Running a limited company comes with costs — and many of them reduce your Corporation Tax bill. But HMRC has strict rules about what counts as an allowable expense. Claim something you shouldn't and you risk penalties. Miss something you could claim and you're overpaying tax.

This guide covers every major category of claimable expenses for UK limited companies, with practical examples and the key rules you need to follow.

The golden rule: wholly and exclusively

Before diving into specific expenses, you need to understand the fundamental test. An expense is allowable for Corporation Tax if it's incurred wholly and exclusively for the purposes of the trade.

This means:

The expense must relate to your business, not personal spending
If an expense has a dual purpose (partly business, partly personal), it's not allowable unless you can separate the business element
The test is about the purpose of the spending, not the outcome

This rule comes from Section 54 of the Corporation Tax Act 2009, and HMRC applies it rigorously.

Office and premises costs

Rent and rates

Office or workshop rent — fully deductible
Business rates — fully deductible
Service charges on business premises — deductible

Working from home

If you run your company from home, you can claim a proportion of household costs:

Simplified method: HMRC allows a flat rate based on hours worked from home (£6/week without evidence, or actual costs with evidence)
Actual cost method: Calculate the business proportion of mortgage interest/rent, council tax, utilities, insurance, and broadband

The company pays you (the director) for the use of your home. This is a tax-free payment if it doesn't exceed the actual additional cost. See our working from home guide for the full calculation.

Utilities

Gas, electricity, water, and broadband for business premises are fully deductible. For home offices, only the business proportion is claimable.

Staff costs

Salaries and wages

All staff salaries (including your own director's salary) are allowable expenses, provided they're commercially reasonable.

HMRC can challenge a salary if it's artificially high — for example, paying a family member well above market rate for minimal work.

Employer's National Insurance

Your company's Employer NIC is a deductible expense. For 2025/26, the rate is 15% on earnings above £5,000 per employee.

Pension contributions

Company pension contributions for employees and directors are deductible, provided they're paid and not just accrued. This is one of the most tax-efficient ways to extract value from your company.

Staff benefits

Allowable staff costs include:

Training and professional development
Staff welfare costs (tea, coffee, reasonable refreshments)
Employer liability insurance
Recruitment costs
Protective clothing and uniforms
Staff parties (up to £150 per head per year — tax-free for staff too)

Subcontractors and freelancers

Payments to subcontractors are deductible, but ensure you correctly determine their employment status. Check IR35 implications for contractors providing services through their own companies.

Travel and subsistence

Business travel

Travel expenses for business purposes are fully deductible:

Train, bus, and taxi fares
Flights for business trips
Fuel costs for business mileage (actual cost or HMRC mileage rates)
Parking and tolls
Hotel accommodation for business trips

Not deductible: Your regular commute between home and a permanent workplace. However, travel to temporary workplaces (client sites, for example) is allowable.

Mileage rates

If using a personal vehicle for business, the company can reimburse at HMRC's approved mileage rates:

Vehicle	First 10,000 miles	Over 10,000 miles
Car/van	45p per mile	25p per mile
Motorcycle	24p per mile	24p per mile
Bicycle	20p per mile	20p per mile

Company vehicles

If the company owns or leases a vehicle:

Fuel for business use — deductible
Insurance, maintenance, and repairs — deductible
Lease payments — deductible (with a restriction for high-CO2 vehicles: 15% disallowance for cars with CO2 emissions over 50g/km)
Consider the benefit-in-kind implications for personal use

For electric vehicles, 100% first-year capital allowances and zero BIK rates make company ownership very tax-efficient.

Subsistence

Reasonable food and drink costs while travelling on business are deductible. HMRC expects these to be modest — a sandwich and coffee, not fine dining. The cost must be additional to what you'd normally spend.

Professional and financial costs

Accountancy fees

Fees paid to accountants for preparing accounts, filing your CT600, and general tax advice are fully deductible.

Legal fees

Legal costs relating to the trade are deductible:

Debt recovery
Employment disputes
Drafting commercial contracts
Defending trading activities

Not deductible: Legal costs relating to acquiring capital assets (these are added to the cost of the asset instead) or criminal proceedings.

Insurance

Professional indemnity insurance
Public liability insurance
Employer's liability insurance (mandatory)
Business contents insurance
Cyber insurance
Key person insurance (if the policy is to protect the trade)

Bank charges and interest

Business bank account fees — deductible
Interest on business loans — deductible
Overdraft interest — deductible
Credit card fees for business purchases — deductible

See our guide on Corporation Tax treatment of bank interest for how interest received is taxed.

Software and subscriptions

Accounting software (Xero, QuickBooks, FreeAgent)
CT600 filing software like Taxpipe
Industry-specific software
Cloud storage and hosting
Professional body memberships
Trade journal subscriptions

Marketing and advertising

All genuine marketing expenses are deductible:

Website design and hosting
Google Ads and social media advertising
Print advertising
Business cards and stationery
PR and marketing agency fees
SEO and content marketing costs
Trade shows and exhibition costs

Client entertainment — the big exception

Client entertainment is NOT deductible for Corporation Tax purposes. This includes:

Taking clients out for meals
Hospitality at sporting events
Gifts to clients (unless they're small branded items under £50 per person per year)

Staff entertainment is deductible (up to the £150 per head annual party limit), but client entertainment is specifically blocked by Section 1298 CTA 2009.

This is one of the most commonly misunderstood expenses. Many companies claim client entertainment and only discover the error during an HMRC enquiry.

Equipment and assets

Small items

Items costing a few hundred pounds (stationery, small tools, minor equipment) are typically expensed directly to profit and loss and are deductible.

Capital items

Larger purchases (computers, machinery, vehicles, office furniture) are capital expenditure. You don't deduct the cost immediately — instead, you claim capital allowances:

Annual Investment Allowance (AIA): 100% deduction on the first £1 million of qualifying plant and machinery each year
Full expensing: 100% first-year allowance for main-rate plant and machinery (permanent from April 2023)
Writing-down allowances: 18% (main pool) or 6% (special rate pool) for items not qualifying for full expensing

Most small companies will claim the AIA or full expensing for equipment purchases, effectively getting the same result as expensing the cost immediately.

Charitable donations

Your company can claim Corporation Tax relief on charitable donations. Gift Aid donations to registered charities are deducted from total profits, reducing your tax bill. The donation must be a genuine gift — not a payment for services.

Bad debts

If a customer owes your company money and you've genuinely given up trying to recover it, you can write off the bad debt as an allowable expense. The debt must be:

A trade debt (arising from your normal business)
Genuinely irrecoverable
Written off in your accounts

A general provision for bad debts is not deductible — only specific, identified bad debts qualify.

What you CANNOT claim

These are the most common disallowable expenses:

Expense	Why it's disallowed
Client entertainment	Specifically blocked by legislation
Clothing (non-uniform)	Fails the "wholly and exclusively" test
Personal expenses	Not for trade purposes
Fines and penalties	Public policy — cannot benefit from breaking the law
Political donations	Not for trade purposes
Depreciation	Replaced by capital allowances
Dividends	Distribution of profit, not an expense
The tax itself	Corporation Tax is not an allowable deduction

How expenses reduce your tax bill

Every £1 of allowable expenses reduces your taxable profit by £1. The actual tax saving depends on your Corporation Tax rate:

Taxable profits	Effective rate	Tax saving per £1,000 of expenses
Under £50,000	19%	£190
£50,000–£250,000	19%–25% (marginal)	£190–£265
Over £250,000	25%	£250

Companies in the marginal relief band actually benefit from an effective marginal rate of 26.5%, meaning expenses are worth even more.

Reporting expenses on the CT600

Your allowable expenses feed into your CT600 through the tax computation:

Start with your accounting profit
Add back any disallowable expenses (entertainment, depreciation, etc.)
Deduct any allowable items not in the accounts (capital allowances, etc.)
The result is your taxable trading profit — entered in Box 155

When filing through Taxpipe, the platform helps you categorise expenses correctly and flags common disallowable items, reducing the risk of errors.

Record keeping

HMRC requires you to keep records supporting your expense claims for at least 6 years after the end of the accounting period. This includes:

Receipts and invoices
Bank statements
Mileage logs
Contracts and agreements

Without evidence, HMRC can disallow expenses during an enquiry. Digital record keeping makes this easier — photograph receipts, use accounting software, and keep everything backed up.

Frequently asked questions

Can my company pay for my personal phone contract?

Only if the phone is used wholly for business. If it's a personal phone also used for business, the company can reimburse a reasonable proportion of the cost. Many directors prefer a separate business phone to keep things clean.

Are director's dividends an allowable expense?

No. Dividends are distributions of profit after tax, not business expenses. They don't reduce your Corporation Tax bill.

Can I claim for clothes I wear to work?

Generally no. Ordinary clothing fails the "wholly and exclusively" test because it also keeps you warm and decent. The exception is genuine uniforms, protective clothing, or costumes required for the job.

What about gym memberships for staff?

A corporate gym membership or fitness benefit can be provided as a staff benefit, but there may be a benefit-in-kind charge on the employee. It's an allowable expense for the company either way — the BIK is the employee's issue, not the company's deduction.

How far back can I claim missed expenses?

You can amend your CT600 up to 12 months after the filing deadline. If you've missed expenses, amend your return to include them and claim back overpaid tax.

Can my company claim the cost of filing through Taxpipe?

Yes. Software costs for tax compliance (including CT600 filing software) are fully allowable business expenses.