Business Expenses You Can Claim: A Complete UK Guide for Companies, Directors and Self-Employed Business Owners

Running a business means spending money. The important question is not simply how much you spend, but which business expenses you can claim for tax purposes. Claiming allowable expenses correctly can reduce your taxable profit and, ultimately, the tax your business pays. But a business expense is not automatically tax-deductible just because it appears in your accounts or was paid from a business bank account.

For UK businesses, the rules depend partly on how the business operates. A sole trader, partnership and limited company can have different considerations, while VAT-registered businesses must also think about whether VAT is recoverable. This guide explains the main business expenses you can claim, the expenses that commonly cause problems, how to deal with mixed personal and business costs, and what records you should keep.

Important: Tax treatment depends on your circumstances, business structure and the nature of the expense. This article is general guidance rather than personalised tax advice.

What Are Allowable Business Expenses?

An allowable business expense is a cost that can be deducted when calculating taxable business profit, provided it meets the relevant tax rules. For example, suppose a sole trader has:

• £60,000 in business income
• £15,000 of allowable expenses

The taxable business profit would generally be £45,000 rather than £60,000. For a limited company, allowable business costs can reduce the company's taxable profit for Corporation Tax purposes. HMRC confirms that limited companies can deduct qualifying costs of running the business when calculating taxable profit.

The key principle is straightforward: the expense must be genuinely connected with the business and satisfy the relevant tax rules. For trading businesses, HMRC's general rule is that expenditure must be incurred wholly and exclusively for the purposes of the trade. That does not mean every expense must be 100% paid exclusively from a business bank account. It means you need to establish the business purpose and, where appropriate, identify the business proportion.

Business Expenses You Can Usually Claim

There is no single list that covers every business, because a software company will have very different costs from a construction company or restaurant. However, several categories are common across UK businesses.

1. Office and Premises Costs

Businesses can generally claim qualifying costs associated with operating their premises. These may include:

• Rent for business premises
• Business rates
• Electricity and gas
• Water
• Repairs and maintenance
• Cleaning
• Security
• Office furniture and equipment
• Business insurance
• Stationery and printing

The important distinction is between business premises and costs that relate partly to your private life. For example, rent for a dedicated office used exclusively for the company's operations is much easier to classify than rent for a room in your home that is also used as a bedroom.

2. Working From Home

Working from home is increasingly common among founders and small businesses, but home-working expenses require care. A qualifying business may be able to claim an appropriate proportion of household running costs where part of the home is used for business. The calculation may involve costs such as:

• Electricity
• Gas
• Water
• Internet
• Heating
• Certain household expenses

For self-employed people, HMRC also provides simplified expenses for working from home. For the 2026–27 tax year, the flat-rate amounts are £10 per month for 25–50 hours worked from home, £18 for 51–100 hours and £26 for 101 or more hours. The simplified home-working rate does not include telephone or internet costs, which can be considered separately.

Limited company directors should not automatically apply the sole-trader simplified-expenses rules to themselves. The rules for employees and directors can differ, so the company's circumstances and reimbursement arrangements matter.

3. Telephone and Internet

If a phone, broadband connection or other communications service is used for business, the business element may be claimable. The treatment becomes more complicated when there is substantial personal use.

For example, a mobile phone provided primarily for business may be treated differently from a personal contract where the owner simply uses it for occasional business calls. Keep evidence showing how the service relates to the business and avoid automatically putting the entire household communications bill through the company without considering the private element.

4. Software and Online Services

Software subscriptions are now one of the most common expenses for modern businesses. Potential examples include:

• Accounting software
• Cloud storage
• Website hosting
• Domain registration
• Project-management tools
• Cybersecurity software
• Design software
• Customer relationship management systems
• Email platforms
• Video-conferencing services
• Business AI tools
• Data and research subscriptions

If a subscription is genuinely used for the business, it will often be a straightforward business cost. However, where a subscription is partly personal, you should consider whether an identifiable business proportion can be claimed.

Business Travel and Mileage

Travel is another area where businesses can legitimately incur significant expenses. For self-employed businesses, HMRC identifies qualifying travel costs such as business journeys by train, bus, tram, air and taxi, as well as hotel accommodation and meals on qualifying overnight business trips. Ordinary private travel and fines are not allowable.

What About Travel From Home to Work?

This is a common source of confusion. Travel between home and a normal workplace is generally not treated in the same way as a genuine business journey. By contrast, travelling to a temporary workplace or travelling between business locations can potentially qualify, depending on the circumstances. The reason for the journey matters just as much as the fact that you travelled.

Mileage Claims

If you use your own vehicle for business journeys, you may be able to use approved mileage rates or, depending on your circumstances, claim actual allowable vehicle costs. For self-employed people using simplified expenses, HMRC's mileage rates for cars and goods vehicles for 2026–27 are 55p per mile for the first 10,000 business miles and 25p thereafter. Motorcycles have a 24p rate. Keep a mileage record showing:

• Date
• Destination
• Reason for the journey
• Business miles
• Vehicle used

A vague entry such as "business travel" is much less useful than "client meeting – Abuja House, London" or another precise description.

Professional Fees and Business Services

Professional services are another major category of legitimate business expenditure. Depending on the circumstances, these can include:

• Accountant's fees
• Bookkeeping
• Solicitor's fees
• Business consultancy
• Tax advice
• Audit fees
• Professional memberships
• Business formation services
• Certain regulatory or compliance services

The underlying purpose matters. Professional advice obtained to operate or manage the business is fundamentally different from legal advice relating solely to a founder's personal affairs. For an international founder operating a UK company, this distinction is particularly important. A company may legitimately pay for services necessary to maintain its UK business, but personal immigration, private investment or unrelated personal advisory costs should not simply be classified as company expenses.

Advertising, Marketing and Website Costs

Businesses can generally incur substantial marketing expenditure in the ordinary course of trading. Examples include:

• Google or social media advertising
• Website development
• SEO services
• Graphic design
• Photography
• Promotional materials
• Business cards
• Email marketing
• PR services
• Content production
• Trade-show costs
• Sponsorship, where the tax rules allow it

The strongest evidence is usually a clear connection between the expenditure and the company's commercial activities. For example, a £500 advertising campaign promoting a company's services is much easier to justify than an expensive personal event described as "marketing" without evidence of a genuine business purpose.

Staff Costs, Salaries and Training

Employee-related costs can represent a substantial part of a company's expenses. Depending on the circumstances, these may include:

• Salaries
• Employer National Insurance contributions
• Pension contributions
• Recruitment costs
• Staff training
• Work-related travel
• Certain employee benefits
• Payroll administration

Directors of limited companies are generally employees of their companies for tax purposes, so director expenses and remuneration need to be handled carefully. HMRC's rules also distinguish between reimbursed employment expenses and taxable payments or benefits. This is one reason why founders should avoid treating the company bank account as a personal wallet.

Business Equipment and Technology

A company may need computers, monitors, phones, cameras, tools, machinery or other equipment. Depending on the nature and cost of the purchase, the tax treatment may involve:

• A normal revenue expense
• Capital allowances
• Other specific tax reliefs

Do not assume that an expensive asset should simply be entered as an ordinary expense. This distinction becomes particularly important for businesses purchasing significant equipment, vehicles or machinery.

Insurance

Business insurance can often be an allowable business cost when it relates to the company's activities. Examples may include:

• Professional indemnity insurance
• Public liability insurance
• Employer's liability insurance
• Business property insurance
• Cyber insurance
• Product liability insurance

Personal insurance policies should not be treated as business expenses merely because the owner runs a company.

Bank Charges, Finance and Payment Fees

Businesses commonly incur:

• Business bank account charges
• Merchant processing fees
• Payment-provider fees
• Foreign exchange charges
• Certain loan-related costs
• Business credit-card fees

The tax treatment of finance costs can be more specialised than ordinary operating expenses. For example, HMRC has separate rules covering financing and loan relationships for companies. Where significant borrowing is involved, professional advice is sensible rather than assuming every financing cost receives the same treatment.

What Business Expenses Cannot You Claim?

Knowing what not to claim is just as important.

Personal Expenses

You generally cannot turn personal spending into a business deduction simply by paying for it through the company. Examples include:

• Personal groceries
• Private holidays
• Personal entertainment
• Ordinary household purchases
• Private clothing
• Personal subscriptions

HMRC specifically notes that an expense with both business and private purposes may fail the relevant test unless an identifiable business proportion can properly be separated.

Fines and Penalties

Business-related fines and penalties are not automatically allowable simply because they arose while operating the business. HMRC specifically identifies fines and penalty charges among costs that self-employed people cannot claim as business expenses.

Ordinary Clothing

Buying a suit for meetings does not normally become an allowable expense merely because you wear it to work. HMRC uses ordinary clothing as an example of expenditure that can have a private purpose as well as a work purpose. Certain specialist or protective clothing can have different treatment.

What Happens When an Expense Is Both Business and Personal?

This is where many small businesses get into trouble. Suppose you purchase a £1,200 laptop and use it:

• 80% for business
• 20% personally

You should not automatically assume that the whole cost is deductible. Where the rules permit an identifiable business proportion to be established, the appropriate proportion may be considered. HMRC recognises that some mixed-use costs can be apportioned where a definite business element can be identified. But not every dual-purpose expense can simply be split. The question is not merely "How much did I use it for work?" The underlying purpose and the specific tax rules matter.

Business Expenses and VAT: Don't Confuse the Two

An expense can be deductible for Corporation Tax or Income Tax purposes without the VAT on that expense necessarily being recoverable. These are separate questions:

Question 1: Is the cost an allowable business expense?

Question 2: If VAT was charged, can the business recover that VAT?

For example, a VAT-registered company may need to account for the VAT element separately when preparing its VAT return. This is particularly important for businesses that purchase services from overseas suppliers, where VAT treatment can involve additional rules.

How to Keep Proper Records

Good expense management is not about saving every receipt in a shoebox. A better system records:

1. What was purchased
2. When it was purchased
3. How much it cost
4. Who supplied it
5. Why it was needed
6. Whether it was business or private
7. Whether VAT was charged
8. How it was paid
9. Whether any personal element needs to be excluded

Digital accounting software can make this much easier. For example, a founder could photograph a receipt immediately, attach it to the accounting transaction and add a short description such as "client meeting , travel and lunch". That creates a much stronger audit trail than trying to reconstruct six months of expenses later.

A Simple Test Before Claiming an Expense

Before putting a cost through the business, ask five questions:

1. Is there a genuine business purpose?

If you cannot explain why the business needed it, stop.

2. Is there a private element?

If yes, determine whether the business element can legitimately be separated.

3. What type of expense is it?

Revenue expenses, capital expenditure, employee expenses and finance costs can have different tax treatment.

4. Is there evidence?

Keep the invoice, receipt, mileage record, contract or other supporting documentation.

5. Does VAT need separate treatment?

If the business is VAT registered, check whether the VAT is recoverable rather than simply treating the entire invoice as one figure. This five-question check catches a surprising number of common mistakes.

A Practical Example for a Small Company

Imagine a UK software company spends £25,000 during its accounting year on:

• £6,000 software subscriptions
• £4,000 advertising
• £3,000 professional fees
• £2,500 business travel
• £2,000 office costs
• £1,500 insurance
• £6,000 staff-related costs

The company should not simply assume that the £25,000 automatically reduces taxable profit. Its accountant or finance team would review each category, identify any disallowable or capital items, consider VAT treatment, and make the appropriate tax adjustments. The lesson is important: bookkeeping records what happened; tax accounting determines how those transactions are treated for tax.

How IncorpUK Fits Into the Picture

For global founders operating UK companies, understanding expenses becomes especially important when the founder lives outside the UK but the company has UK operations. A UK company can incur legitimate business costs even when its directors or shareholders are internationally based. But the company should maintain clear records separating company expenditure from the founder's personal costs.

Platforms such as IncorpUK can be useful in the wider context of UK company formation and management for global founders, but expense classification remains a tax and accounting matter. Where an expense is unusual, substantial or potentially personal, getting advice from a qualified UK accountant is the safer route.

FAQ: Business Expenses You Can Claim

Can I claim my phone bill as a business expense?

Potentially, but the treatment depends on how the phone is provided and used. A genuine business cost may qualify, while private use may require different treatment or apportionment.

Can I claim expenses paid from my personal bank account?

Yes, a business owner or director can sometimes pay a legitimate business expense personally and have the company reimburse them or record the amount appropriately. Keep the original receipt and evidence that the expense was incurred for the business.

Can I claim meals as a business expense?

Some business meals and travel-related meals can qualify, but ordinary personal meals generally cannot. Business entertaining also has specific tax rules, so do not assume every meal with a client is deductible.

Can I claim expenses for working from home?

Potentially. The rules differ depending on whether you are self-employed or operating through a limited company. Self-employed people can use HMRC's simplified home-working rates if they meet the conditions, while directors and employees have different rules.

Can I claim mileage for business travel?

Potentially. Business journeys can qualify, but ordinary commuting generally does not. Keep an accurate mileage log and apply the appropriate mileage or actual-cost rules.

Can I claim clothes as a business expense?

Ordinary clothing is generally not deductible simply because it is worn for work. Specialist protective or occupational clothing can have different treatment.

Can I claim a laptop as a business expense?

A laptop purchased for business use may qualify for tax relief, but the exact treatment depends on the circumstances, including whether it is revenue expenditure or a capital asset and whether there is private use.

Do business expenses reduce Corporation Tax?

Allowable expenses can reduce a company's taxable profits, which can reduce its Corporation Tax liability. However, not every accounting expense is necessarily deductible for tax purposes.

How long should I keep business expense records?

You should retain records for the periods required by HMRC and the relevant tax rules. Your accounting records should be organised so that transactions can be supported if HMRC asks questions.

What happens if I claim an expense incorrectly?

An incorrect claim can lead to an adjustment to taxable profit and potentially additional tax, interest or penalties depending on the circumstances. If you discover an error, deal with it promptly rather than allowing it to remain in the accounts.

Final Takeaway

Business expenses are an important part of running a tax-efficient UK business, but "business expense" does not automatically mean "tax-deductible expense." The safest approach is to focus on purpose, evidence and the specific tax rules that apply. Keep business and personal spending separate. Record the reason for significant expenses. Maintain receipts and invoices. Track business mileage accurately. Treat mixed-use costs carefully. And remember that VAT recovery and tax deductibility are separate issues.

For founders, particularly those running companies from outside the UK, disciplined expense management is more than an accounting exercise. It creates a clear financial trail, makes tax reporting easier and reduces the risk of expensive misunderstandings with HMRC. The goal is not to claim every possible expense. It is to claim every legitimate expense you are entitled to claim, and to be able to prove why it qualifies.