Limited Company Expenses: What Directors Can Claim in 2025/26

The Accounted Business Team·12 March 2026·7 min read

Every pound your limited company spends on allowable business expenses is a pound that does not get taxed as profit. At a Corporation Tax rate of up to 25%, that is a meaningful saving. Yet many directors either miss legitimate claims or push the boundaries into dangerous territory.

This guide sets out exactly what you can and cannot claim through your limited company for the 2025/26 tax year, with specific figures and rules so you know where you stand.

The Basic Rule

An expense is allowable if it is incurred "wholly and exclusively" for the purposes of the business. If something has a dual purpose — part business, part personal — it generally cannot be claimed in full. Some costs can be apportioned, but the rules are strict.

Your company pays for legitimate business costs. Those costs reduce its taxable profits. Less profit means less Corporation Tax. That is the mechanism.

Office and Premises Costs

If your company rents office space, the rent, business rates, utilities, insurance, and maintenance costs are all fully deductible. If you share space, claim only the business portion.

Working from Home

If you work from home as a director, your company can pay you a tax-free allowance for the use of your home. HMRC accepts two approaches:

Flat rate method: Your company can pay you £6 per week (£26 per month) without any receipts or calculations needed. This covers additional household costs like heating, lighting, and broadband used for work.

Actual cost method: You calculate the actual additional costs of working from home — the proportion of your electricity, gas, broadband, council tax, and so on that relates to business use. This usually gives a higher figure but requires evidence and calculations. Your company then reimburses you for that amount.

Either way, the payment from the company to you is tax-free, and the company gets a Corporation Tax deduction.

Travel and Mileage

Using Your Own Car for Business

If you use your personal car for business journeys, your company can reimburse you at HMRC's approved mileage rates:

| Vehicle | First 10,000 miles | After 10,000 miles | |---|---|---| | Car or van | 45p per mile | 25p per mile | | Motorcycle | 24p per mile | 24p per mile | | Bicycle | 20p per mile | 20p per mile |

These payments are tax-free to you and deductible for the company. Keep a mileage log with the date, destination, purpose of the trip, and miles driven.

Important: Commuting from home to a permanent workplace does not count as business travel. But if your home is your business premises and you drive to a client site, that is a business journey.

Company Car vs Mileage

Running a car through the company can trigger a Benefit in Kind (BiK) tax charge on you personally. For most directors of small companies, claiming mileage on a personal car is simpler and often cheaper overall. The exception is electric vehicles, where the BiK rate is very low (2% in 2025/26 rising to 3% in 2026/27), making a company electric car worth considering.

Other Travel Costs

Train tickets, flights, taxis, parking fees, congestion charges, and hotel stays for business trips are all allowable. Subsistence (meals) while travelling on business is also deductible, but keep the receipts.

Staff and Employment Costs

Salaries and Pensions

All salaries, wages, bonuses, and employer pension contributions are deductible. Employer National Insurance contributions are also an allowable cost.

Training

Training courses that maintain or improve skills needed for the business are deductible. A plumbing company director attending a gas safety update course — fully deductible. A plumbing company director paying for a personal cooking class — not deductible.

Trivial Benefits — the £50 Rule

Your company can give you (and other employees) small gifts and perks tax-free, as long as each one:

Costs £50 or less (including VAT)
Is not cash or a cash voucher
Is not a reward for work or performance
Is not part of a contractual obligation

There is an annual cap of £300 for directors (and their family members who work for the company). This is per tax year.

Common trivial benefits include a birthday gift, a bottle of wine, or a supermarket voucher at Christmas. Each instance must be £50 or under, and you can have multiple throughout the year up to the £300 cap.

Annual Events and Parties

Your company can spend up to £150 per head per year on annual events that are open to all employees. This covers the Christmas party, a summer event, or both — as long as the combined cost per head stays at or under £150 (including VAT).

If you go over £150 per head, the entire amount becomes taxable — not just the excess. So watch the budget carefully. The cost per head includes transport, food, drink, entertainment, accommodation, and everything else related to the event.

For a single-director company, this means you can throw yourself a Christmas dinner worth up to £150 and put it through the business. If you have a spouse or partner who also works for the company, they get the allowance too.

Professional Subscriptions and Software

Subscriptions to professional bodies relevant to your trade are deductible. So is business software — accounting packages, project management tools, industry-specific software, and your Microsoft 365 or Google Workspace subscription.

Your phone and broadband costs are deductible to the extent they are used for business. If you have a dedicated business mobile, the whole cost is allowable. If you use a personal phone for business, claim the business portion.

Insurance

Business insurance premiums are deductible. This includes:

Professional indemnity insurance
Public liability insurance
Employer's liability insurance (compulsory if you have employees)
Business contents and equipment insurance
Key person insurance (with conditions)
IR35 investigation insurance

Directors' personal life insurance is not an allowable company expense unless it is set up as a relevant life policy, which has specific rules and can be very tax-efficient.

Equipment and Tools

Items bought for business use are deductible. Under the Annual Investment Allowance (AIA), your company can claim 100% tax relief on up to £1 million of plant and machinery expenditure in a year. For most small companies, this means you get full tax relief on every piece of equipment you buy.

This covers computers, laptops, phones, office furniture, tools, machinery, and vehicles (with special rules for cars).

Laptops and Phones

If the company buys a laptop or phone that is available for personal use, technically this could be a BiK. However, HMRC generally does not pursue this where the personal use is incidental and the items are needed for work.

Marketing and Advertising

Website costs, advertising, business cards, flyers, Google Ads, social media advertising, and PR costs are all deductible. So are gifts to clients, up to £50 per person per year, as long as the gift includes a conspicuous advertisement for your business (a branded pen counts, a bottle of champagne does not unless it has your logo on it).

Accountancy and Legal Fees

Fees for your accountant, bookkeeper, and tax adviser are deductible. Legal fees relating to the business (contract reviews, debt recovery, employment law advice) are also deductible. Legal fees for buying property for personal use are not.

What You Cannot Claim

Some costs that directors commonly try to claim but should not:

Client entertaining. Meals and drinks with clients are not deductible for Corporation Tax, even though they are a genuine business cost. You can still pay for them through the company, but they will not reduce your tax bill.
Clothing. Normal clothing, even if you only wear it for work, is not deductible. Protective clothing, uniforms with a permanent logo, and costumes are deductible.
Fines and penalties. Parking tickets, speeding fines, and HMRC penalties are not allowable.
Personal expenses. Anything that is not for the business cannot go through the company. If it does, it will be treated as a benefit in kind or a director's loan, both of which create tax problems.

Keeping Records

You must keep receipts and records for all expenses. HMRC can request evidence during an enquiry, and "I lost the receipt" is not a defence.

This is where good bookkeeping software earns its keep. With Accounted, you can scan receipts on the go and Penny matches them to transactions automatically. Every expense is categorised, timestamped, and stored — giving you a clean audit trail without the shoebox of crumpled receipts.

Want to make sure you are claiming everything you are entitled to? Start your free trial of Accounted and let Penny track your company expenses in real time. You will save time, reduce your tax bill, and sleep better knowing your records are in order.

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