One of the real advantages of trading through a limited company is the ability to reduce your Corporation Tax bill by claiming allowable business expenses for limited companies. The principle is straightforward: legitimate costs your company incurs in the course of doing business can be deducted from your taxable profits before HMRC works out what you owe.

In practice, though, it is rarely that simple. Directors often either over-claim (by putting through personal costs that do not qualify) or under-claim (by not knowing that certain costs are allowable at all). Both create problems. Over-claiming can attract HMRC scrutiny; under-claiming means you pay more Corporation Tax than you need to.

This post covers the main expense categories, the rule that ties them all together, and the areas where we tend to see the most confusion.

Every allowable expense for a limited company must pass the same HMRC test: the cost must be incurred wholly and exclusively for the purposes of the business. That phrase does a lot of work.

It means that if an expense has any element of personal benefit, HMRC can (and often will) disallow part or all of it. A laptop you use entirely for client work qualifies. A laptop you also use to stream films in the evenings is more complicated. The same logic applies to mobile phone contracts, professional subscriptions, and anything that straddles work and personal life.

The other practical rule worth knowing upfront: you need to keep records. HMRC expects you to retain receipts and supporting documentation for six years. Cloud accounting software makes this straightforward, particularly with a receipt-capture app like Dext attached, but the obligation exists regardless of how you file.

With that foundation in place, here are the main categories worth understanding.

The most common allowable expenses for limited companies are the costs of simply running the business. These tend to be the least contentious, provided they clearly relate to trading.

• Office costs: rent, utilities, insurance, and stationery for a business premises all qualify. If you operate from a serviced office or co-working space, the membership fees are allowable.
• Software and subscriptions: accounting software, project management tools, industry databases, and professional publications used for work are all claimable. This is one area where directors consistently under-claim.
• Professional fees: your accountant’s fees, legal advice directly related to the business, and Companies House filing fees all qualify. Personal legal costs do not.
• Bank charges: business bank account fees and transaction charges are allowable. Personal account charges are not.
• Marketing and advertising: website hosting, paid advertising, design work, and print materials are all legitimate business expenses.

The common thread is that each cost must be for the business, not for you personally. A client entertainment bill, for example, sits in a different category and is generally not deductible for Corporation Tax purposes, even if it feels like a business cost.

Travel is an area where the rules are well-established, but the detail matters.

Mileage

If you use your personal vehicle for business travel, your company can pay you a mileage allowance at the HMRC approved rates: 45p per mile for the first 10,000 business miles in a tax year, dropping to 25p per mile after that (rates applicable as of July 2026). These payments are tax-free to you and fully deductible for the company.

Commuting to a regular, permanent workplace does not count as business travel and cannot be claimed, a point that catches out a number of directors who work from a fixed client site.

Company vehicles

If the company owns the vehicle, the treatment is different. The company can claim capital allowances on the purchase cost and deduct running costs (fuel, insurance, servicing), but any private use by a director creates a benefit-in-kind that is subject to income tax and National Insurance. Electric vehicles currently attract more favourable benefit-in-kind rates, which is worth factoring in if you are considering a company car.

Public transport and other travel

Train tickets, taxi fares, flights, and hotel costs for genuine business trips are all allowable. Keep the receipts and a note of the business purpose.

This is an area that has seen some change recently, and it is worth being clear on how it works for limited companies specifically.

If your company does not have a separate office and you work from home, your company can pay you a flat rate of £6 per week as a tax-free contribution towards your household costs. No receipts are required for this amount, and no complex calculations. It simply reimburses you for the additional household costs (heating, lighting, broadband) associated with working from home.

Alternatively, if your home-working costs are genuinely higher, you can calculate a more precise figure based on the proportion of your home used for work. This requires a bit more record-keeping but can result in a larger allowable deduction if the numbers justify it.

It is worth noting that from April 2026, the rules changed for employees claiming homeworking relief directly from HMRC, but this does not affect the position for limited companies paying their directors a home-working allowance. The £6 per week route remains fully available.

One thing to be cautious about: if you want to claim a proportion of your mortgage interest or rent through the company, the rules are considerably more complex and can create unintended tax consequences. This is an area where it is worth taking specific advice before proceeding.

Knowing what you cannot claim is just as important as knowing what you can. These are the areas we see cause the most problems.

• Client entertaining: taking clients out for dinner or drinks is a legitimate business activity, but HMRC specifically disallows client entertainment as a Corporation Tax deduction. The cost comes out of post-tax profits.
• Personal expenses run through the company: clothing (unless it is a uniform or protective equipment), gym memberships, personal holidays, and groceries are not allowable, even if you argue they help you work better. If a personal expense goes through the company incorrectly, it can be treated as a director’s loan or a benefit-in-kind, both of which create additional tax complications.
• Fines and penalties: HMRC late-filing penalties, parking fines, and similar costs are not deductible. The logic is that allowing them as a deduction would partly subsidise behaviour the law is trying to discourage.
• Capital purchases (broadly): if you buy equipment or machinery, these are generally treated as capital expenditure rather than a revenue expense. You can still get tax relief through the Annual Investment Allowance, which allows a full deduction in the year of purchase up to the allowance limit, but the treatment is different from a straightforward revenue expense.

If you are unsure whether a specific cost qualifies, our consistent advice is to keep the receipt and ask your accountant. It is much easier to make that judgement with the documentation in hand.