What Expenses Can a UK Limited Company Claim Against Tax?

Run a UK limited company and most of what you spend on the business can lower your tax bill at year end. That’s the theory, anyway. HMRC won’t let you claim just anything, and getting it wrong means you either overpay tax or claim for something you shouldn’t have touched. Most of it comes down to four words: wholly and exclusively.

That phrase sits in the Corporation Tax Act 2009, Section 54(1)(a). An expense only counts as allowable if it was incurred wholly and exclusively for your company’s trade. Buy a laptop for client work and you’re fine. Buy one and use it half the time for scrolling social media, and things get murkier. HMRC does let you split costs that serve both purposes, things like your phone bill or home internet, so long as you can show a reasonable business proportion. Their manual, BIM37035, goes into this dual-purpose spending if you want to check the detail.

The everyday costs most companies claim

Once the wholly and exclusively test makes sense, the common expenses list starts to feel fairly predictable. Software subscriptions, office supplies, accountant fees, marketing and advertising, business insurance, bank charges on your company account, it all falls into the usual bucket. Interest on a business loan is allowable too, though repaying the loan itself isn’t, since that’s just moving money around rather than spending it.

Travel is where directors tend to trip up on numbers rather than principle. From 6 April 2026, the HMRC mileage rate 2026 rose to 55p per mile for the first 10,000 business miles, dropping to 25p after that. It’s the first change to the mileage rate since 2011, so if you’re still working off 45p somewhere in your records, you’re underclaiming. A lot of guidance floating around online hasn’t caught up with this yet, so it’s worth knowing in case you’re cross-checking figures elsewhere.

Use of home as office, and what actually changed in 2026

Here’s a distinction that gets lost in most explanations of use of home as office limited company rules. From April 2026, HMRC scrapped the ability for individual employees to self-claim the £6 a week working-from-home flat rate through Self Assessment or a P87 form. Plenty of directors read that headline and assumed home working relief had disappeared entirely. It hasn’t.

What changed is the self-claim route for employees. Your limited company can still pay you, whether you’re a director or employee, the £6 a week homeworking allowance directly, as a reimbursed expense. Over a full year that adds up to £312, paid with zero receipts required, and it stays tax-free when it’s paid this way. The difference really just comes down to who initiates the payment. If you’d rather claim actual costs instead, say a share of your gas and electricity bill, that’s allowed too, but it means proper calculations and evidence behind them, and HMRC’s manual EIM32815 lays out how that works. For most small companies, though, the flat rate is just less hassle.

What you can’t claim, even though the company can pay for it

This is where people trip up more than anywhere else on this list, honestly. There’s a difference between something your company is legally allowed to pay for, and something that’s actually deductible against Corporation Tax. Client entertainment is the classic example. Your company can pay for taking a client to dinner. But that cost gets added back when you file, so it doesn’t reduce your tax bill at all.

Staff entertaining works differently, and this is usually where the confusion starts. An annual event open to all staff, a Christmas party being the obvious one, is deductible up to £150 per head. Go a penny over that and the whole amount becomes taxable, not just the bit that tipped it over. Separately, there’s the trivial benefits rule: non-cash gifts up to £50 each, with directors of close companies capped at £300 a year in total. These are two different allowances for two different situations, and mixing them up is a mistake we see a lot.

Fines, penalties, and personal costs dressed up as business ones aren’t on the table either way. Buying long-term assets, like equipment or a company vehicle, isn’t a simple deduction. That falls under capital allowances, a bigger topic we cover properly in our piece on capital vs revenue expenses rather than trying to squeeze it in here.

Expenses from before you even started trading

Here’s a rule that catches new directors off guard: you can claim costs you paid personally before the company was even trading. Under Section 61 of the same Corporation Tax Act, you can go back up to seven years and claim pre-trading expenses on the first day your company starts active business, provided those costs would have been allowable had the company already been running at the time.

This matters more than people think if you spent months planning before incorporation. Domain registration, formation agent fees, early advisory costs, all of that can potentially go into your first set of accounts instead of just getting written off. Worth understanding properly before your accountant prepares your annual accounts, since it can shift what you’re able to claim in year one.

Corporation tax expenses for non-resident directors

A good number of Xpezia’s clients run their UK limited company entirely from Pakistan, and the questions they ask tend to look different from what a UK-based director would ask, mostly because most guidance out there just assumes you’re sitting in the UK. You’re not, and that’s fine. HMRC doesn’t require a director to hold a personal UK bank account to be reimbursed for company expenses. Payments made from a Pakistani card, converted at the applicable exchange rate to GBP, are acceptable, as long as they’re properly documented.

Record keeping works the same way it does for digital-first businesses anywhere in the world. Scanned receipts, photos on your phone, cloud accounting software, all of it satisfies HMRC’s requirements. There’s no expectation that you’re storing paper in a UK filing cabinet somewhere; HMRC’s whole system runs on digital, paperless workflows now, so a well-organised cloud drive does the job. One thing worth flagging: how a UK expense reimbursement interacts with your personal tax position back in Pakistan, including FBR rules, isn’t something we can advise on here. That’s a conversation for a cross-border specialist, since it sits outside UK Corporation Tax entirely.

For the full picture on how these deductions feed into your overall tax position, our full guide to UK Corporation Tax covers the mechanics in more depth. And when it’s time to put these figures into practice, filing your Corporation Tax correctly the first time saves you the trouble of going back to correct things later.

A few quick questions people usually have