Allowable expenses for limited companies

• Salaries and employer costs — wages (including the director’s), employer National Insurance and pension contributions
• Premises and home working — rent, rates, utilities for business premises; the homeworking allowance for directors working from home
• Travel and subsistence — business journeys (not ordinary commuting), mileage at HMRC’s approved rates for personal cars, hotels and reasonable meals when travelling
• Technology and software — computers, accounting software, hosting, business phone contracts
• Professional fees — accountancy, legal advice on trading matters, business insurance, bank charges
• Marketing — websites, advertising, subscriptions to trade bodies on HMRC’s approved list
• Training — staff and director training connected with the business

Larger purchases of equipment aren’t claimed as ordinary expenses — they get capital allowances, which for most small companies still means a 100% deduction in year one.

Capital allowances explained →

• Trivial benefits — gifts to employees under £50 each (not cash or vouchers exchangeable for cash, not a reward for work) are tax-free; directors of close companies are capped at £300 per year
• Annual events — up to £150 per head per year (a Christmas party, a summer event) tax-free for staff and deductible for the company
• One mobile phone per employee on a company contract
• Employer pension contributions — usually the single most tax-efficient way to extract value from a profitable company, deductible for Corporation Tax with no NI or income tax on the way in

• Client entertaining — meals, hospitality, event tickets for customers or suppliers
• Most fines and penalties — parking fines, late filing penalties
• Ordinary commuting — home to your regular workplace
• Everyday clothing — even if you only wear the suit for work (uniforms and protective clothing are fine)
• Personal costs — paying them through the company doesn’t make them business costs; it creates a benefit in kind or a director’s loan

Every claim needs evidence — receipts, invoices, a mileage log. In practice missed expenses are usually a bookkeeping problem, not a knowledge problem: costs paid personally and never recharged, subscriptions on a personal card, home-office claims never set up. When we prepare year-end accounts and the Corporation Tax return we review expenses for exactly these gaps. Call 0114 327 1480.

Our Corporation Tax return service →