Allowable expenses for a limited company: what directors can claim

A limited company can deduct a cost from its profits before Corporation Tax if it is a day-to-day running cost incurred wholly for the business. Accountancy fees, business travel, a work phone, tools and software all qualify. Some costs are disallowed by law even when they are genuinely for the business, and entertaining clients is the one everybody hits. Bigger purchases, such as vans and equipment, are not deducted as expenses but through capital allowances.

That is the company's half. As a director you are also its employee, so each expense has a second question: is it tax-free for you, or a benefit you pay tax on? This guide answers both.

The two tests every limited company expense has to pass

Test one: can the company deduct it? GOV.UK puts it in two parts. Is the cost revenue (day-to-day running) or capital (buying an asset the company keeps for years)? And does it have only a business purpose? The legal wording, in section 54 of the Corporation Tax Act 2009, is "wholly and exclusively for the purposes of the trade". Pass both and the cost comes off taxable profit.

Test two: is it tax-free for you? Since 6 April 2016, if the company pays or repays an expense you could have claimed tax relief on yourself, such as business travel, it does not have to report it or take tax or National Insurance off. Anything else the company pays for your benefit is either taxed through payroll or reported on a P11D.

The two tests are separate. A cost can pass the first and fail the second, as a gym membership usually does.

What a limited company can claim: the list

Trivial benefits must not be cash or a cash voucher, a reward for work, or in your contract. A "close" company is one run by five or fewer shareholders, which covers most owner-managed companies.

What it is worth

Corporation Tax is 19% on profits of £50,000 or less, 25% on profits over £250,000, with Marginal Relief in between. Both thresholds shrink if you have associated companies or a short accounting period.

So a genuine £1,000 expense saves the company £190 at the small profits rate, or £250 at the main rate. "Put it through the company" is a discount, not a free lunch.

Mileage: your own car, the company's money

If you drive your own car on company business, the company can pay you HMRC's mileage rates and you pay no tax on them:

GOV.UK's example: 12,000 business miles gives an approved amount of £6,000 (10,000 × 55p plus 2,000 × 25p). National Insurance runs on its own scheme, with 55p on every business mile and no drop after 10,000. Pay more than the approved amount and the excess is taxable.

The rate covers fuel, insurance, repairs and the rest, so the company does not also pay for your petrol. Your drive from home to a permanent workplace is private travel, director or not. Travel to a temporary workplace is different, and HMRC's 24-month rule decides which is which. HMRC expects a log behind every claim; our guide to mileage log requirements shows what it should show, and HMRC mileage rates for 2026/27 has the full rates.

Equipment, vans and cars

Anything the company buys to keep, from a laptop to a van, is a capital cost. It cannot be deducted as an expense, but capital allowances usually get you to the same place:

• Annual Investment Allowance: deduct the full cost of most plant and machinery, up to £1 million a year. Not cars.
• Full expensing: companies only. 100% of the cost of new, unused plant and machinery bought from 1 April 2023. Not cars.
• Cars: new, unused electric or zero-emission cars bought before April 2027 get a 100% first-year allowance. Other cars get writing down allowances: 14% a year (18% before April 2026) if CO2 is 50g/km or less, or 6% if it is higher.

Vans, lorries and motorcycles do not count as cars here, so they can use the Annual Investment Allowance. A company car also brings a benefit in kind for you; our guide to advisory fuel rates for company cars covers the fuel side.

Working from home as a director

The company can pay you up to £6 a week (or £26 a month if you are paid monthly) towards extra household costs, tax-free and without receipts, as long as you work from home under an arrangement with the company and do so regularly. It can pay more if your extra costs really are higher, but then you need the evidence. Equipment the company provides, such as a laptop or desk, is exempt if any private use is insignificant.

What you cannot do is borrow the sole trader rules. HMRC's guidance on claiming a share of mortgage interest and Council Tax, and the flat monthly rates, applies to the self-employed only, not to directors.

Personal costs and your director's loan account

If the company pays for something personal, it does not become allowable by going on the company card. It is either taxed as your pay or recorded as money you owe the company, in your director's loan account. If you are also a shareholder and the account is overdrawn at the company's year end and not repaid within nine months, the company pays Corporation Tax at 33.75% on what is still owed. It can reclaim that once the loan is repaid, but not the interest.

Keep the records

Companies must keep records of all money spent, such as receipts, petty cash books and orders, for 6 years from the end of the last financial year they relate to, and longer in some cases. Failing to keep accounting records can mean a £3,000 fine or disqualification as a director. Our guide on how long to keep receipts has the detail, and if the company is VAT-registered, check each receipt is a valid VAT receipt.

Frequently asked questions

What expenses can I claim as a director of a limited company?

Costs you pay for the company's business, such as travel, mileage, training and professional fees, which it can repay you tax-free. Personal costs it pays are taxed as a benefit or pay.

Can a limited company claim mileage?

Yes. It can pay you 55p a mile for your first 10,000 business miles in your own car this tax year, then 25p, tax-free. Keep a mileage log as the record.

Can a limited company claim use of home as an office?

It can pay you up to £6 a week tax-free if you regularly work from home by arrangement, or more with evidence of your extra costs.

Can my limited company pay for my gym membership?

It can, but it is normally a taxable benefit, reported on your P11D. The exemption covers facilities open to all staff and not to the general public, so a membership at a public gym does not qualify.

Can my limited company pay for my eye test or glasses?

Yes, tax-free, if health and safety law requires the eye test because you use a screen for work. Glasses are exempt when they are needed for screen work.

Can my limited company pay for my holiday?

Not as a business expense. A holiday fails the "wholly and exclusively" test, so it is taxed as your pay or owed back through your director's loan account.

Where ClaimSnappy fits

Most directors' expenses go wrong in the same dull way: the receipt is in a coat pocket and the miles are in nobody's head. ClaimSnappy handles the paying-yourself-back part.

Set up a personal desk as someone who works for an employer, with your company as the employer and its mileage rate. Snap or upload receipts, pick a category (Client entertainment and Staff entertainment are separate) and mark each business, personal or split; personal parts are never claimed. Receipts paid on the company card go on the claim as evidence without adding to what you are repaid. Each trip needs a reason, and own-car trips are priced at HMRC's 55p, then 25p after 10,000 business miles.

You build the claim and send it to the company's accounts inbox or your accountant, with the forms as PDF and a CSV of the lines. If there are staff, a business desk lets their claims go to a manager for approval. Your accountant can join free in the accountant portal, where client entertaining lines are flagged, and make import files for Xero, QuickBooks Online or Sage 50.

There is a 30-day trial with no card needed, then Solo is £5 a month, or Team is £25 a month with six people included. See how it works if you claim for yourself or run a team, or compare plans.

ClaimSnappy keeps the records; it does not decide what HMRC will allow. For anything borderline, an accountant is cheaper than a compliance check.