What business expenses can Limited Companies claim?

Operating through a limited company in the UK offers numerous advantages, including limited liability and potential tax benefits. One of the significant advantages is the ability to claim various business expenses as tax-deductible, thereby reducing your taxable profit and ultimately the amount of Corporation Tax you owe. Understanding what qualifies as a tax-deductible expense is important for ensuring your company remains tax-efficient and compliant with HMRC regulations. This guide provides an in-depth look at the key tax-deductible limited company expenses in the UK.

Tax-deductible expenses are the costs a business can subtract from its income to lower its taxable profit. For example, if your revenue is £35,000 and your allowable expenses total £5,000, you'll be taxed on £30,000. For an expense to be deductible, it must be "wholly and exclusively" for the business. If an expense is both for personal and business use, you can only claim the business part.

Knowing which expenses qualify as allowable is essential to ensure compliance with HMRC regulations and make the most of available tax reliefs.

Claiming Limited Company Expenses: Key Rules

Understanding the rules for what counts as a deductible expense is important for managing your limited company’s finances effectively. Here are the key rules to keep in mind:

1. Wholly and Exclusively for Business: You can only claim expenses incurred wholly and exclusively during the everyday running of your business. For example, if you buy office supplies solely for business use, you can claim the full cost as a deductible expense.
2. ‍Avoiding Dual-Purpose Expenses: You can’t claim expenses that have a dual purpose for business and personal use. For example, if you extend a business trip abroad for leisure purposes, you can only claim expenses for the business days, not the additional leisure days.
3. Proper Payment Method: Business expenses can be paid through your company’s business bank account, or you can reclaim the costs of business expenses paid by you and later reimbursed via your company. For example, if you pay for a business lunch with a client using your personal funds, you can reimburse yourself from the company’s bank account later.
4. Offsetting Against Corporation Tax: Most limited company expenses can be offset against your company’s Corporation Tax liability, with some exceptions like business entertainment. For example, office rent is a deductible expense that can be offset against Corporation Tax, whereas taking clients out for entertainment is not deductible.
5. Record Keeping: Keep detailed records of all expenses, including receipts, invoices, and bank statements. Maintain an accurate record of pre-formation and running costs, including VAT receipts. Keep receipts for office supplies and travel tickets so you can justify these expenses if HMRC queries them.
6. Necessary and Reasonable: Expenses should be necessary for business operations and reasonable in amount. For example, a company laptop for business use is necessary and reasonable, whereas a luxury watch would not be.
7. Proper Classification: Correctly categorise expenses to ensure they are claimed appropriately. Classify a business lunch under 'meals and entertainment' and office rent under 'office costs'.
8. Timing: Claim expenses in the correct accounting period. If you incur a business expense in March but pay it in April, it should be claimed in the March accounting period.

Need Expert Advice on Your Business Expenses?

1. Speak to a qualified business accountant to ensure your expense claims are tax-efficient and HMRC-compliant
2. Book a free consultation to review your limited company’s expense policy
3. Get support on claiming pre-trading expenses, VAT deductions, and more

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As a limited company director, you want to run your business in the most tax-efficient way possible.

One way to achieve this is to correctly claim allowable business expenses so that you don't have to pay more tax than you are legally obliged to.

We'll run through the different expenses you can claim as a limited company director:

1. Employee Expenses

2. Business Travel Expenses

3. Office Expenses

4. Mobile Phone, Landline and Broadband Expenses

5. Professional Services Expenses

6. Financial and Legal Expenses

7. Marketing, Advertising and PR Costs

8. Professional Development Expenses

9. Eye Test Expenses and Glasses

10. Books, Journals and Magazines

11. Website Development Costs

12. Donations

1. Employee Expenses

Allowable Employee Expenses List:

Employee or staffing expenses refer to the costs related to employing and supporting the workforce within the business. Some examples of allowable staffing expenses include:

1.1 Salary and National Insurance

Salaries paid to directors and employees are allowable business expenses

1. Your company can also claim employer’s National Insurance Contributions (NICs) as a deductible expense
2. If your salary exceeds the annual NIC threshold, you’ll need to pay Class 1 employee NICs, and the company pays Class 1 employer NICs
3. These must be processed through the PAYE payroll system

1.2 Staff Entertainment (e.g. Christmas Party)

You can claim the cost of an annual staff event (such as a Christmas party), provided the following HMRC conditions are met:

1. The cost does not exceed £150 per head (including VAT) across all annual events
2. The event is primarily for employee entertainment
3. The event is open to all employees or all employees at a particular location
4. Employees can bring a guest, meaning the total budget may reach £300 for two people
5. If the cost per head exceeds £150, the entire amount becomes taxable, not just the excess

This is a per-tax-year exemption, so multiple events can be claimed if their combined cost stays within the £150 threshold

1.3 Lunch and Subsistence Expenses

You can reimburse employees for reasonable subsistence costs when they are travelling or working away from their usual place of work

Examples of allowable expenses:

1. Lunch during client visits or business travel
2. Meals on overnight business trips
3. Light refreshments purchased during meetings or site work

These must be incidental and business-related — routine lunches at the employee’s usual place of work are not claimable

1.4 Gifts and Trivial Benefits

‍You're not required to pay tax and National Insurance contributions, nor notify HMRC about gifts or trivial benefits for an employee if it meets the following conditions:

1. The cost of the benefit is £50 or less
2. It is not cash or a cash voucher
3. It is not performance-related or a reward for work
4. It is not contractual or part of a salary sacrifice
5. The total value of trivial benefits provided to a director or office holder does not exceed £300 in a tax year

If these conditions are not met, the benefit becomes taxable and must be reported on a P11D or processed through payroll.‍

1.5 Healthcare Expenses

If you provide private medical insurance for an employee, it is treated as a benefit in kind. You must pay Class 1A National Insurance contributions at 15% for the 2025/26 tax year, while the employee will pay income tax on the value of the benefit

Since 6 April 2023, employers have also been required to pay a separate Health and Social Care Levy of 1.25%. This levy applies to employee earnings, including those of individuals above state pension age. However, existing reliefs continue to apply for apprentices under 25 and employees under 21 earning less than £50,270 per year

While National Insurance rates have increased, the threshold at which contributions become payable has also risen. This helps to reduce the overall cost or offset some of the additional liability for both employer and employee

Certain health benefits are exempt from tax and National Insurance, meaning there is no need to report them to HMRC. These include:
- One annual medical check-up or health screening
- Medical insurance or treatment provided to an employee working overseas‍‍‍

1.6 Pension Contributions

‍Once you’ve set up an agreement with a pension provider, you can begin contributing to your pension and benefit from 100% tax relief as an allowable business expense

For the 2025/26 tax year:

1. The annual allowance remains at £60,000
2. This covers all your pension contributions across personal and workplace schemes
3. Contributions above this limit may be subject to a tax charge

Additional considerations:

1. If your threshold income exceeds £200,000 and your adjusted income exceeds £260,000, your annual allowance is tapered down by £1 for every £2 over the £260,000 limit, to a minimum of £10,000
2. If you've accessed your pension flexibly, the Money Purchase Annual Allowance (MPAA) applies, reducing your contribution limit to £10,000
3. You can carry forward unused allowance from the previous three tax years, provided you were a member of a registered pension scheme in those years
4. Personal contributions attract tax relief up to 100% of UK earnings or £3,600, whichever is higher
5. The Lifetime Allowance was abolished from 6 April 2024, removing the cap on total pension savings

Pension decisions can be complex and may have long-term implications. We recommend speaking with a qualified financial advisor before making contributions

2. Travel Expenses

Your limited company can reimburse you for certain travel-related costs, provided the journey is made wholly, exclusively and necessarily for business purposes. Personal or commuting travel does not qualify for tax relief.

2.1 Limited Company Mileage Allowance

If you use your personal vehicle for business travel, your company can reimburse you using HMRC's approved mileage rates. These rates cover fuel, wear and tear, and general running costs

HMRC-approved mileage rates for 2025/26:

1. 45p per mile for the first 10,000 miles (cars and vans)
2. 25p per mile after 10,000 miles
3. 24p per mile for motorcycles
4. 20p per mile for bicycles

Qualifying journeys include:

1. Travel between two different workplaces for the same job
2. Travel from home to a client or temporary workplace
3. Business travel to attend meetings or perform services away from your normal place of work
4. Deliveries or site visits

Important notes:

1. Journeys between home and your regular office are classed as ordinary commuting and are not allowable
2. You must retain a mileage log with journey dates, locations, purpose and distance
3. If your company owns the vehicle, you may not claim mileage – only the actual costs of fuel and running expenses, and you may be liable for Benefit in Kind tax on private use

You can claim the following rates:

‍Note: You can only claim the cost of fuel if your company owns the car.

2.2 Business Travel Expenses

You can also claim for other business-related travel costs, as long as the travel is not part of your regular commute and is directly linked to your company’s operations

Allowable expenses include:

1. Public transport fares (train, bus, coach, underground)
2. Taxis or ride-hailing services (e.g. Uber) for business journeys
3. Airfare and ferry tickets for work-related travel
4. Hotel or serviced accommodation for overnight stays
5. Meals incurred as part of an overnight business trip
6. Parking fees, tolls and congestion charges
7. Vehicle running costs if not claiming mileage (fuel, servicing, insurance – only where directly attributable to business use)

Non-allowable travel includes:

1. Commuting from home to a permanent workplace
2. Any personal portion of a mixed-purpose journey
3. Meals or accommodation when no overnight stay is involved

3. Office Expenses

This section outlines what your limited company can claim for office-related costs — whether you're working from home or operating from a dedicated business space. Claims must be wholly, exclusively and necessarily for business purposes.

3.1 Use of Home as Office - Limited Company

3.1.1 Claiming a Flat Rate

If you work from home, HMRC allows you to claim £6 per week (equivalent to £312 per year) as a flat-rate expense without the need for receipts

1. This is not treated as a benefit in kind
2. No personal tax or National Insurance applies
3. It's ideal for directors with minimal home office use or those preferring simplicity

3.1.2 Apportionment of Household Costs

If you use a room in your home regularly and substantially for business, you may claim a proportion of household bills. This approach can be more accurate than the flat rate, but requires supporting records

Allowable expenses include:

1. Utilities such as electricity, gas and water
2. Broadband and telephone services
3. Rent (if you’re renting your home)

Note: Council tax and mortgage interest are only claimable if you're self-employed, not through a limited company. Mortgage capital repayments are not allowable under any structure

To calculate the business use:

1. Count the number of rooms in your home
2. Identify how many are used for business
3. Estimate the proportion of time the room is used for work
4. Apply this percentage to the relevant household costs

Example: 1 business-use room in a 5-room home, used 50% of the time → 10% of eligible household bills

3.1.3 Rental Agreement Requirement

If you wish to claim apportioned expenses via your limited company:

1. A formal rental agreement must be in place between you (as homeowner) and your company
2. Rent should reflect the market value for the space used
3. Rental income must be reported on your Self Assessment, but can be offset by allowable costs
4. Without a formal agreement, payments from the company may be treated as a benefit in kind, triggering additional tax

The rules can be complicated, so we recommend consulting an accountant before you set up a rental agreement.

3.2 General Office and Stationery Expenses

These are everyday costs that help you run your business and are immediately deductible in full

Examples include:

1. Postage and courier services
2. Stationery and general office supplies
3. Printer ink and consumables
4. Books, journals or subscriptions relevant to your business
5. Software subscriptions (e.g. Microsoft 365, Xero)
6. Accountancy and bookkeeping fees
7. Business banking and transaction charges
8. Business telephone and broadband (pro-rated if shared with personal use)

All items must be used exclusively for business; personal use should be excluded from claims

3.3 Office Equipment and Furnishings

Higher-value or longer-lasting items used in your business can be claimed as capital assets under Annual Investment Allowance (AIA) or Full Expensing, rather than as everyday expenses

Examples include:

1. Laptops, monitors, printers and accessories
2. Office chairs, desks and shelving
3. Perpetual software licences or multi-year purchases
4. Mobile phones used solely for business

Assets must be used wholly for business purposes. Where personal use is involved, only a business proportion may be claimed

3.4 Plant and Machinery

This covers more substantial or operational equipment used in the delivery of services, manufacturing or trade, beyond standard office functions

Examples include:

1. Tools and machinery for construction or manufacturing
2. Vehicles used solely for business (excluding cars unless fully electric and compliant)
3. Equipment used in workshops or warehouses
4. Heavy-duty computing or technical systems

From 1 April 2023, the previous 130% super-deduction and 50% first-year allowance ended. These applied only to corporation tax-paying companies and are no longer available in 2025/26

For the current tax year:

1. Businesses can claim 100% tax relief under the Annual Investment Allowance (AIA) — up to £1 million annually
2. Full Expensing is available for new and unused main rate assets
3. Writing Down Allowances (WDA) apply where AIA or full expensing is not claimed

Claims must be supported with purchase documentation and proper accounting treatment

4. Phone Bills and Broadband Expenses

4.1 Mobile Phone Expenses

If the contract is in the company’s name

1. The full cost of the mobile phone bill can be claimed as a business expense
2. There must be no significant personal use to avoid triggering a benefit-in-kind
3. No benefit-in-kind arises where the mobile contract is used strictly for business and provided to an employee or director

If the contract is personal

1. You can only claim the cost of individual business calls
2. These must be clearly identifiable, and itemised bills are required as evidence
3. You may also reclaim the VAT on the business element if you’re VAT registered

Further information is available in our guide to claiming mobile phone expenses when self-employed.

4.2 Landline Expenses

Business-only landline

1. If the contract is in the company’s name and used exclusively for work, the full cost is an allowable expense

Personal landline with business use

1. You may claim the cost of identifiable business calls
2. You must retain itemised phone records as evidence
3. Line rental or inclusive minutes are not deductible unless the phone is used exclusively for business

4.3 Broadband Expenses

Broadband contract in the company’s name

1. If the connection is used wholly and exclusively for business, you may claim the full cost
2. If there is any significant personal use, it will trigger a benefit-in-kind charge, and the company must report it via PAYE or a P11D

Broadband contract in your personal name

1. You may claim the business-use proportion of your broadband costs
2. You’ll need to show how usage is split between business and personal (e.g. based on working hours or bandwidth use)
3. Claims should be reasonable and evidence-based (such as a log of working days or itemised usage)

5. Professional Services Expenses

5.1 Business Insurance

Insurance premiums are fully deductible as business expenses when the policy is directly related to business activities

Common allowable policies include:

• Professional indemnity insurance – protecting against claims of negligence or errors
• Public liability insurance – covering injury or damage claims from third parties
• Employer’s liability insurance – mandatory if you employ staff
• Business contents insurance – protecting equipment, stock or office furniture

Note: Personal insurance policies or those covering non-business activities are not allowable.

5.2 Company Formation Costs

The initial costs of forming and setting up your company are also generally allowable

These may include:

• Company registration fees with Companies House
• Fees paid to an accountant, solicitor or formation agent
• Printing and postage related to incorporation
• Purchase of domain names, business software or digital tools essential for a startup
• Basic office supplies or equipment required to commence trading

While some capital items (e.g. laptops, furniture) may fall under capital expenditure, many of these costs are still deductible via Annual Investment Allowance (AIA) in the year of purchase.

6. Financial and Legal Expenses

6.1 Professional Fees Expense

You can claim costs for professional services if they are wholly and exclusively for business use

Allowable examples include:

1. Accountancy and bookkeeping services
2. Legal advice relating to business contracts or disputes
3. Architect or surveyor fees for business premises or projects

Personal legal fees or services unrelated to business are not allowable.

6.2 Bank, Credit Card and Other Financial Costs

You can claim the following financial costs as business expenses:

1. Business bank account charges
2. Credit card transaction fees
3. Overdraft interest
4. Loan interest (if the loan was taken for business purposes)

Repayments of loan capital or personal finance costs are not allowable.

6.3 Bad Debts (e.g. Unpaid Invoices)

If you've invoiced a customer and are certain you won’t receive payment, you can claim the amount as a bad debt expense

To claim:

• The unpaid amount must have been previously included in your company’s turnover
• You must have taken reasonable steps to recover the amount
• The debt must be written off in your accounts

You cannot claim for late payments or debts that are simply overdue

7. Marketing, Advertising and PR Costs

Marketing expenses are allowable if they directly promote your business and are not excessive or personal in nature

Common examples include:

1. Website creation and development costs
2. Hosting fees and domain name registrations
3. Online advertising (e.g. Google Ads, LinkedIn)
4. Print advertising (e.g. flyers, newspapers)
5. PR agency or freelance marketing consultant fees

Entertaining clients or hospitality for promotional purposes is not an allowable marketing cost

8. Training and Professional Development

You can claim training costs if they maintain or improve the skills you use in your existing trade

8.1 Training Courses

Claimable if:

• The course enhances your current skills or supports your existing role
• It is not aimed at learning a new trade or entering a new market

Not allowable:

• Courses for a new qualification unrelated to your current business activity
• Courses intended to help you change profession

8.2 Professional Subscriptions

You can claim the cost of memberships or subscriptions if:

• The organisation is HMRC-approved (see their list of professional bodies)
• The subscription is relevant to your business activity

9. Eye Test Expenses and Glasses

You may claim for the cost of an eye test if you regularly use screen-based equipment (e.g. computers) for work

You may also claim for glasses or contact lenses if:

1. They are specifically prescribed for VDU (visual display unit) use
2. They are not for general everyday use

10. Books, Journals and Magazines

You may claim for business-relevant reading materials such as:

• Trade journals
• Industry magazines
• Specialist publications related to your services or sector

The content must directly support your business knowledge or decision-making. Lifestyle or unrelated publications are not claimable.

11. Website Development Costs

You may claim website development costs as a business expense if the site is used to generate or support income

Allowable elements include:

• Design and development fees
• Hosting and maintenance
• Content creation (copywriting, photography, SEO)

If the website has a long-term value to the business, these costs may be treated as capital expenditure and written off over time.

It is always good to speak to your accountant to determine eligibility.

12. Donations

Donations are not allowable expenses against trading profits but can reduce your Corporation Tax liability when given to registered UK charities

You may deduct donations of:

• Cash
• Equipment or trading stock
• Land, property or shares (excluding your own company’s shares)
• Employee time (e.g. secondment)
• Sponsorship payments (if commercial in nature

Using limited company expenses offers several advantages for businesses. Here are some key benefits:

1. Reduced Taxable Profits

Claiming allowable business expenses reduces your company's taxable profit, which directly lowers your Corporation Tax liability. This can lead to significant tax savings and more funds available for reinvestment in your business.

2. Enhanced Cash Flow

By claiming expenses, you can improve your company’s cash flow. Money spent on allowable business expenses reduces your overall tax liability, freeing up cash that can be used for other essential business activities. This improved cash flow can help in managing day-to-day operations, funding growth initiatives, and ensuring financial stability.

3. Maximising Profitability

Properly managing and claiming expenses ensures that your business retains as much profit as possible. By effectively reducing the taxable amount, you increase the net profit that can be distributed to shareholders or reinvested in the company. This maximisation of profitability is crucial for the long-term success and growth of your business.

4. Legitimate Cost Recovery

Running a business incurs various costs, from office supplies to travel expenses. Claiming these costs as business expenses allows you to recover some of these expenditures legitimately. This means you can operate more efficiently, knowing that the costs incurred in running your business can be offset against your tax bill.

5. Improved Financial Planning

By keeping a detailed record of all business expenses, you can gain better insights into your company's spending patterns. This detailed record-keeping aids in more accurate budgeting and financial planning. Understanding where your money is going helps in making informed decisions about cost management and resource allocation.

6. Professional Image

Maintaining clear and accurate financial records, including detailed expense claims, can enhance your company’s professional image. It demonstrates to stakeholders, including investors and auditors, that your business is well-managed and compliant with tax regulations. This professionalism can lead to increased trust and credibility in the business community.

7. Employee Benefits

Claiming expenses related to employee benefits, such as training, travel, and accommodation, can enhance employee satisfaction and retention. When employees know that their legitimate work-related expenses will be covered, it boosts morale and can improve productivity. Offering such benefits can also make your company more attractive to top talent.

8. Tax-Efficient Remuneration

Directors and employees of a limited company can claim expenses as part of a tax-efficient remuneration package. Instead of higher salaries, which are subject to income tax and National Insurance contributions, expenses can be reimbursed tax-free. This approach can lead to overall tax savings for both the company and its employees.

9. Investment in Business Growth

Reinvesting the money saved from tax-efficient expense claims can fund further growth and development. Whether it’s upgrading equipment, expanding into new markets, or increasing marketing efforts, these investments can drive the business forward. Effective expense management ensures that more of your revenue is directed towards growth rather than tax payments.

10. Compliance and Audit Readiness

Maintaining accurate records of business expenses ensures compliance with HMRC regulations, reducing the risk of penalties and fines during audits.

11. Utilising Tax Reliefs and Allowances

Certain expenses, such as Research and Development (R&D) costs, may qualify for additional tax reliefs or allowances, providing further tax savings.

To claim tax-deductible expenses, follow these steps:

1. Understand Allowable Expenses:

Get familiar with the types of expenses that are eligible for tax deductions. In the UK, allowable expenses typically include costs that are incurred wholly and exclusively for business purposes.

2. Keep Accurate Records:

Maintain detailed records of your expenses, including receipts, invoices, and supporting documents. These records will serve as evidence to support your claims and comply with HMRC requirements.

You can consider using below for accurate record keeping for your limited company:

• Use accounting softwares like FreeAgent to keep track of your business expenses.
• Hire accountants for limited company to keep records of your expenses.
• Use electronic recording system to documentise records.
• Use annual expense spreadsheet to capture all the spend and amend it throughout the year.

3. Classify Your Expenses:

Categorise your expenses into appropriate categories, such as office expenses, travel costs, professional fees, or marketing expenses. This will help you accurately report them on your tax return.

4. Use the Correct Payment Method:

1. Company Bank Account: Ideally, pay for business expenses directly from your company’s bank account to keep transactions clear and easy to track.
2. Personal Reimbursements: If you pay for a business expense personally, you can reclaim the cost from your company later. Ensure you keep receipts and document the reimbursement accurately.

5. Complete Your Self-Assessment Tax Return:

If you're self-employed or a director of a limited company, you will need to complete a self-assessment tax return. Include your tax-deductible expenses in the relevant sections of the form, such as the "Self-Employment" or "Business Expenses" section.

6. Seek Professional Advice:

If you're unsure about which expenses are tax-deductible or how to accurately claim them, it's advisable to consult with qualified limited company accountants. They can provide personalized guidance based on your specific circumstances and help you maximise your allowable deductions.

7. Retain Documentation:

Keep your expense records and supporting documents for at least five years, as HMRC may request to review them for audit purposes.

1. Operating Expenses:
   - Rent and utilities
   - Office supplies and equipment
   - Insurance premiums
   - Business rates
   - Telephone and internet expenses
   - Property maintenance and repairs
   - Business insurance
2. Professional Services:
   - Accounting and bookkeeping fees
   - Legal fees
   - Consultancy and advisory services
   - IT and software services
   - Marketing and advertising expenses
   - Professional membership fees
   - Training and development costs
3. Staffing Expenses:
   - Employee salaries and wages
   - Employer National Insurance contributions
   - Pension contributions
   - Recruitment expenses
   - Staff training and development costs
   - Employee benefits (such as health insurance)
4. Travel and Subsistence:
   - Business-related travel expenses
   - Accommodation costs during business trips
   - Meals and entertainment expenses
   - Mileage or vehicle expenses
5. Business Premises:
   - Rent or mortgage payments for business premises
   -Property insurance
   - Business rates and council tax
   - Maintenance and repairs
6. Office Expenses:
   -Office furniture and equipment
   - Printing and stationery
   - Computer hardware and software
   -Postage and delivery costs
7. Marketing and Advertising:
   - Website development and maintenance
   - Advertising campaigns
   - Graphic design and printing
   - Online marketing expenses
8. Financial and Bank Charges:
   - Bank fees and charges
   - Merchant service fees
   - Interest on business loans or overdrafts
   - Professional fees for financial services

Non-allowable limited company expenses refer to costs that are not eligible for tax deduction or cannot be claimed as legitimate business expenses. Here are some common examples:

1. Personal expenses: Any expenses that are purely personal, such as personal clothing, personal travel, or personal entertainment, cannot be claimed as business expenses.
2. Fines and penalties: Fines, penalties, and legal fees incurred as a result of breaking the law or regulations are generally not allowable expenses.
3. Capital expenses: Costs associated with purchasing or improving fixed assets, like property or equipment, are typically considered capital expenses and are not fully deductible in the year of purchase. Instead, they are typically claimed through capital allowances over a period of time.
4. Dividends: Dividend payments made to shareholders are not considered allowable expenses. Dividends are distributed from profits after tax and are subject to dividend tax rather than being deductible as an expense.
5. Private healthcare and insurance premiums: Personal health insurance or private medical expenses are generally not allowable as business expenses.
6. Entertaining clients: Expenses incurred for purely entertainment purposes, such as lavish client dinners or tickets to sporting events, are usually not allowable as business expenses.

FAQs on Allowable Expenses for Limited Companies

1. How Much Does an Accountant Cost for a Limited Company in 2025?

The cost of hiring an accountant for a limited company in 2025 can vary depending on factors such as the size and complexity of your business, the scope of services required, and the accountant's location and experience. On average, you can expect fixed fee packages ranging from £79 to £200 per month. Additional services and online accounting software may have separate costs.

2. Can I claim my business vehicle as a tax deduction if I don't own it myself?

‍Yes, you can claim your business vehicle as a tax deduction even if you don't own it yourself. If you use a vehicle for business purposes, you can claim the expenses associated with its use as a tax deduction. This applies whether you buy the vehicle, lease it, or use it under a hire or rental agreement. However, consulting with an accountant or tax advisor is recommended to ensure compliance and maximise your eligible deductions.

3. Can I claim buying assets as a business expense?

No, buying assets is classed as a capital expense, not a regular business expense. However, you can claim tax relief on assets through capital allowances, depending on the type of asset and its use.

4. Can I claim rent as a business expense limited company?

‍Yes, you can claim rent as a business expense for your limited company as long as it is incurred solely for business purposes.

5. What is tax relief for limited companies?

Tax relief for limited companies reduces the amount of tax your company pays. It includes deductions for allowable expenses, capital allowances, R&D tax credits, and reliefs like the Annual Investment Allowance.

Understanding and effectively managing tax-deductible expenses is important for maintaining the financial health of your limited company. By diligently tracking and claiming eligible expenses, you can significantly reduce your taxable profit and, consequently, your Corporation Tax bill. This improves your cash flow and supports better budgeting, financial planning, and compliance with HMRC regulations.

However, the complexities of tax laws and the need for meticulous record-keeping can be daunting. To ensure your business maximises its tax efficiency while remaining compliant, it is advisable to hire experienced accountants for limited companies who can provide you with expert guidance tailored to your specific business needs, helping you manage the complexity of tax-deductible expenses with ease.

Book a free consultation with a qualified accountant for a limited company today and get professional help to make the most of your tax-deductible business expenses.