What Expenses Can Company Directors Claim?
For fifteen years, HMRC's main mileage rate sat at 45p a mile. It had been that figure since April 2011. From 6 April 2026, it's 55p for the first 10,000 business miles in a tax year. That one change is worth hundreds of pounds a year to a director who drives to clients, and plenty of directors I speak to still haven't noticed.
It's a good reminder of something I tell clients across Tunbridge Wells, Tonbridge and Sevenoaks all the time. Business expenses are not a set of fixed rules you learn once. They shift, they have limits, and they reward the people who pay attention. Claim too little, and you hand money to HMRC that you didn't need to. Claim the wrong things, and you risk a letter you'd rather not receive.
So let's go through it properly. What can a limited company claim, what can't it, and where do directors most often get it wrong? I'll cover office costs, travel, staff, professional fees and technology, then finish with the mistakes I see most often.
Before the lists, one principle. For an expense to reduce your company's Corporation Tax, it has to be incurred "wholly and exclusively" for the purposes of the business. That's the test, and almost every rule I'm about to describe is a version of it.
Wholly means the whole cost is for the business. Exclusively means there's no other purpose, such as a private one. A laptop used only for work passes. A family holiday with one client meeting added on does not. Where a cost is mixed, such as a phone used for both work and personal calls, you can usually claim only the business share.
Two other ideas are worth knowing. First, HMRC separates day-to-day running costs, which are generally deductible straight away, from capital costs like equipment and vehicles, which are dealt with through capital allowances. Second, the company is a separate legal person. If you pay for a business cost personally, the company can reimburse you. If the company pays for a personal cost, it becomes a benefit or a loan. I've covered that second point in our guide to director's loan accounts, and it comes up again below.
Costs that you incurred before the company started trading may also be claimable. Expenses in the seven years before trading begins can generally be treated as incurred on the first day of trading, as long as they would have been allowable had the business been running. Many new directors miss this one.
If your company rents an office, workshop or unit, the rent is an allowable expense. So are business rates, service charges, and the cost of utilities and cleaning that go with the premises. Across Kent and the South East, where commercial rents can be high, these are often a company's largest fixed costs.
The one caution is capital work. Repairs that keep a building in the condition it was in are usually allowable. Improvements, such as building an extension, are normally capital and are treated differently. If you're fitting out new premises, it's worth getting advice before the invoices arrive.
Many directors in this part of the world work from home at least part of the week. The good news is that the company can help with the costs without creating a tax charge.
The simplest route is the household expenses exemption. The company can pay you £6 a week, which is about £26 a month, towards the additional costs of working from home. This is free of income tax and National Insurance, and you don't need receipts. If your actual extra costs are higher, the company can pay more, provided you can evidence them.
A designer I worked with in Tonbridge had been working from a spare bedroom for three years, and had never claimed a penny. The £6 a week alone would have come to over £900 across that time, in tax-free payments from the company. Not a fortune, but money for nothing.
Be careful with the alternative approach of claiming a share of rent, mortgage interest or council tax. These bring complications, including potential issues with capital gains relief on your home, and they're rarely worth the risk for the sums involved. If you're considering it, ask first.
If the company has the contract, phone and broadband costs are allowable to the extent that they're for business. A single mobile phone contract in the company's name is generally exempt from benefit in kind, even if it's used privately as well. Landline and broadband at home are different: only the business share is claimable, so keep a note of how you worked it out.
Printer ink, postage, paper, packaging, cleaning products and the like are straightforward allowable expenses. So are business insurances: public liability, professional indemnity, employers' liability, buildings and contents cover for business premises, and cyber insurance. Insurance for your own life or health is not a business expense unless it's provided in a particular way, so ask before you assume.
If you use your own car or van for business, the company can reimburse you at HMRC's approved mileage rates without any tax charge. From 6 April 2026, the rates are 55p a mile for the first 10,000 business miles in the tax year and 25p a mile after that. Motorcycles are 24p and bicycles 20p. The rate is the same for petrol, diesel, hybrid and electric vehicles.
Keep a mileage log. It doesn't need to be elaborate. A date, a start and end location, a purpose and the miles driven is enough. I'd recommend a simple app or spreadsheet, kept up to date weekly, because rebuilding twelve months of journeys from a diary is miserable.
A company car is a different matter. The company can claim capital allowances on the purchase and deduct running costs, but the director is taxed on the private use as a benefit in kind, and the company pays Class 1A National Insurance on it. For a fully electric car, the benefit-in-kind rate is 4% of the car's list price in 2026–27, rising to 5% in 2027–28, 7% in 2028–29 and 9% in 2029–30. That is far lower than for petrol or diesel, which is why electric company cars have become popular among Kent directors.
The rules for allowances on cars are time-limited and keep changing, and cars don't qualify for the Annual Investment Allowance. If you're thinking of buying a car through the company, speak to us before you sign.
Fares for business journeys are allowable, whether that's a Southeastern train from Tunbridge Wells to London, a taxi to a client site or a flight to a conference. So are hotels, and meals when you're travelling away from your normal place of work on a business trip. Keep the receipts.
Travel to a temporary workplace, such as a client's office, is generally allowable. Directors who work mostly from home can usually treat trips to clients as business travel. But if you attend the same client site regularly for more than 24 months, it may become a permanent workplace in the eyes of HMRC, and the cost is then treated as commuting.
Parking and tolls on business journeys are allowable. Parking fines are not, and neither are speeding fines or other penalties, whatever the circumstances. I once had a client in Sevenoaks pay a string of penalty notices through the company because the van was "a business vehicle". It was, but the fines were still personal.
Wages paid to employees, including your own salary as a director, are allowable, along with employer's National Insurance and employer pension contributions. Staff are the biggest cost for many companies, and the rules for them are the most detailed.
If you employ anyone other than yourself, you may be eligible for the Employment Allowance, which can reduce your employer's National Insurance bill by up to £10,500 a year. A company with a sole employee who is also the director can't claim it, so hiring a first employee can change the picture considerably.
Paying your spouse or a family member through the company is allowable only if they genuinely do the work and are paid a fair amount for it. A spouse who handles invoicing and the company's admin can reasonably be paid for it. A spouse who does nothing, and receives a salary to use up their personal allowance, is the sort of arrangement that gets challenged. Keep a record of what they do, and pay at least the National Minimum Wage.
Training that maintains or updates the skills you already use in the business is allowable. A course in new tax software for an accountant, or a safety update for a builder, fits. Training that gives you a wholly new skill, or sets you up in a different trade, generally does not.
Small gifts to staff can be tax-free as "trivial benefits" if they cost no more than £50 each, aren't cash or a cash voucher, and aren't a reward for work or part of a contract. Directors of small, closely held companies are subject to an overall cap of £300 a year on these.
An annual staff event, such as a Christmas party, is exempt if it costs no more than £150 per head across the year, including VAT, and it is open to all staff. A café owner in Tunbridge Wells once told me about her Christmas lunch at £220 a head. It was a lovely lunch. It also meant the whole amount became taxable, not just the £70 over the limit. The £150 is a threshold, not an allowance.
Your salary as a director is allowable for Corporation Tax. Dividends are not, because they're paid from profit that has already been taxed. That's a reason to think carefully about your salary and dividend mix, which we cover in a separate guide.
The fees you pay for accounts, tax returns, payroll, bookkeeping and tax advice are allowable. So is the cost of dealing with an HMRC enquiry, provided that no penalty for careless or deliberate errors is involved. The penalties themselves aren't allowable, but the professional fees to resolve the enquiry normally are.
Legal fees follow the capital and revenue split. Costs of drafting standard contracts, debt recovery and routine employment advice are allowable. Costs connected with buying a property, acquiring a long lease, or setting up the company are generally capital, and aren't deductible against profits. If you're not sure, ask before assuming.
Payments to freelancers, consultants and subcontractors for services to the business are allowable. If you work in construction, there are extra rules around the Construction Industry Scheme, and different rules apply to certain labour providers. Keep invoices, and check whether the person you're paying has been properly engaged, to avoid issues around employment status.
Subscriptions to professional bodies that appear on HMRC's approved list are allowable. Trade association fees often are. Bank charges, card fees, merchant processing costs and interest on business loans are normally deductible too. A membership of a golf club or a gym, however, is not, even if you do talk shop on the fairway.
Laptops, desktops, tablets, screens, printers, phones and specialist equipment are capital items, and the company claims capital allowances on them rather than deducting the cost directly. For most small businesses, the Annual Investment Allowance lets you deduct up to £1 million of qualifying spending in the year you buy it. Companies can also claim full expensing on certain new plant and machinery. The effect, in practice, is that a £1,500 laptop usually saves about £285 of Corporation Tax at the 19% rate in the year of purchase.
Use matters here. If the equipment is also used privately, particularly by family members, the private use may create a benefit in kind. A laptop that sits in the study and is mainly used for school homework is hard to defend.
Accounting software, project management tools, design subscriptions, cloud storage, security software and similar services are day-to-day running costs, and generally deductible in full as they arise. This is the part of the technology bill that has grown most in recent years, and many directors are paying for tools they no longer use. It's worth reviewing your subscriptions every year.
The cost of building a website, hosting it, registering a domain and running online advertising is generally allowable. A large one-off website build can be treated as capital in some cases, but small businesses can usually treat ordinary website costs as revenue. Social media advertising, search engine optimisation and email marketing platforms are all allowable.
As mentioned above, one mobile phone contract in the company's name is not a taxable benefit, even if it's used privately. Additional phones are different, as are phones bought outright for personal use. If you're unsure whether a particular phone arrangement qualifies, check before relying on the exemption.
Advertising, leaflets, signage, trade shows, business cards and your website are all allowable. So are small gifts to clients if they cost no more than £50 per person in the year, carry a conspicuous advertisement for your company, and aren't food, drink, tobacco or vouchers.
What isn't allowable is entertaining clients. A lunch with a prospect, tickets to a match or dinner after a meeting is not deductible for Corporation Tax, and any VAT on it can't be reclaimed. This catches many directors out. Staff entertainment is treated differently, as the party rule above shows, but client entertainment generally never qualifies.
As above, this is the classic. The cost isn't allowable, even if the lunch led directly to a contract. Keep it separate in your books, so that it's excluded from the Corporation Tax computation cleanly.
Ordinary clothing, even if you wear it only for work, is not allowable. A suit for meetings is still a suit. Protective clothing, uniforms with a logo and costumes for a particular trade can be allowable. A Maidstone electrician I know claimed a new wardrobe of jeans and shirts as "work clothes" for two years. The jeans were not covered.
Travel from home to a permanent workplace is not business travel. For a director with an office, that includes the daily trip there. Where home is your main base, travel to a client is business travel. The line depends on where your place of work is.
Phones, broadband, cars, home heating and laptops used personally all have to be apportioned. The easiest mistake to make is to put the entire bill through the company because it was paid from the company's account.
Streaming services, groceries, gym memberships, holidays and family gifts paid for by the company aren't business costs. If they've been paid from the company's bank account, they sit on your director's loan account and may create a section 455 charge or a benefit in kind. I covered that in detail in our director's loan account guide.
Parking tickets, speeding fines, late filing penalties and HMRC penalties are not allowable.
Buying a van is capital. Servicing it is revenue. Buying a computer is capital. Paying for repairs is revenue. The distinction determines how and when the tax relief arrives. Getting it wrong doesn't usually cost the full amount, but it creates avoidable corrections.
At the other end of the scale, some directors pay business costs from their personal account and never ask the company to reimburse them. The money is lost to the business, and so is the tax relief. If you pay a business cost personally, put it through as an expense claim, with the receipt, or credit it to your director's loan account.
Receipts, invoices, mileage logs and notes on business purpose matter. Company records should be kept for at least six years from the end of the accounting period. An expense you can't evidence is one you may lose in an enquiry.
Quick answer: A limited company can claim costs that are incurred wholly and exclusively for the business: office costs, business travel, staff costs, professional fees, technology, insurance and marketing. It can't claim client entertainment, fines, ordinary clothing, commuting or private costs. Mixed-use costs can be claimed only in proportion to their business use.
What this means for a company director: You're running a separate legal entity, so every cost needs a business reason, a record and a clear label. If you pay for something personally that's for the business, the company can reimburse you. If the company pays for something personal, it can create a tax charge. A little discipline during the year saves a lot of correction at year-end.
Example: A consultancy director drives 9,000 business miles in 2026–27. At 55p a mile, the company reimburses £4,950 tax-free. The director also buys a £1,500 laptop used only for work, and receives £312 for working from home at £6 a week. That's £6,762 of costs. At the 19% Corporation Tax rate, the company saves about £1,285. Under the old 45p rate, the mileage claim would have been £4,050, which is £900 less. The difference is worth about £171 in Corporation Tax on top of the extra cash the director receives.
Common mistakes: Claiming client entertainment; deducting commuting; treating the company bank account as a personal one; claiming mixed-use costs in full; and failing to keep receipts or a mileage log.
When should you speak to an accountant? Before you make a large purchase such as a vehicle, a property fit-out or a major piece of equipment; when you take on your first employee; when you're unsure whether a cost is business or personal; and whenever HMRC asks you to explain a claim.
Good claims depend on good records, and good records don't need to be complicated. Here's the routine I suggest to clients.
Cloud accounting software makes much of this easy. If you're not already using it, it's worth asking us about.
Getting expenses right is not about finding clever tricks. It's about claiming everything you're entitled to, and avoiding what you aren't. At Peter Hodgson & Co, we help company directors across Tunbridge Wells, Tonbridge, Sevenoaks and the wider Kent and South East area get this right, with clear advice and practical systems that fit around a busy working week.
If you'd like a second opinion on what you're claiming, or you're starting a company and want to set things up properly from the beginning, we'd be glad to hear from you. You can complete the "Contact Us" form on our website, call us on 01892 515 733, or send us an email at info@peterhodgson.co.uk.
Disclaimer:
The content of this blog is for general informational purposes only and should not be considered professional tax advice. The information is correct at the time of publishing but may change following future UK budget announcements or updates to HMRC guidance. Individual circumstances vary, and tax obligations can differ based on your personal situation. We strongly recommend consulting with us or a qualified tax professional to receive advice tailored to your specific needs.
Similar Articles
Newsletter
.svg)
.svg)
