Which limited company expenses are tax-deductible?

You will incur various costs each year when you run your limited company.

This guide explains which expenses are tax-deductible and can be offset against your company’s Corporation Tax bill.

Company expenses – in a nutshell

Allowable expenses reduce your company’s profits and, therefore, the amount of Corporation Tax it pays.

Expenses are either paid directly by the company or reimbursed to employees who pay out of pocket for business-related costs.

Many expenses are rejected not because they are unreasonable, but because they fail the “wholly and exclusively” test in practice.

S54 Corporation Tax Act 2009 prevents a taxpayer deducting expenditure in computing their trading profits unless it is incurred wholly and exclusively for the purposes of the trade, profession or vocation.

HMRC most often challenges expenses that have a personal element (a ‘dual purpose’), are paid from personal accounts without supporting records, or are claimed inconsistently from year to year.

Typical limited company expenses

Here are some of the most common limited company expenses, with links to further sources of information.

Accommodation

If you need to leave your permanent residence while on business, reasonable accommodation costs are allowable.

Advertising, Marketing, PR

The costs of promoting your business – both expenses relating to professional services provided, plus any material costs, such as producing promotional literature.

Annual Staff Event

The cost of a regular company event, such as a Christmas party, may qualify for the annual function exemption. The exemption is worth up to £150 per attendee, including VAT, and can cover one event or several annual events within the limit. If the limit is exceeded, the exemption does not apply to that event, although the cost will generally still be deductible by the company for Corporation Tax purposes. See EIM21690.

Bank Charges

Any charges or interest related to financial accounts in the company’s name.

Broadband

Business broadband costs can be allowable, but the tax treatment depends on how the broadband is set up and who pays the bill. Read our full guide to broadband expenses here.

Business Gifts

You can claim for business gifts costing up to £50 per person per tax year. This must be a genuine business gift advertising your company and not food, alcohol, tobacco (or an exchangeable voucher).

Charity donations and sponsorship

You can make donations via your company. However, these sums are not treated as ‘business expenses’, as you receive no benefit in return.

Qualifying charitable donations can, however, be deducted when calculating your company’s taxable profits.

If you decide to sponsor a team or similar initiative and your company receives something in return (e.g., publicity), those costs can be treated as business expenses where the sponsorship has a genuine business purpose.

Find out more in our guide to charitable donations and sponsorships.

Clothing

For obvious reasons, everyday clothing is not usually tax-deductible.

However, if you require specific clothing (such as a uniform) during the running of your business, this can be claimed, as can protective workplace clothing.

Company Formation

The incorporation cost is not eligible, as it is a one-off capital expense, not a ‘revenue’ expense.

The company can reimburse the person who paid the formation cost, but it cannot be offset against the company’s Corporation Tax bill.

Computer / Internet Software

Business-related software and subscriptions are generally allowable. Read our dedicated guide here.

This includes cloud-based software and subscription services such as accounting software, CRM platforms, project management tools, AI writing or coding tools, cybersecurity software, password managers, and cloud storage services, provided they are used wholly for business purposes.

Website, hosting and domain costs

Website costs don’t all receive the same tax treatment, so it is important to keep a record of what your company has actually paid for.

Everyday costs such as hosting, domain fees, maintenance and routine updates can normally be deducted from your company’s profits.

Building a new website, or making a major upgrade to an existing one, may be treated as capital expenditure if the work creates a longer-term asset for the business.

Employers’ National Insurance

Unsurprisingly, any Employers’ NICs your company is liable to pay on employees’ salaries are allowable. This payroll tax applies to salaries at a rate of 15% above the prevailing Secondary Threshold (£5,000 in 2026/27).

Entertainment

The cost of entertaining clients is not tax-deductible. Staff entertaining is treated differently – see ‘Annual Staff Event’ above.

Equipment (Plant and Machinery Costs)

You can offset the cost of qualifying equipment purchases against your tax bill. This is known as capital expenditure.

The tax treatment of such expenses is governed by capital allowances. The Annual Investment Allowance currently allows 100% relief on qualifying expenditure up to £1 million per year, and certain items may qualify for first-year allowances.

Also, read our guide to the tax treatment of standard computer hardware and software.

Food & Drink

If you travel from home to a qualifying temporary workplace, you can claim reasonable food and drink expenses.

Business Insurance

Many companies take out employers’ and public liability insurance, and professional indemnity cover. Business insurance taken out for the purposes of the trade is generally a legitimate business cost.

Life Insurance

Relevant life insurance allows a limited company to provide life cover for a director or employee, with the company paying the premiums. Find out more here.

Income Protection Insurance

You can also offset the cost of an executive income protection policy against your Corporation Tax bill, subject to the usual conditions, although the payments themselves (should you make a claim) will be taxable.

Medical Health Check / Eye Tests

The company can provide one health screening assessment and one medical check-up per employee per tax year without a benefit in kind arising, provided the conditions are met.

If a company employee uses computer equipment, the cost of a qualifying eye test can also be an allowable expense.

You can also claim the cost of glasses or contact lenses where they are needed specifically for screen-related activities at the workplace, rather than for general use.

Find out more about health and medical expenses in our dedicated guide.

Mileage

If you use your own vehicle for business, you can claim HMRC’s standard mileage rates – currently 45p/mile for the first 10,000 business miles and 25p per mile thereafter. Motorbikes are 24p per mile, and bicycles are 20p per mile.

See the official rates page.

Office Costs

If your company rents an office, the rent, utilities, and any other related costs are allowable.

If you work from home, your company can normally pay you £6 per week without requiring evidence of the additional household costs, provided the homeworking conditions are met. Claims based on actual household costs are subject to different rules. See EIM01476.

Pension Contributions

Company contributions made to a registered pension scheme are usually allowable, subject to the normal rules. Our guide to making employers’ contributions to a pension explains this.

Landline, mobile and smartphone costs

A company can provide a director or employee with a mobile phone without a benefit in kind arising where the relevant conditions are met. If you use a personally owned phone, you can generally reclaim the cost of identifiable business calls. Read our full guide to phone expenses here.

Private Medical Insurance

Company-paid private medical insurance is generally an allowable business expense for Corporation Tax purposes, but it is normally treated as a taxable benefit in kind for the director or employee.

Read our guide to private medical insurance for more information on the tax treatment.

Pre-Trading Costs

You may incur some costs before your limited company starts trading. Qualifying pre-trading costs can be claimed from up to 7 years before the company starts to trade.

If you register for VAT, you may also be able to reclaim VAT paid before registration. The timescales are shorter – generally up to 6 months for services and up to 4 years for goods, subject to the pre-registration VAT rules. Find out more in this dedicated guide.

Professional Fees

The cost of hiring professionals to help with various aspects of running your company, such as accountants and solicitors. This also covers the cost of hiring any other company on a business-to-business contract.

Professional Memberships / Subscriptions

The company can normally pay for professional subscriptions where they are incurred for the purposes of the business. Different rules apply where an employee or director pays personally and claims tax relief, including whether the organisation appears on HMRC’s approved list.

You can also claim the cost of subscribing to trade magazines and journals where they are relevant to the business. Read our dedicated guide to the tax treatment of professional subscriptions.

Recruitment Costs

Costs associated with recruiting staff, including job advertising, recruitment agency fees, and background checks, are allowable business expenses.

Research & Development

Companies undertaking qualifying R&D activities may be eligible for R&D tax relief. This is a specialist area, so consult with your accountant if you believe your work may qualify.

Salaries / Wages

The cost of paying staff (and directors) is offset against your company’s profits. Read our guide to setting the most tax-efficient director’s salaries here.

Stationery, Printing, Postage

These are all allowable expenses, as long as the costs are directly related to your business.

Subcontractor Costs

Payments to freelancers and subcontractors for business services are allowable expenses. Ensure you have proper contracts and invoices in place, and be aware of IR35 rules if engaging individuals through personal service companies.

Training Courses

Training-related costs can be allowable where the training is work-related and relevant to the director or employee’s duties.

This can include learning new skills where they are likely to prove useful in the person’s work. Read our guide to training expenses.

Travel Expenses

The cost of qualifying business travel is an allowable expense. You can also reclaim the costs of congestion charges, tolls and parking fees incurred on qualifying business journeys.

If, as a contractor, for example, you travel to a temporary workplace, the 24-month rule may restrict the expenses you can claim. Relief stops once you know that your period of significant attendance at the workplace is expected to exceed 24 months. See our dedicated guide to the 24-month rule.

Loan interest and finance costs

Interest on business loans, overdrafts, and finance agreements is generally allowable, provided the borrowing is wholly for business purposes.

Arrangement fees and professional fees related to securing finance are also typically deductible.

Bad Debts

You can claim relief for trade debts that have become irrecoverable, provided the debt was included in your taxable income, and you’ve taken reasonable steps to recover it.

‘Trivial Benefits’

You can provide staff with small benefits worth up to £50 at a time (and not a penny more), without treating them as ‘benefits in kind’, provided the other conditions for the exemption are met.

These might include store gift cards, a hamper, wine, or chocolates. Under rules introduced in April 2016, a director of a close company is subject to an annual cap of £300.

Non-allowable expenses

Certain expenses are specifically not allowable for Corporation Tax relief, including:

• Fines and penalties – Including parking fines, tax penalties, and regulatory fines.
• Client entertainment – Business entertaining of clients is generally not deductible. Staff entertaining is subject to different rules.
• Costs with dual purpose – Expenses that cannot be separated between business and personal use.
• Political donations – Unlike qualifying charitable donations, these do not generally receive Corporation Tax relief.

How are disallowable expenses treated?

Expenses with a ‘duality of purpose’, i.e. which have a personal and business element, are not generally allowable.

And if your company pays for something which provides a private benefit to an employee or director, it may be treated as a taxable benefit in kind.

Depending on the type of benefit:

• The company may have to pay Class 1A National Insurance Contributions at 15% on the taxable value of the benefit.
• The employee or director may have to pay income tax on the value of the benefit.

A summary of HMRC rules

• To be allowable for Corporation Tax, an expense must be incurred wholly and exclusively for business purposes.
• The cost should be supported by records or receipts.
• Capital items are not normally treated as day-to-day expenses but may qualify for relief under capital allowances.
• If an expense provides a private benefit, it may need to be reported and taxed as a benefit in kind.

If you have any questions about expenses, please chat with your accountant. Although we have taken great care in compiling this guide, the information should be used only as a reference.