What Expenses Can a UK Limited Company Claim?

Information checked: 2 September 2026.

A UK limited company can deduct a cost from its taxable profits where the cost was incurred wholly and exclusively for the purposes of its trade, is revenue rather than capital in nature, and is not specifically disallowed by statute. Client entertaining is disallowed by statute. Equipment purchases are usually capital, with relief given through capital allowances instead. Personal spending on a company card is not an expense at all, whatever account it was paid from.

Paying for something from your company bank account does not automatically make it a business expense. One of the most common mistakes we see is the assumption that if the company card paid for it, the company can claim it. In reality, the treatment depends on what was purchased and why.

The statutory test is stricter than “there was a business reason for it”. A cost must be incurred wholly and exclusively for the purposes of the trade. Where a cost has a genuine private purpose running alongside the business purpose, that duality can defeat the deduction entirely, rather than simply reducing it.

Common limited company expenses

Depending on the nature of the business, allowable costs commonly include:

• Accountancy and certain professional fees
• Business insurance
• Office rent and business premises costs
• Software and subscriptions
• The business proportion of telephone and internet costs
• Advertising, websites and marketing
• Employee salaries, employer National Insurance and employer pension contributions
• Qualifying business travel and accommodation
• Staff training
• Stationery and everyday business costs

Three further categories are worth knowing about, because they are frequently missed rather than frequently misclaimed:

• Mileage in your own car. Where a director or employee uses a personal vehicle for business journeys, the company can reimburse at the approved mileage rates free of tax and National Insurance. The rate for cars and vans rose from 45p to 55p per mile for the first 10,000 business miles in the tax year. The increase was announced on 21 May 2026 and backdated to 6 April 2026, and it is the first change since 2011. The rate above 10,000 miles remains 25p, and the motorcycle, bicycle and passenger rates are unchanged. If mileage for the current tax year has already been processed at 45p, it is worth revisiting.
• One mobile phone. A single mobile phone provided to a director or employee, with the contract in the company’s name, is exempt from a benefit in kind charge even where there is private use. A phone in the individual’s own name with the company paying the bill is treated very differently.
• Pre-trading expenditure. Costs incurred in the seven years before trading begins can generally be treated as incurred on the first day of trade, provided they would have been allowable had the company been trading at the time.

Working from home changed in April 2026, and the change runs in the opposite direction to the mileage increase. Employees can no longer claim tax relief from HMRC for unreimbursed homeworking costs, even where they are contractually required to work from home. What survives is the employer side: where there is a genuine homeworking arrangement, the company can still pay up to £6 a week, or £26 a month, free of tax and National Insurance, or reimburse a higher evidenced amount. For director-run companies this means the claim now has to run through the company rather than the personal tax return.

Business travel and ordinary commuting

Two separate questions get conflated here, and the distinction is worth understanding because it changes the answer.

The first is whether the company gets a deduction. Travel costs paid for staff are a cost of employing them, and the company will usually get relief either way.

The second is whether the payment is taxable on the individual. Travel between home and a permanent workplace is ordinary commuting and is treated as private travel, so reimbursing it is taxable pay subject to PAYE and National Insurance. Travel to a temporary workplace, or to visit a client, is generally not. Clients tend to ask this question in the first form when the tax cost actually sits in the second.

What if you use the company card for personal spending?

A director paying for groceries, a personal holiday, private clothing or another personal purchase from the company bank account does not turn that payment into a tax-deductible expense.

Depending on the circumstances, it may instead need to be recorded through the Director’s Loan Account, treated as remuneration, or accounted for in another way.

Where a cost has both business and private elements and the business part can be clearly and separately identified, it may be possible to deduct that identifiable business proportion. The key word is identifiable. An apportionment that cannot be evidenced is not an apportionment.

Director’s loans: the nine-month habit

In practice, a good number of our clients take more out of the company during the year than salary and declared dividends support, and then clear the balance before the nine-month deadline. Done deliberately, that works. Done by default, it has become more expensive than most directors realise.

If the Director’s Loan Account is overdrawn nine months and one day after the year end, the company pays a section 455 charge on the outstanding balance. For loans made on or after 6 April 2026 that charge is 35.75%, up from 33.75%, because the rate tracks the dividend upper rate, which rose in April 2026. The charge is refundable once the loan is repaid, but only nine months and one day after the end of the accounting period in which repayment happens, so the cash can be tied up for a long time.

Three points that catch people out:

• Mixed balances. Where a running loan account spans 6 April 2026, repayments are generally treated as clearing the oldest advances first unless allocation is documented at the time. That means repayments clear the cheaper 33.75% borrowing before the 35.75% borrowing, which is the wrong way round.
• Repay and redraw. Repaying £5,000 or more and withdrawing a similar amount within 30 days will not usually secure relief, and where the balance exceeds £15,000 and there are arrangements to redraw, relief can be denied outside the 30-day window too.
• Beneficial loan interest. Separately from section 455, a loan balance exceeding £10,000 at any point in the tax year creates a taxable benefit in kind unless interest is paid at the official rate, which is 3.75% for 2026/27. Keeping the balance under £10,000 throughout the year removes the issue entirely.

Clearing the account before the deadline avoids the section 455 charge. It does not, on its own, deal with the other two.

Can you claim client entertaining?

This is a common source of confusion.

Taking a client to lunch or an event may have a genuine commercial purpose, but client entertaining is specifically disallowed when calculating taxable profits for Corporation Tax. The company can pay the bill; it simply does not reduce the tax bill. VAT on client entertainment is normally blocked as well.

Staff entertaining is treated differently. The cost of entertaining employees is generally deductible for the company, and an annual function such as a Christmas party can be exempt from a benefit in kind charge where the total cost is no more than £150 per head per year and the event is open to all employees. Exceed £150 and the whole amount becomes taxable, not just the excess.

The trivial benefits exemption sits alongside this and is separate from it. A non-cash benefit costing £50 or less, not given as a reward for work and not contractual, is exempt from tax and National Insurance with nothing to report. Directors of close companies are capped at £300 of trivial benefits per tax year; other employees have no annual cap.

What about training?

Training for directors and employees is a staff cost, and a company will normally obtain relief for it in the same way as salary. There is a separate question of whether the individual is taxed on it, and the work-related training exemption usually removes that charge where the training is relevant to their role.

This is one area where the rules for companies and sole traders genuinely differ. HMRC’s more restrictive treatment of training that takes a proprietor into a new area applies to unincorporated businesses. Directors of limited companies are sometimes advised as though the same restriction applies to them.

What about computers and equipment?

Purchasing a laptop, machinery or another longer-term asset is not treated in the same way as an ordinary day-to-day cost.

The purchase is likely to be capital expenditure, with relief given through the capital allowances rules instead. The correct treatment depends on the type of asset and how it is used, so “I bought it for the company” does not by itself determine how it is recorded.

Quick reference

Conclusion

A limited company can deduct many genuine business costs, but not every payment leaving the company bank account is an allowable expense.

Particular care is needed where business and personal spending mix, and specifically with Director’s Loan Account movements, travel costs and significant equipment purchases. The loan account is where the cost of getting it wrong has risen most in 2026.

Leon Advisers provides accounting, Corporation Tax, payroll, VAT and annual accounts services for UK limited companies. Contact us if you would like your company’s expenses and accounting records reviewed.

This article provides general information. Whether a particular expense is allowable depends on the nature of the cost and the circumstances of the company. Based on HMRC guidance and legislation in force at the date shown above.