Can I Claim Bank Charges as a Business Expense?
Yes - business bank charges and fees are fully deductible.
What HMRC Says
Bank charges for business accounts are allowable expenses.
When You Can Claim
- Monthly account fees
- Transaction fees
- International transfer fees
- Card processing fees
- Overdraft fees
When You Cannot Claim
- Personal bank charges
- Charges due to personal mismanagement
Understanding Bank Charges Expenses
Bank charges on your business bank account are one of the most straightforward expenses to claim. Any fee charged by your bank in connection with operating your business account is an allowable deduction against Corporation Tax. This includes monthly account maintenance fees, transaction charges, CHAPS and Faster Payment fees, international wire transfer fees, foreign currency conversion charges, direct debit and standing order fees, overdraft arrangement fees, overdraft interest, and charges for additional services like business debit cards or cheque books.
The principle is simple: if the charge arises from operating your company's bank account, it is a business expense. There is no apportionment needed because your business bank account should only be used for business transactions. If you are using a personal bank account for business (which you should not be doing as a limited company), HMRC would expect you to apportion charges between business and personal use — but the correct approach is always to have a dedicated business account.
Overdraft interest and arrangement fees deserve specific mention. Interest paid on a business overdraft is deductible as a finance cost. This applies whether the overdraft is authorised or unauthorised, although excessive unauthorised overdraft fees may prompt questions about the financial management of the business. The interest is deductible because borrowing to fund business operations is a legitimate business activity.
For companies that receive payments from overseas, foreign exchange fees and currency conversion charges are deductible. Banks typically charge 1-3% for currency conversion, and these costs add up quickly for businesses with international clients. Similarly, SWIFT fees for international transfers (typically £10-25 per transfer) are deductible.
VAT treatment is important: most bank charges are exempt from VAT, meaning there is no VAT to reclaim. This is because financial services are VAT-exempt under UK law. However, some ancillary bank services (like safe deposit boxes or specific reporting services) may include VAT — always check the bank statement or invoice. Because bank charges are VAT-exempt, they go into your accounts net with no input VAT to reclaim.
Real-World Examples
Standard business account fees
A limited company pays £7.50 per month for a Starling business account plus occasional transaction fees totalling £90 over the year. The full £180 annual cost is deductible. Since bank charges are VAT-exempt, there is no VAT to reclaim.
International payment fees
A software company receives payments from US clients via wire transfer. The bank charges £25 per incoming international transfer plus 1.5% currency conversion. Over the year, these fees total £1,800. The entire amount is deductible as a finance cost.
Overdraft interest
A seasonal retail business uses a £15,000 authorised overdraft during quieter months. The annual overdraft arrangement fee is £150 and interest charges total £420 over the year. Both the arrangement fee and the interest are deductible finance costs.
Multiple business bank accounts
A consulting firm maintains a current account with Barclays (£12/month), a savings account with Tide (free), and a foreign currency account with Revolut Business (£25/month). All monthly fees across all business accounts are deductible — there is no restriction on the number of business accounts a company can operate.
Common Mistakes to Avoid
- Overlooking bank charges entirely in the accounts — they are small individually but can add up to hundreds of pounds per year, especially with international transactions
- Using a personal bank account for business and then struggling to separate personal and business charges — always maintain a dedicated business bank account
- Assuming overdraft interest is not deductible because it results from cashflow difficulties — all business borrowing costs are allowable regardless of the reason for the borrowing
- Trying to reclaim VAT on bank charges — most bank charges are VAT-exempt, so there is no VAT to reclaim in most cases
Frequently Asked Questions
Are business bank charges tax deductible?
Yes, all charges on your business bank account are deductible against Corporation Tax. This includes monthly fees, transaction charges, international transfer fees, overdraft interest, and card charges. They reduce your taxable profit pound for pound.
Can I claim overdraft fees as a business expense?
Yes, both overdraft arrangement fees and overdraft interest on a business account are deductible as finance costs. This applies to authorised and unauthorised overdrafts, though maintaining proper credit facilities is obviously preferable for the business.
Is there VAT on bank charges?
Most bank charges are VAT-exempt under UK financial services VAT exemptions. This means there is no VAT charged and none to reclaim. Some ancillary banking services may include VAT, but standard account fees, transaction charges, and interest are exempt.
Can I claim foreign exchange fees through my company?
Yes, currency conversion fees and foreign exchange charges on your business bank account are deductible. If your company receives or makes payments in foreign currencies, all associated bank charges are allowable business expenses.
Should I use a free business bank account to save on charges?
Free business accounts reduce costs but may have hidden limitations like transaction caps or fewer features. The bank charges on a paid account are fully tax-deductible, so the effective cost is reduced by your Corporation Tax rate. A £10/month account effectively costs £7.50 after 25% CT relief.
Source: HMRC Business Income Manual BIM45800 (Interest and finance charges) and BIM35000 (General business expenses)
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