Understanding what your Allowable Limited Company Expenses can claim as allowable business expenses is essential if you want to reduce your corporation tax bill and operate tax efficiently. In this guide, we break down the key rules for the 2025/2026 tax year and explain the most common expenses UK companies can deduct.
What are allowable expenses?
Allowable expenses are costs that are incurred “wholly and exclusively” for business purposes. HMRC permits companies to deduct these costs from their revenue before calculating taxable profit. Lower taxable profit means lower corporation tax.
If an expense is partly personal and partly business related, only the business portion is deductible. Personal spending must always be kept separate. Client entertainment and most business gifts are not allowable.
Good record keeping is vital. All receipts, invoices, statements, and supporting documents must be retained for at least six years after submission of your company tax return.
Common allowable limited company expenses
Below is an overview of the most frequent business expenses that UK limited companies can claim.
1. Startup and office expenses
Companies can claim costs incurred up to seven years before trading begins. These may include professional advice, market research, formation fees, software, and initial equipment.Once trading, ongoing office expenses include:
- Office rent
- Utilities
- Business rates
- Internet and telephone
- Office supplies and stationery
- Software subscriptions
If you work from home, you can claim a reasonable portion of household costs that relate to your business activities.
2. Travel and subsistence
Business related travel is allowable, provided it is not your normal commute. Allowable travel includes:
- Public transport fares
- Flights
- Taxis
- Hotels and overnight accommodation
- Business meals during overnight travel
- Parking and tolls
- Vehicle repairs and servicing for company owned vehicles
Mileage claims for personal vehicles follow HMRC’s approved rates. For 2025/26 the rates are:
- 45p per mile for the first 10,000 miles
- 25p per mile for each additional mile
- 24p per mile for motorcycles
- 20p per mile for bicycles
Commuting from home to your regular workplace cannot be claimed.
3. Marketing and advertising
Any cost incurred to promote or advertise your business is usually allowable. This includes:
- Website development and hosting
- Social media advertising
- Google Ads and SEO services
- Promotional materials and print advertising
- Photography and branding
- Sponsorships that serve a genuine business purpose
Monthly advertising subscriptions are also deductible.
Allowable Limited Company Expenses
4. Staff and employment costs
Most staff related costs are allowable, including:
- Employee salaries
- Employer’s National Insurance
- Pension contributions
- Uniforms and protective equipment
- Professional training and development
- Staff parties up to £150 per employee per year
Screen dependent employees may claim eye tests and the cost of glasses required solely for work. Directors of limited companies fall under the same rules as employees.
5. Professional and legal fees
The following costs are allowable:
- Accounting and bookkeeping fees
- Legal fees
- HR and payroll consultancy
- Recruitment fees
- Company secretarial services
- Compliance and regulatory advice.
These can be claimed at any stage of the business lifecycle.
6. Business insurance
Insurance that protects your company is deductible. Allowable policies include:
- Employers liability
- Public liability
- Professional indemnity
- Cyber insurance
- Tools and equipment insurance
- Motor insurance for company vehicles
Insurance that covers personal risks is not allowed.
7. Capital allowances on equipment
Long term assets that your business uses for more than one year qualify for capital allowances rather than standard expenses. Typical examples are:
- Computers
- Machinery
- Office furniture
- Vans and plant equipment
Through the Annual Investment Allowance (AIA) companies can deduct up to £1 million of qualifying expenditure each year. Many small and medium sized businesses claim the full cost of equipment in the year of purchase using this allowance.
Employee benefits and HMRC reporting
Some employee benefits, such as private medical insurance or company cars, must be reported to HMRC using a P11D or through payrolling benefits. Tax and National Insurance may arise depending on the type of benefit.
If employees pay for business expenses personally, they can be reimbursed and the company can claim the cost, provided it meets the “wholly and exclusively” test. A clear employee expenses policy is recommended.
Expenses you cannot claim
Certain expenses are not allowable for corporation tax purposes. These include:
- Client entertaining
- Personal expenses
- Fines and penalties
- Normal commuting
- Non business related gifts
These costs must be recorded separately.
Compliance tips for directors
To stay compliant and avoid penalties:
- Maintain accurate records and digital receipts
- Keep business and personal spending separate
- Use accounting software to track and categorise expenses
- Keep all records for at least six years
- Speak to an accountant if you are unsure about any expense
Understanding what your limited company can claim is a simple and effective way to reduce your tax liability. Applied correctly, allowable expenses help you operate more efficiently and retain more profit in your business. If you need personalised advice or support preparing your company’s tax return, contact a qualified accountant.
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