Limited Company Expenses: What Can You Claim?
Understand common limited-company expenses, capital versus revenue costs, director reimbursements, benefits, VAT, and records for Corporation Tax.
Last reviewed: 11 August 2026 · Editorial policy
Start with business purpose and type of cost
A company can generally deduct qualifying revenue expenses when calculating taxable profit if the cost was incurred wholly for a business purpose. The facts, documents, and reason for the purchase matter.
First decide whether the cost is revenue, capital, employment-related, or specifically disallowed. That classification determines whether it reduces trading profit immediately, is relieved through capital allowances, needs benefit reporting, or receives no Corporation Tax deduction.
Common company expense categories
The table shows typical starting points. Mixed-purpose, unusual, or material transactions deserve a specific review.
| Category | Potentially deductible examples | Check carefully |
|---|---|---|
| People | Salary, employer National Insurance, pension contributions and genuine subcontractor costs | Payroll operation, employment status, benefits and connected parties |
| Premises and homeworking | Office rent, utilities, repairs and qualifying homeworking payments | Personal household costs and director use of company assets |
| Technology and equipment | Software, hosting, small tools and qualifying equipment | Capital allowances, private use and asset ownership |
| Travel and subsistence | Qualifying business journeys, accommodation and subsistence | Ordinary commuting, permanent workplaces and dual-purpose trips |
| Sales and marketing | Advertising, website activity and trade-event costs | Client entertaining and gifts have restrictions |
| Professional costs | Accounting, audit, legal and insurance costs for the trade | Company formation, share transactions and capital matters may differ |
| Finance | Certain interest, bank charges and merchant fees | Loan capital, related-party loans and non-trading finance rules |
Revenue expense versus capital purchase
Revenue expenses support day-to-day trading. Capital expenditure normally creates or improves an asset with an enduring benefit, such as machinery, a vehicle, or major equipment. Capital items are not simply added to ordinary overheads.
A company may instead claim capital allowances where the asset and use qualify. The timing and amount of relief can differ from the accounting depreciation shown in the profit and loss account.
Director and employee costs
A director can pay a genuine company expense personally and be reimbursed with supporting evidence. Conversely, when the company pays a personal bill, it may need to be posted to the director’s loan account, treated as salary, or reported as a benefit rather than deducted as an ordinary business expense.
Travel, homeworking, phones, cars, medical cover, loans, and staff entertainment all have detailed rules. Decide who received the benefit, why it was provided, whether an exemption applies, and whether PAYE, National Insurance, P11D, or payroll reporting is required.
- Use an expense claim with date, amount, business purpose, and receipt.
- Keep director loan-account entries separate from business expenses.
- Review recurring benefits before the first payroll and again before year end.
Costs that are restricted or disallowed
Client entertaining is a well-known example of a cost that may be a real business expense in the accounts but is normally added back when calculating Corporation Tax. Fines for breaking the law and personal costs are also common exclusions.
Some expenses are only partly deductible or are relieved under another regime. Record them accurately rather than leaving them out of the bookkeeping; the tax computation can then make the correct adjustment.
| Cost | Typical treatment | Why it needs review |
|---|---|---|
| Client entertaining | Usually disallowed for Corporation Tax | Staff entertaining and overseas customer rules can differ |
| Personal purchases | Not an ordinary business deduction | May affect the director loan account or create earnings/benefit treatment |
| Fines and penalties | Usually disallowed | Commercial compensation and contractual charges may differ |
| Depreciation | Added back in the tax computation | Capital allowances may provide separate tax relief |
| Corporation Tax | Not deducted when calculating taxable profit | It is calculated from the adjusted taxable result |
VAT and evidence
A VAT-registered company should separately consider whether input VAT can be reclaimed. Corporation Tax deductibility and VAT recovery are related to the same purchase but are not the same test. A valid VAT invoice, business use, partial exemption, employee reimbursement, and scheme choice can all affect recovery.
Keep invoices, receipts, contracts, mileage records, expense claims, bank evidence, and the reasoning for unusual items. Company accounting records generally need to be retained for six years from the end of the relevant financial year, with longer retention in some situations.
Frequently asked questions
Can my company pay for my mobile phone?+
It can, but ownership, contract terms, private use, and whether the phone is provided to a director or employee affect the tax and benefit treatment. One employer-provided phone can qualify for an exemption when the conditions are met.
Can a director claim expenses paid personally?+
Yes, where the director incurred a genuine company expense and provides adequate evidence. Record the reimbursement through an expense claim rather than treating the personal account as a company bank account.
Is client entertaining a business expense?+
It can be a genuine cost in the accounts, but it is normally disallowed when calculating taxable company profit. VAT recovery is also commonly restricted.