What expenses can a limited company claim?

A limited company can usually claim expenses that are incurred wholly for business purposes and are not specifically disallowed by tax rules. The key point is that the cost must belong to the company’s trade, not the director personally. Some costs reduce taxable profit directly, while others, such as equipment and vehicles, may need capital allowance treatment instead.

GOV.UK’s company expenses guidance explains that companies can deduct some running costs when working out taxable profit before paying Corporation Tax.

Merranti’s business expense guide is a useful starting point because many business owners ask “can I claim this?” when the real question is whether the cost is genuinely business-related, properly evidenced, and treated correctly for tax.

The basic rule for company expenses

The starting point is simple.

A limited company can usually claim costs that are incurred for the business.

But the practical answer is often more complicated.

GOV.UK’s Corporation Tax expenses guidance explains that, to decide whether a company can deduct a cost, you need to know whether it is capital or revenue, and whether it only has a business purpose.

That means the company needs to ask:

was the cost paid by the company or reimbursed by the company?
was the cost for the company’s trade?
was there any personal use?
is the cost revenue or capital?
is the cost specifically disallowed?
is there a proper invoice or receipt?
has the cost been recorded correctly?

A cost does not become allowable just because it was paid from the company bank account.

That is a common mistake.

Merranti’s guide on the tax risks of mixing personal and business money is useful because company funds and personal funds should be kept separate.

Revenue expenses vs capital expenses

A major distinction is between revenue expenses and capital expenses.

Revenue expenses are day-to-day running costs. These are usually regular or recurring costs linked to operating the business.

Examples can include accountancy fees, software subscriptions, insurance, office costs, telephone costs, marketing, training and travel.

Capital expenses are usually costs of buying, improving or selling longer-term assets.

GOV.UK’s Corporation Tax expenses guidance gives examples of capital expenses, such as buying a van used by the business, buying land, or buying a server used for several years.

This matters because revenue expenses may reduce taxable profit directly, while capital expenses may need capital allowances instead.

GOV.UK’s allowances and reliefs guidance explains that companies may be able to claim capital allowances on assets kept for use in the business, such as equipment, machinery and business vehicles.

Merranti’s Corporation Tax guide is useful here because Corporation Tax is based on taxable profit, not just the cash left in the company bank account.

Common expenses a limited company may claim

A limited company may be able to claim many normal business running costs.

These can include:

accountancy fees
bookkeeping fees
business insurance
software subscriptions
website costs
marketing and advertising
office rent
office supplies
postage and stationery
telephone and internet costs
business travel
training costs
professional subscriptions
bank charges
equipment used for the business
staff wages
employer pension contributions
subcontractor costs

The exact treatment depends on the facts.

For example, software might be a normal monthly subscription, or it might be part of a larger capital project.

Training might be allowable where it updates existing business knowledge, but not always where it creates a completely new trade or personal qualification.

Telephone and internet costs may need adjustment if there is personal use.

That is why expense claims should be reviewed by category, not guessed from the bank feed.

Merranti’s business expense guide explains why the same type of cost can be allowable in one case and restricted in another.

Personal costs are not company expenses

A limited company is separate from its director.

This means the company cannot simply claim the director’s personal costs as business expenses.

Personal costs might include:

family meals
personal clothing
holidays
home groceries
school fees
personal entertainment
commuting from home to a normal workplace
personal mortgage or rent
non-business subscriptions
private travel
personal tax bills

If the company pays for personal costs, the payment may need to be treated as salary, a benefit in kind, a dividend, or a director’s loan.

It should not normally be posted as a normal business expense.

Merranti’s guide on mixing personal and business money is relevant because personal spending through the company can create tax issues even where the director owns the business.

Owning the company does not mean the company’s money is personally yours.

Business entertaining is usually disallowed

Client entertaining is one of the most common areas of confusion.

A company may pay for a meal with a client, but that does not automatically mean the cost reduces taxable profit.

GOV.UK’s company expenses guidance gives entertaining clients as an example of a specifically disallowed expense.

This means the cost may appear in the accounts, but it is usually added back when calculating Corporation Tax.

Examples can include:

client meals
hospitality events
tickets to sporting events
gifts that do not meet the business gift rules
social entertainment for customers

Staff entertaining is different and may be allowable in some cases, especially where it is available to employees generally and meets the relevant conditions.

The distinction matters.

Client entertaining and staff entertaining are not the same tax category.

Travel expenses need the right purpose

Travel can be allowable where it is genuinely business travel.

This may include travel to client sites, supplier meetings, temporary workplaces, business conferences or work-related events.

However, travel between home and a normal permanent workplace is usually ordinary commuting and is not normally allowable.

For company directors, this can create grey areas.

If the director works from home and travels to different client sites, the position may be different from a director who travels from home to the same company office every day.

Travel should be supported by records showing:

where the trip was
why it was business-related
who attended
the date
the mileage or fare
the receipt or invoice

If mileage is claimed, mileage logs should be kept.

Merranti’s business expense guide is useful because travel, meals and subsistence are often misunderstood.

Working from home costs

A limited company director may be able to claim some home working costs, but the rules need care.

The company may reimburse certain additional home working costs, or there may be a formal arrangement where the company pays rent for business use of part of the home.

However, claiming too much can create other problems.

For example, exclusive business use of part of a home may create Capital Gains Tax concerns when the property is sold.

Merranti’s home working expenses guide is useful because the rules differ between limited company directors, sole traders and landlords.

Merranti’s work-from-home relief update is also relevant where employees or directors are considering home-working support after April 2026.

The safe answer is not always “claim the maximum”.

The better answer is to claim a reasonable amount that is supported by evidence and does not create a bigger tax issue elsewhere.

Equipment and assets

Equipment bought for the company can often receive tax relief, but the route may be through capital allowances rather than direct expense deduction.

Examples can include:

computers
laptops
printers
tools
machinery
office furniture
servers
business vehicles

GOV.UK’s allowances and reliefs guidance explains that companies may be able to claim capital allowances where they buy assets kept for use in the business.

This distinction is important.

A laptop used by the company may be a valid business cost, but it may not be treated in the same way as a monthly software subscription.

The tax treatment depends on whether the cost is revenue or capital.

There may also be a benefit in kind issue if the director or employee has significant personal use of an asset provided by the company.

Company vehicles need extra care

Vehicles are one of the areas where directors often make expensive assumptions.

A company car can create a benefit in kind charge if it is available for private use.

The tax position depends on the type of vehicle, emissions, list price, private use and whether fuel is provided.

A van may be treated differently from a car, but the facts still matter.

Merranti’s company vehicles and tax guide is useful because buying a vehicle through the company can affect Corporation Tax, VAT, personal tax, Class 1A National Insurance and cash flow.

The company should not buy a vehicle only because “it saves tax”.

The full tax cost should be reviewed first.

Director expenses and reimbursements

A director may personally pay for a genuine company cost and then be reimbursed by the company.

That can be fine where the cost is genuinely for the company and properly evidenced.

Examples might include:

parking for a client meeting
train tickets for business travel
software bought personally for company use
small office supplies
business postage
subsistence during business travel

However, reimbursements should be supported by receipts and recorded properly.

If the director regularly pays company costs personally, it can make bookkeeping harder and increase the risk of missed or duplicated claims.

A cleaner approach is to use the company bank account or company card for business costs, while keeping personal spending separate.

Merranti’s guide on the tax risks of mixing personal and business money explains why unclear payments can create director loan account and tax issues.

Corporation Tax is affected by expense claims

Allowable expenses reduce taxable profit.

That can reduce Corporation Tax.

But incorrect claims can cause problems if HMRC reviews the company’s tax return.

GOV.UK’s company expenses guidance says companies need to understand the difference between revenue and capital expenses to correctly deduct costs.

This matters more now because Corporation Tax rates can vary depending on profit levels.

Merranti’s Corporation Tax marginal relief guide is relevant for companies with profits between the lower and upper Corporation Tax thresholds, because the effective rate can change as profit changes.

A missed expense can mean paying too much tax.

An incorrect expense can mean penalties, interest and extra work later.

Both are problems.

Records matter as much as the expense itself

A valid expense needs evidence.

Bank statements alone are often not enough.

The company should keep:

invoices
receipts
contracts
mileage logs
expense claims
supplier statements
payment records
notes explaining business purpose
board minutes where relevant
dividend and loan records separately

Merranti’s HMRC records guide is useful because tax claims are only as strong as the records behind them.

If HMRC asks why a cost was claimed, the company should be able to explain it.

A vague transaction description in bookkeeping software is not a substitute for evidence.

Common company expense mistakes

The first mistake is claiming personal costs as company expenses.

This can create director loan, benefit in kind, salary or dividend issues.

The second mistake is treating all equipment as a normal expense.

Some items are capital assets and may need capital allowance treatment.

The third mistake is claiming client entertaining.

Client entertaining is commonly disallowed for Corporation Tax.

The fourth mistake is forgetting private use.

If an asset or service has personal use, the tax treatment may change.

The fifth mistake is losing receipts.

Without evidence, even a genuine business cost may be difficult to defend.

The sixth mistake is relying completely on bookkeeping software.

Software can categorise transactions, but it does not decide whether an expense is allowable, capital, disallowed, private, or a benefit in kind.

Speak to Merranti before your year end

Limited company expenses are not just about collecting receipts.

A proper review should check whether costs are business-related, revenue or capital, supported by evidence, correctly posted, and not creating personal tax issues for directors or employees.

Merranti’s business expense guide, Corporation Tax guide, Corporation Tax marginal relief guide, home working expenses guide, company vehicles guide and HMRC records guide are useful starting points.

If you run a limited company and are unsure whether your expenses are being claimed correctly, contact Merranti Accounting before your year end so the records, tax treatment and Corporation Tax position can be reviewed properly.

What expenses can a limited company claim?

A limited company can usually claim costs that are incurred wholly for business purposes, provided they are not specifically disallowed and are treated correctly for tax. GOV.UK’s company expenses guidance explains the basic rule.

Can a limited company claim personal expenses?

No, not as normal business expenses. If the company pays personal costs for a director or employee, the payment may need to be treated as salary, a benefit, a dividend or a director’s loan.

Can a company claim client entertaining?

Usually no. GOV.UK’s company expenses guidance gives entertaining clients as an example of a specifically disallowed expense.

Can a company claim equipment?

Yes, but equipment may need capital allowance treatment rather than being deducted as a normal revenue expense. GOV.UK’s allowances and reliefs guidance explains capital allowances for business assets.

Can a director claim home working costs?

Sometimes, but the method and amount need care. Merranti’s home working expenses guide explains the issues for directors, self-employed people and landlords.

Do I need receipts for company expenses?

Yes. The company should keep invoices, receipts and records showing the business purpose of the cost. Merranti’s HMRC records guide explains what records businesses should keep.