Running a limited company comes with a wide range of costs, from accounting fees and software subscriptions to travel, equipment and marketing. Understanding which of these costs can be claimed as limited company expenses is important, as allowable expenses can reduce the amount of profit your company pays Corporation Tax on.
However, not every cost paid by a company automatically qualifies. There are rules around what can be deducted, particularly where an expense has both a business and personal element.
This guide covers some of the most common limited company expenses, along with a few areas where the rules can be less straightforward.
What Are Allowable Expenses for a Limited Company?
Generally, an expense must be incurred for a genuine business purpose to be deductible when calculating your company’s taxable profits. Some types of expenditure are specifically excluded, while larger purchases and long-term assets may be treated differently through capital allowances. You can find further guidance on allowances, expenses and reliefs for businesses on GOV.UK.
The allowable expenses a limited company can claim will therefore depend on the nature of the business, what the money was spent on and how the purchase is used.
For those who have recently incorporated or are considering setting up a company, getting these processes right from the beginning can make managing your finances much easier. Our Business Start Ups & Growth team can provide support with everything from business structure and accounting systems to ongoing financial management.
What Expenses Can I Claim Through a Limited Company?
Although every business is different, there are several common categories of expenditure that limited companies may be able to claim.
Office and Business Running Costs
Many of the everyday costs involved in operating your business can be treated as allowable expenses. These may include:
- Office rent and business premises costs
- Stationery and printing
- Postage
- Business telephone costs
- Software and online subscriptions
- Website hosting
- Business insurance
- Bank charges
Where something is used for both business and personal purposes, the treatment can become more complicated, so it is important to keep a clear record of how the expense relates to the company.
Accountancy and Professional Fees
Fees paid for professional services required by the company are another common business expense. This can include accountancy fees, bookkeeping costs and certain legal and professional services.
Working with an accountant can also help ensure your expenses are recorded correctly and reflected accurately in your annual accounts. MGRW+ provides comprehensive Accountancy & Audit services to help limited companies keep their financial reporting accurate, compliant and up to date.
Salaries and Staff Costs
The cost of employing people to work within the business can usually be included when calculating company profits. Depending on the circumstances, this may include:
- Employee salaries and wages
- Employer National Insurance contributions
- Pension contributions
- Recruitment costs
- Relevant employee training
- Certain staff benefits
Different tax rules can apply to particular employee benefits and expenses, so these should always be considered individually.
Travel and Business Mileage
Travel costs can also be allowable where the journey is necessary for business purposes. Examples could include travelling to meet a client, attending a temporary workplace or visiting another business location.
Relevant costs may include train fares, parking charges, accommodation and certain meal costs while travelling for business.
If you use your own vehicle for qualifying business journeys, the company may also be able to reimburse you for business mileage. Ordinary commuting between your home and a permanent workplace, however, is generally treated differently.
Equipment and Technology
Most businesses need equipment to operate, whether that means laptops and monitors for an office-based company or specialist machinery and tools for a trade.
Depending on what has been purchased and how it will be used, equipment may qualify for tax relief. Larger purchases or assets expected to remain in the business for a longer period may need to be treated as capital expenditure rather than an everyday business expense.
The correct treatment can vary, so it is worth checking before assuming the full cost can simply be deducted from your profits.
Marketing and Advertising
Costs incurred promoting your company will commonly have a clear business purpose and can include:
- Digital advertising
- Search engine optimisation
- Website development and maintenance
- Print advertising
- Brochures and promotional materials
- Sponsorship and certain promotional activities
- Marketing agency fees
These costs can quickly add up, so making sure they are properly recorded can help give you a more accurate picture of the company’s profitability.
Working From Home
If you run your limited company from home, there may also be opportunities for the company to contribute towards certain home-working costs.
Exactly what can be claimed will depend on how you work from home and the arrangements in place. It is particularly important to separate genuine business costs from ordinary household expenses, rather than simply putting personal bills through the company.
What Expenses Can’t a Limited Company Claim?
Knowing what you cannot claim is just as important as identifying allowable expenses.
Personal purchases with no genuine business purpose cannot normally be deducted simply because they were paid from the company bank account. Client entertaining is also generally excluded when calculating taxable business profits, despite potentially being a legitimate business activity.
Other costs may be restricted or require a different tax treatment depending on the circumstances.
If you are uncertain whether a particular purchase qualifies, it is usually better to check before including it as an expense.
Why Is It Important to Keep Accurate Expense Records?
Keeping clear records makes it easier to demonstrate what your company has spent and why. Receipts, invoices and supporting information should therefore be retained alongside accurate accounting records.
This not only helps when preparing your annual accounts but can also reduce the risk of missing legitimate expenses or incorrectly claiming costs that should not have been deducted.
Professional Tax Compliance support can help ensure your Corporation Tax calculations and returns correctly reflect the income, expenses and allowances relevant to your company.
Need Help With Your Limited Company Expenses?
Understanding what expenses you can claim through a limited company can help you manage your finances and avoid paying more tax than necessary. At MGRW+, our experienced accountants can help you identify relevant expenses, keep accurate records and manage your Corporation Tax obligations.
Get in touch with our team today to discuss your limited company accounts and find out how we can support your business.