Expenses for Limited Companies: What Can You Claim?

Claiming allowable expenses is an essential part of managing a limited company’s finances. By understanding what expenses can be claimed, businesses can reduce taxable profits, ensuring compliance while optimising tax efficiency.

What Are Allowable Expenses?

Allowable expenses are costs incurred wholly and exclusively for the purpose of running a business. These expenses can be deducted from your company’s profits before calculating Corporation Tax, which helps to minimise your tax liability.

Common Allowable Expenses for Limited Companies

1. Office Costs

Expenses related to running an office are generally allowable, including:

  • Rent and utility bills (if operating from a dedicated business premises).
  • Home office expenses, such as a proportion of household bills, if working from home.
  • Office supplies, such as stationery, printer ink, and postage.

2. Staff Costs

Payments made to employees, including directors, are allowable, such as:

  • Salaries and bonuses.
  • Employer National Insurance Contributions (NICs).
  • Pension contributions (up to the allowable limits).

3. Travel Expenses

Business-related travel costs are allowable, including:

  • Public transport fares (e.g., train, bus, and taxi).
  • Mileage allowance for business journeys in personal vehicles (45p per mile for the first 10,000 miles).
  • Accommodation and subsistence costs for overnight stays.

Note: Commuting between your home and regular workplace is not an allowable expense.

4. Professional Services

Fees for professional advice and services related to your business can be claimed, including:

  • Accountancy and bookkeeping fees.
  • Legal advice related to business operations.
  • Consultancy fees for business improvement or strategy.

5. Equipment and Technology

Purchases of equipment used solely for business purposes are allowable, such as:

  • Computers, laptops, and monitors.
  • Software subscriptions and licences.
  • Tools and machinery specific to your industry.

For larger purchases, these may need to be claimed as capital allowances.

6. Marketing and Advertising

Costs incurred to promote your business can be claimed, including:

  • Website development and maintenance.
  • Social media advertising and campaigns.
  • Printed materials, such as flyers and business cards.

7. Insurance

Business-related insurance policies are allowable, including:

  • Professional indemnity insurance.
  • Public liability insurance.
  • Employer’s liability insurance (if you have employees).

8. Training and Development

Costs for training courses or professional development are allowable if they relate directly to your business activities. For example:

  • Courses to improve industry knowledge or skills.
  • Certifications required for your profession.

Expenses That Are Not Allowable

Certain expenses cannot be claimed as they are considered personal or not wholly for business use, including:

  • Entertaining clients or business partners.
  • Gym memberships or personal leisure activities.
  • Commuting costs between home and a permanent workplace.
  • Fines and penalties, such as speeding tickets.

Tips for Managing Allowable Expenses

  1. Keep Detailed Records: Maintain receipts and invoices for all claimed expenses. These documents are essential for tax audits and compliance.
  2. Separate Business and Personal Finances: Use a dedicated business bank account to simplify expense tracking.
  3. Work with an Accountant: A qualified accountant can help you identify allowable expenses and ensure accurate reporting.
  4. Review Expenses Regularly: Periodically review your expense claims to ensure they remain compliant with HMRC rules.

Understanding and claiming allowable expenses is vital for optimising your limited company’s tax efficiency. By following HMRC guidelines and maintaining accurate records, you can reduce your taxable profits while staying compliant. Professional advice can further help you navigate the complexities of expense claims, ensuring your business operates smoothly and efficiently.

Disclaimer: This article provides general information and should not be considered legal, tax, or financial advice. Always consult a qualified professional for personalised guidance. For feedback or suggestions, email [email protected].