What expenses can I claim through my company?
You can claim expenses that are 'wholly and exclusively' for business purposes. This includes travel, equipment, professional subscriptions, training, marketing, and business insurance.
Detailed Explanation
Fully allowable expenses
- Travel to client sites and business meetings (not regular commute) - Mileage at 45p/mile (first 10,000 miles), then 25p/mile - Hotels and subsistence when travelling for business - Equipment: computers, phones, furniture - Software and subscriptions - Professional memberships - Business insurance (not personal) - Accountancy and legal fees - Marketing and advertising - Training relevant to current business - Bank charges and interest on business loans - Business use of home (£6/week or apportioned actual costs)
Partially allowable
- Phone bills (business proportion) - Vehicle costs (if business use only; personal use creates BIK) - Client entertainment (allowable for Corporation Tax, not VAT)
Not allowable
- Personal expenses - Commuting to regular workplace - Clothing (unless protective/uniform) - Fines and penalties - Entertaining suppliers or potential customers (for VAT) - Training for a new career/different business
Keeping records
- Keep receipts for 6 years - Record business purpose - Separate personal and business expenses - Use a business bank account
Source: HMRC Allowable Business Expenses
Real-World Examples
Training for a New Skill
Sarah runs a web design business and wants to learn SEO to improve her client services. The cost of an SEO course is a fully allowable business expense, as it directly enhances the existing business.
Working from Home Expenses
John uses a room in his house exclusively as an office for his consulting business. He can claim a portion of his utility bills (electricity, gas, water) and mortgage interest or rent that corresponds to the percentage of the home used for business purposes. He should keep detailed records for these calculations.
Business Travel
A small architecture firm regularly visits potential construction sites. The fuel costs, train fares, and parking fees incurred while travelling to these sites are deductible business expenses. They maintain mileage logs and receipts to support these claims.
Common Mistakes to Avoid
- Claiming expenses with a 'dual purpose' without properly apportioning the business and personal use, such as claiming the full cost of a phone when it's also used personally.
- Forgetting to keep receipts or sufficient records to substantiate claimed expenses, making them difficult to defend during an HMRC inquiry.
- Claiming for personal expenses disguised as business, such as expensive personal holidays or luxury items, which are unlikely to be 'wholly and exclusively' for business.
- Incorrectly claiming for commuting costs, as travel from home to a regular place of work is generally not allowable.
Frequently Asked Questions
Can I claim for eye tests if I use a computer for work?
Yes, you can claim for the cost of eye tests if you use a computer screen (VDU) for a significant part of your working day. HMRC allows for the cost of the eye test itself and, if required specifically for VDU use, you can also claim for the cost of basic glasses.
What happens if I claim expenses incorrectly?
If you incorrectly claim expenses, HMRC may conduct an investigation and disallow the expenses. This could result in additional tax owed, interest charges on the unpaid tax, and potentially penalties depending on the severity and nature of the error. It is always best to be cautious and seek professional advice when unsure.
Can I claim for entertaining clients?
Client entertaining is generally not an allowable expense for corporation tax purposes, however, there are exceptions for staff entertaining if it is provided equally to all staff and the costs are reasonable.
Are there limits on claiming for office equipment?
While there are no specific monetary limits, the equipment must be reasonable for the business's needs. Also, consider using Annual Investment Allowance (AIA) for large purchases of qualifying plant and machinery (like computers and office equipment) up to £1 million per year. Amounts exceeding AIA are treated as capital allowances.
Practical Tips
- Maintain a separate business bank account to easily track income and expenses, simplifying bookkeeping and tax reporting.
- Use accounting software like AccountsOS to categorise and track your expenses, automatically generating reports for tax purposes.
- Create a clear expense policy for your company, outlining what is and isn't allowable to prevent confusion and errors.
- Regularly review your expenses with your accountant or tax advisor to ensure compliance with HMRC regulations and identify potential areas for tax savings.
Related Questions
Can I claim client lunches as a business expense?
Client entertainment is not tax-deductible for Corporation Tax or VAT purposes. However, the cost comes from pre-tax profits, so there's still some indirect benefit.
Can I buy a car through my company?
Yes, but if you use it personally, you'll pay Benefit in Kind (BIK) tax based on the car's list price and CO2 emissions. Electric cars have the lowest BIK (2% in 2024/25).
What is the mileage allowance?
The Approved Mileage Allowance Payment (AMAP) is 45p per mile for the first 10,000 business miles and 25p per mile thereafter. This covers fuel and running costs.
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