Ltd Company Expenses
By Mustafa Bilgic · Updated 24 August 2026
Every legitimate business expense your limited company pays reduces taxable profit and lowers your corporation tax bill. The rule is simple in principle -- the cost must be wholly and exclusively for business purposes -- but the details trip up thousands of directors every year. This guide covers what you can and cannot claim, with the grey areas flagged honestly.
Claiming the right expenses reduces your corporation tax legally. The key is evidence and the 'wholly and exclusively' test -- when in doubt, ask your accountant before you claim.
The 'Wholly and Exclusively' Rule
HMRC allows a deduction only if the expense was incurred wholly and exclusively for the purposes of the trade. If something has a dual purpose -- part business, part personal -- the personal element is not deductible. A laptop used 100% for work is fully deductible. A laptop used half for work and half for personal browsing should be claimed at the business proportion only, with a clear basis for the split.
The test is about purpose, not outcome. Business entertaining that helps win clients still fails the test because HMRC specifically disallows client entertainment. Staff entertainment (such as an annual party for employees) is allowed up to a set amount per head. These distinctions are not intuitive, which is why directors often claim things they should not and miss things they could. Use our corporation tax calculator to see how allowable expenses reduce your tax bill.
Common Allowable Expenses
Office costs (rent, utilities, broadband, stationery, software subscriptions), staff costs (salaries, employer pension contributions, recruitment fees), travel (fuel at the approved mileage rate or actual cost, trains, flights, hotels for genuine business trips), and professional fees (accountant, solicitor, industry body subscriptions) are all straightforward claims. Insurance premiums for the business -- professional indemnity, public liability, employer's liability -- are fully deductible.
If you work from home, the company can pay you a flat-rate allowance for the use of your home as an office without triggering a benefit-in-kind charge. HMRC accepts a set weekly amount without evidence; above that, you need to calculate the actual additional costs (heating, lighting, broadband proportion) and keep records. The flat-rate route is simpler and audit-proof for most home-based directors.
Grey Areas and Benefit-in-Kind Risks
A mobile phone provided by the company is tax-free as a benefit if it is the employee's only company-provided phone. A second phone, or a phone contract in the director's name reimbursed by the company, is a taxable benefit. The same logic applies to other assets: one company-provided item per category is typically fine, multiples attract scrutiny.
Company cars are an expensive benefit in kind for most directors because the taxable value is based on the car's list price and CO2 emissions, not the cost to the company. In most cases, claiming mileage at the approved HMRC rates (45p per mile for the first 10,000 business miles, 25p thereafter) through your personal car is more tax-efficient than putting a vehicle through the company. Fully electric vehicles are the exception -- their benefit-in-kind rate is low enough to make company ownership viable.
What HMRC Will Disallow
Client entertainment (meals, event tickets, gifts) is never deductible, no matter how directly it leads to new business. Fines and penalties -- parking tickets, late-filing penalties, speeding fines -- are not allowable. Clothing that is not protective or uniformed (a suit for client meetings, for example) fails the test because it serves a dual purpose.
Personal expenses put through the company bank account are not just disallowed -- they create a director's loan account balance that must be repaid or taxed. If the balance is outstanding at the company's year end, the company pays a penalty tax charge on the loan amount, and you may owe a personal benefit-in-kind charge on top. Keep personal spending out of the business account entirely. Speak to your accountant before claiming anything you are unsure about.
Not tax advice -- speak to your accountant.
Frequently asked questions
Can my company pay for my gym membership?
Only if the company provides an on-site gym or a facility available to all employees. Paying for an individual director's external gym membership is a taxable benefit in kind and is not deductible as a business expense.
Are training courses an allowable expense?
Training that updates or maintains existing skills used in the business is allowable. Training for an entirely new skill unrelated to your current trade may not qualify. The distinction is whether the training serves the existing business or prepares you for a different one.
Can I claim for food while travelling for business?
Meals during genuine business travel (an overnight stay away from your normal workplace, for example) are allowable. Lunch bought during your regular working day at your usual place of work is not, even if the company pays for it.
What records do I need to keep?
Receipts or digital records for every expense claimed, bank statements showing the payment, and a clear note of the business purpose. HMRC can request records going back six years, so store them securely for at least that long.