Limited Company Allowable Expenses: A Complete Guide

Running a limited company comes with a number of financial advantages. One of the most significant advantages is the ability to deduct certain costs as allowable business expenses. Understanding what qualifies as an allowable expense can help you legally reduce your corporation tax bill and keep more of your profits. This guide covers what you need to know about allowable expenses for UK limited companies.

What Are Allowable Expenses?

Allowable expenses are legitimate business costs incurred “wholly, exclusively, and necessarily” in the course of running your business. When properly claimed, they reduce your taxable profit, meaning your company pays less Corporation Tax.

If you’re unsure, a good rule of thumb is: Would you have incurred this cost if you weren’t running your business? If the answer is no, it’s likely to be allowable.

Allowable Expenses for Limited Companies

Here are some of the most frequently claimed allowable expenses:

Office and Admin Costs

Rent for business premises
Utility bills (electricity, gas, water)
Business rates
Office supplies (paper, pens, printer ink)
Postage and stationery
Phone and internet bills (business use only)

Staff Costs

Salaries and wages
Employer’s National Insurance contributions
Pensions and employee benefits
Subcontractor payments (under the CIS if applicable)

Professional Fees

Accountant fees
Legal advice and services
Consultancy fees
Business insurance (e.g. public liability, professional indemnity)

Travel and Subsistence

Public transport fares
Mileage (45p per mile for the first 10,000 miles in a car)
Hotel accommodation (when travelling for work)
Meals (if working away from your usual location)

Note: Commuting between home and a permanent workplace is not allowable.

Marketing and Advertising

Website design and hosting
Business cards and brochures
Online advertising (e.g. Google Ads, Facebook Ads)
Trade shows and networking events

Training and Development

Courses related to your current business activities
Professional subscriptions (e.g. memberships in industry bodies like ICAEW, CIPD)

Equipment and Capital Allowances

Computers, phones, software
Tools and machinery
Furniture and fittings
Capital items may need to be claimed through Annual Investment Allowance (AIA) or Writing Down Allowance (WDA).

Use of Home as Office

If you work from home, you can claim a portion of household bills calculated at a percentage of actual costs based on usage.

Limited Company allowable expenses

What Can’t You Claim?

Some costs are specifically disallowed by HMRC:

Client entertainment (e.g. taking a client to dinner)
Fines and penalties (e.g. speeding tickets)
Personal expenses (e.g. clothes, unless it’s a uniform or protective gear)
Ordinary commuting costs
Gifts (with certain exceptions – e.g. promotional items under £50)

Record Keeping

To support your claims, it’s essential to keep accurate records of:

Receipts and invoices
Bank statements
Mileage logs (for business travel)
Contracts and agreements (for professional services)

All records should be kept for at least six years, in case HMRC asks to review them.

Claiming Expenses: How It Works

Pay the expense through the company bank account (or reimburse yourself if paid personally).
Record the expense accurately in your company accounts.
At your company’s year-end, your accountant will use these records to reduce your taxable profits.
Less profit = less Corporation Tax to pay (currently 25% for profits over £50,000).

Final Thoughts

Knowing which expenses your limited company can claim is vital to operating tax-efficiently. While this guide offers a general overview, every business is different. To make the most of your allowable expenses and avoid costly mistakes it’s wise to consult with a qualified accountant who understands the nuances of small business taxation.

Need Help Managing Your Expenses?

If you’re looking to maximise your tax efficiency, contact our qualified business tax accountants to manage your limited company finances.

The HWBulletin

Our HWBulletins cover a range of subjects, including some of the services that we offer and an update of the recent changes that have, or will take place.

Read latest issue.