Limited Company Business Expenses – HMRC-Compliant Guide
Prepared by Karia Accountants
This guide explains what a UK limited company can and cannot claim as business expenses.
Across all categories, HMRC applies the “wholly and exclusively for the purposes of the trade” rule. If an expense has a personal element, it must be restricted, apportioned, or treated separately (for example as a benefit in kind or via the director’s loan account).
On this page
Car, van and travel expenses as a limited company →
Accommodation costs and expenses whilst on business travel →
Accountancy fee expenses for limited companies →
Bank, credit card and other financial charges →
Charitable donations as a limited company →
Childcare costs and expenses →
Christmas party and staff event expenses through your limited company →
Equipment expenses for your limited company →
Eye tests and glasses or spectacles →
General office costs and purchases for your limited company →
Gifts and trivial benefits from your limited company →
Legal and other professional fees →
Medical insurance (Healthcare) expenses through your limited company →
Mobile phone, landline and broadband expenses as a limited company →
Pension payments through your limited company →
Travel and subsistence expenses as a limited company →
Training expenses through your limited company →
Use of your home as an office when you’re a limited company →
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Business mileage expenses (using your own vehicle)
When a director or employee uses their own vehicle for business journeys, the company can reimburse mileage using HMRC’s Approved Mileage Allowance Payments (AMAPs).
HMRC mileage rates (cars and vans):
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45p per mile for the first 10,000 business miles in the tax year
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25p per mile for business miles above 10,000
Allowable example:
A director drives 12,000 business miles in the year. The company reimburses £5,000 (10,000 × 45p + 2,000 × 25p).
What is not acceptable:
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Claiming home-to-office travel where the office is a permanent workplace
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Guessing mileage with no log
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Claiming mileage for personal or mixed-purpose journeys without restriction
Mileage records must show the date, journey, miles travelled, and business purpose.
Car, van and general travel expenses
Business travel costs are normally allowable where they are incurred solely for business and are not ordinary commuting.
Allowable examples:
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Train or taxi fares to visit clients
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Parking and tolls on business trips
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Hire cars used for business journeys
What is not acceptable:
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Normal commuting between home and a permanent workplace
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Parking fines or penalties
Travel costs connected to client entertaining
Accommodation costs while on business travel
Overnight accommodation can be claimed when staying away from home is necessary for business.
Allowable example:
Hotel stay for a multi-day client engagement where daily travel home would be impractical.
What is not acceptable:
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Luxury or excessive accommodation not justified by business need
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Costs for family members staying with you
Accommodation that is effectively part of a holiday
Accountancy fees
Accountancy and compliance costs incurred for the company are generally allowable.
Allowable example:
Fees paid to Karia Accountants for company accounts, corporation tax, VAT, and payroll services.
What is not acceptable:
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Personal tax or legal fees unrelated to the company
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Private disputes or personal advice pushed through company accounts
Advertising and marketing
Marketing costs incurred to promote the company’s trade are normally allowable.
Allowable examples:
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Website hosting and design
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Google or social media advertising
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Business cards and brochures
What is not acceptable:
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Personal branding costs with no clear business purpose
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Hospitality or entertainment incorrectly classed as marketing
Bank, credit card and financial charges
Business banking costs are usually allowable.
Allowable examples:
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Business bank account fees
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Card processing charges (e.g. Stripe)
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Interest on business borrowing
What is not acceptable:
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Repayment of loan capital
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Interest on personal loans or overdrafts not linked to the business
Business insurance
Insurance taken out specifically for the business is generally allowable.
Allowable examples:
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Professional indemnity insurance
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Public or employer’s liability insurance
What is not acceptable:
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Personal insurance policies claimed through the company
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Mixed policies where the business element is not identifiable
Charitable donations by a limited company
Companies can obtain corporation tax relief for qualifying charitable donations, subject to conditions.
Allowable example:
Cash donation to a registered UK charity, properly documented.
What is not acceptable:
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Payments that are effectively loans
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Conditional donations
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Payments that resemble profit distributions
Childcare costs
Childcare is normally a personal cost and not incurred wholly and exclusively for the company.
Not acceptable:
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Nursery fees, childminders, or after-school clubs charged to the company
Christmas parties and staff events
Staff events may qualify for the annual function exemption.
Key rule:
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Maximum £150 per head (including VAT) per tax year
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If the limit is exceeded, the entire amount becomes taxable
Allowable example:
Annual staff Christmas party costing £120 per attendee.
What is not acceptable:
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Treating £150 as an “allowance” rather than a strict cap
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Events mainly for clients
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Director-only events (unless all staff are directors)
Entertainment expenses
Client entertainment is generally not allowable for corporation tax purposes.
Not allowable examples:
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Client meals and drinks
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Hospitality tickets
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Events for prospects
These should still be recorded in the accounts but flagged as disallowable.
Equipment expenses
Equipment required for the business can be allowable, depending on the nature of the item.
Allowable examples:
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Office furniture
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Tools required for the trade
What is not acceptable:
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Personal items dressed up as business equipment
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Assets with substantial private use and no restriction
Eye tests and glasses
Certain eye care costs can be exempt where required for screen work.
Allowable example:
Company pays for a screen-related eye test and provides glasses needed specifically for VDU use.
What is not acceptable:
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General prescription glasses for everyday use
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Eye care costs not meeting the exemption conditions
Computers and other fixed assets
Laptops and similar items are usually treated as capital assets.
Allowable example:
£1,200 laptop used for business and claimed via capital allowances.
What is not acceptable:
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Claiming full relief for mainly personal assets
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Failing to account properly when assets are sold or scrapped
General office costs
Routine office running costs are normally allowable.
Allowable examples:
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Stationery and printer ink
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Postage
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Small consumables
What is not acceptable:
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Household groceries
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Home furniture with no business function
Gifts and trivial benefits
A trivial benefit must:
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Cost £50 or less
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Not be cash or a cash equivalent
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Not be contractual or performance-related
Director limit (close companies):
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Maximum £300 per tax year (often understood as £50 × 6)
Allowable example:
Six non-cash gifts of £50 or less in a tax year.
What is not acceptable:
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Cash or general gift cards
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Gifts costing more than £50
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Rewards linked to performance
Legal and professional fees
Professional fees incurred for business purposes are generally allowable.
Allowable examples:
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Solicitor fees for commercial contracts
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HR and regulatory advice
What is not acceptable:
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Personal legal disputes
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Private property or family matters
Medical insurance
Private medical insurance is usually a benefit in kind.
Typical treatment:
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Company may deduct the cost
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Director/employee is taxed on the benefit
What is not acceptable:
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Treating private healthcare as a normal expense with no benefit reporting
Mobile phone, landline and broadband
Mobile phones:
One mobile phone per employee can be exempt if structured correctly.
Allowable example:
Company contract in company name for one handset for the director.
What is not acceptable:
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Paying personal phone contracts without review
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Multiple phones treated as exempt without justification
Broadband:
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If already in place at home, only the business portion is usually claimable
Pension contributions
Employer pension contributions are generally allowable if properly structured, allowed up to £60,000 per person per annum
Allowable example:
Company pays £500 per month into the director’s SIPP as an employer contribution.
What is not acceptable:
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Treating personal contributions as employer contributions
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Large contributions with no documentation or rationale
Professional subscriptions
Subscriptions may be allowable where they relate to the role and are HMRC-approved.
Allowable example:
Subscription to an approved professional body relevant to the work.
What is not acceptable:
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Gym or social club memberships
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Subscriptions unrelated to the business
Salaries
Salaries paid through payroll are normally allowable.
Allowable example:
Director salary processed via PAYE with RTI submissions.
What is not acceptable:
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Paying “salary” with no payroll
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Paying family members with no genuine work or excessive pay
Travel and subsistence
Meals may be allowable when incurred due to qualifying business travel.
Allowable example:
Lunch purchased during a business trip to another city.
What is not acceptable:
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Regular lunches near the normal workplace
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Meals linked to client entertaining
Training expenses
Training is more likely allowable when it updates existing skills.
Allowable example:
Software training relevant to the current business.
What is not acceptable:
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Training that creates a new trade or profession
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Courses with a strong personal element
Use of home as an office
Flat rate method:
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£6 per week (£26 per month) paid by the company
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No calculations required
Actual cost method:
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Fair and reasonable apportionment of household costs
What is not acceptable:
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Claiming homeworking costs without evidence of regular homeworking
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Claiming large proportions of household costs without justification
Final note from Karia Accountants
Incorrect expense claims are a common HMRC enquiry trigger. Getting the classification, evidence, and tax treatment right is essential.
If you are unsure whether an expense is allowable, it is always safer to check first.