Expenses

Allowable expenses for a UK limited company — what we look for

Every legitimate business expense reduces your Corporation Tax bill by 19-25%. Most underclaiming we see isn't aggressive aggressive interpretation — it's just forgetting the basics: the home-office allowance, business mileage, professional subscriptions. This page is the checklist we walk through with every new client.

By Hannah Pike, ACCA · Last reviewed 20 May 2026

At a glance

  • The £6/week (£312/year) homeworking payment the company can make to you tax-free is the simplest claim most often missed. Saves ~£59/yr in CT. An employee claiming this relief themselves was abolished on 6 April 2026, so the company route is now the only one.
  • Business mileage at 55p/mile (first 10,000) and 25p thereafter is tax-free reimbursement. Track it in real time, not retrospectively.
  • Professional subscriptions, software, training, books — all claimable if they relate to the trade. The 'wholly and exclusively' test is more permissive than people fear.
  • Don't claim: entertainment that isn't staff entertainment, clothing that isn't a uniform or PPE, anything explicitly disallowed by HMRC's lists.

The 11 categories most underclaimed

  1. Home office (£6/week simplified, or proportionate utilities if you have a dedicated room) — £312/yr minimum.
  2. Business mileage (55p first 10k miles, 25p after) — tracked in real time, not estimated.
  3. Phone & internet — claim the business proportion if there's a personal mix; 100% if it's a business-only line.
  4. Professional subscriptions and memberships — ACCA, ICAEW, IT trade bodies, industry-specific.
  5. Software subscriptions — accounting tools, design tools, productivity tools, dev tools.
  6. Training and books — if it relates to your trade or maintains your professional knowledge.
  7. Trivial benefits (gifts under £50 each, up to £300/year for directors) — tax-free if the rules are met.
  8. Staff entertainment (£150 per head per year) — annual event, not client lunches.
  9. Eye tests and glasses (if you use a screen at work) — usually one of the few personal-feeling claims that actually works.
  10. Use of personal vehicle for the company — mileage as above, NOT fuel + insurance + depreciation.
  11. Pension contributions paid by the company — see /methodology/director-salary-2026 — extremely tax-efficient.

The 'wholly and exclusively' test

Section 54 of the Corporation Tax Act 2009 says expenses must be incurred 'wholly and exclusively for the purposes of the trade'. The test is more permissive than people fear — it's about purpose at the moment of incurring the expense, not about whether there's any incidental personal benefit.

Example: a freelance designer buys a high-spec laptop for work. It can also be used for personal browsing. The expense is allowable because the purpose at the moment of purchase was business. Same logic for monitors, desks, ergonomic chairs.

What's not allowable (the common traps)

  • Client entertainment — meals, drinks, hospitality for clients aren't deductible from CT. Staff entertainment is, up to £150/head/year for the annual event.
  • Ordinary clothing — even if you only wear it for work. Uniforms with branding and protective gear are fine.
  • Speeding fines, parking fines — explicit HMRC disallow.
  • First-class travel above what's necessary — HMRC can challenge if it looks excessive.
  • School fees, gym memberships, golf club memberships — even if there's a business networking angle.
  • Capital expenditure mis-coded as expense — laptops over £200 should go through capital allowances, not expense the lot in year one.

How the practice health check applies this rule

When you connect FreeAgent, we read the expenses category and look for two specific signals: (1) any claim with "home" in the description (the home-office allowance), and (2) any claim with "mile" in the description (business mileage). Absent home-office or mileage when there are other expenses on file triggers a "watch" finding nudging you to add the basics. Zero expenses on file at all triggers an "issue" finding — most trading companies should have at least the home-office allowance.

Related methodology

The methodology How we review your books — the 7-point methodology Tax efficiency Optimum director's salary for 2026/27 — the number, the why, the trade-offs

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