Your business has costs to deal with and pay as part of their day-to-day trade and as part of ad hoc strategies. They typically range from phone line bills, postage and stationery to computer software and travel costs. Being the owner of your limited company, you can claim corporation tax relief on these costs as allowable expenses for Limited Companies, which helps you keep your company tax efficient.
Being aware of which costs are allowable expenses for Limited Companies and which aren’t can significantly help with your tax obligations.
Let’s get into more detail.
Allowable Expenses for Limited companies: the fundamental rules
When filing business expenses for your limited company, follow these guidelines:
- Only expenses incurred wholly and exclusively for your business operations are claimable.
- Expenses serving both business and personal purposes are partially non-claimable. For instance, if a business trip is extended for leisure, only the days spent on business activities are eligible for claims.
- You can pay business expenses directly from your company’s account, or personally pay and later get reimbursed by your company. Keep the receipt!
- Most allowable expenses for limited companies can reduce your corporation tax liability, but there are exceptions, such as costs related to business entertainment.
- Keep detailed records of all expenses from the inception of your company, including VAT receipts, to support your claims in case of any inquiries about your expense claims.
How to claim allowable expenses for your limited company
If you opt to cover your limited company’s expenses personally, you have the option to use the company’s funds directly or get reimbursed later. It’s also important for employees to be able to claim expenses. Therefore, establishing a clear company expense policy and form is crucial, so everyone is on the same page about allowable spending limits and criteria. Make sure your staff save all receipts and submit their expense forms. HMRC can ask for these!
How to keep a record of limited company business expenses
When it comes to record-keeping, we believe it’s essential for managing your limited company’s business expenses. Inaccurate records could lead to HMRC denying your expense claims. Maintain both physical and digital copies of your receipts. Consider creating an allowable expense spreadsheet that you can regularly update and modify over the course of the year.
Limited company expenses you can claim.
We get asked the same question all the time, ‘is there a list of allowable expenses for my limited company’. The short answer is yes, there is a list. However as not all businesses operate in the same industry and with the same circumstances, there isn’t one list to work from. This is why its important to always revert back to the wholly and exclusively for the business test.
Below are some of the general expenses majority of businesses should be claiming.
General allowable expenses for Limited Companies
| Expense Category | Notes |
| Health Check and Eye Test Expenses | Allowable in full |
| Business Insurance Expenses | Allowable in full |
| Advertising, Marketing, and PR Expenses | Allowable in full |
| Accommodation Expenses for Business Trips | Allowable in full |
| Bank Charges | Allowable in full |
| Use of Home as Office | Allowable in full |
| Professional Subscription Expenses | Allowable in full |
| Phone Bills | Allowable in full |
| Annual Staff Party Expenses | Capped at £150 per person |
| Equipment Expenses | Allowable in full |
| Professional Development Expenses | Allowable in full |
| Start-up Costs | Allowable in full |
| Salary and Wages | Allowable in full |
| Pension Contributions | Capped at £40,000 per year |
Gifts, entertainment, and trivial benefits
Trivial Benefits
There’s no requirement to pay tax, National Insurance, or report to HMRC for a trivial benefit (a minor gift or benefit) provided to an employee, as long as it meets these conditions:
- Not specified in their employment contract.
- Not given as a reward for their work or performance.
- Not in the form of cash or a cash voucher.
- The amount is £50 or less.
However, if the gift or benefit you provide to your employees does not meet all these criteria, you will be required to pay tax on them.
Travel expenses
Travel costs are an allowable expense for a limited company so long as the expenses are your responsibility to pay, and the travel is essential for business activities. This does not include any regular commute such as from home to your permanent workplace.
For travel to a temporary workplace using your personal vehicle, and if you’ve covered the fuel costs yourself, you can claim these rates:
- Cars and vans: 45p per mile for the first 10,000 miles, then 25p per mile thereafter.
- Motorcycles: 24p per mile.
- Bicycles: 20p per mile.
Claiming these rates reduces your overall Corporation Tax liability and allows for self-reimbursement of the claimed amount.
In addition to the mileage rates, the likes or parking costs and road tolls can also be claimed as business expenses:
Entertainment expenses
Typically, expenses incurred on business entertainment do not qualify as deductible against profits. However, if you, as a director of a limited company, personally incur such expenses as part of your role, they might be claimable as business expenses. Nonetheless, these entertainment costs will not be deductible for the company’s profits, effectively rendering the claim neutral in terms of financial impact.
Support for Limited Companies
Our team is dedicated to helping limited companies be as tax efficient as possible. Understanding how to do this as a company director is crucial, and we’re here to offer the necessary guidance and support. If you find this guide insightful, we advise consulting with us before taking any actions based on this information to guarantee the most appropriate course of action.
Please note that if you take or avoid actions based solely on this article without our explicit advice, we cannot be held responsible for any financial repercussions that may ensue.
