Running a limited company comes with its fair share of expenses, but the good news is that many of these costs can be claimed back as allowable expenses. From travel and office supplies to marketing and professional fees, knowing what you can claim is key to keeping your business finances in check. If you've ever searched for a 'bookkeeping firm near me' to help you sort it all out, you're not alone. Let’s break down the basics so you’re not leaving money on the table.
Key Takeaways
You can claim travel expenses like mileage, train tickets, and reasonable meal costs during business trips.
Office essentials such as stationery, furniture, and software are allowable expenses if used solely for work.
Marketing costs, including ads, sponsorships, and PR campaigns, can be claimed if they serve business purposes.
Employee benefits like salaries, staff gifts, and health allowances are deductible within certain limits.
Professional fees, such as accountancy services and insurance policies, are also considered allowable expenses.
Travel and Accommodation Expenses
Claiming Business Travel Costs
When travelling for business purposes, you can claim a variety of costs as allowable expenses. This includes car hire, petrol, train tickets, and even parking fees. If you’re using taxis, keep it reasonable—HMRC frowns upon claims that seem excessive or unnecessary. For example, a short taxi ride that could have been walked might raise eyebrows. Remember, only work-related travel counts—commuting to your regular office doesn’t qualify.
Allowable Mileage Rates
If you drive your own vehicle for business, you can claim mileage instead of fuel costs. HMRC provides fixed mileage rates:
Vehicle Type | Rate (First 10,000 miles) | Rate (Over 10,000 miles) |
|---|---|---|
Cars and Vans | 45p per mile | 25p per mile |
Motorbikes | 24p per mile | 24p per mile |
Bicycles | 20p per mile | 20p per mile |
It’s important to keep detailed records of your trips, including the date, destination, and purpose of travel. Without proper documentation, claims can be denied.
Overnight Stays and Meals
If your work takes you far enough that staying overnight is necessary, you can claim for accommodation and meals. However, there are limits. A mid-range hotel is fine, but a luxury resort probably isn’t. Similarly, meals should be reasonable—think pub dinners or café lunches, not extravagant dining. If your workday exceeds five hours, lunch is claimable; work over ten hours, and you can claim dinner too.
Keep receipts for every expense. HMRC requires clear evidence to back up your claims. It’s always better to be safe than sorry while filing.
Office and Equipment Costs
Essential Office Supplies
Running a business means you’ll need the basics to keep things ticking over. Items like printer paper, ink, pens, and envelopes are all considered allowable expenses. These small purchases might seem insignificant, but they add up over time. Don’t forget postage costs if you’re regularly sending out documents or parcels for work.
Technology and Software Purchases
If you’re buying technology for your business, such as laptops, phones, or specialised software, these are allowable expenses as long as they’re used for work purposes. You can even claim for necessary software subscriptions like accounting tools or design programmes. Just make sure you’re not claiming for personal gadgets or apps that don’t contribute to the business.
Furnishing Your Workspace
Whether you’re setting up a home office or renting a dedicated space, you can claim for furniture like desks, chairs, and shelving. These items need to be reasonable—don’t expect HMRC to approve a claim for a luxury recliner or designer lamp. If you’re working from home, you may also be able to claim a portion of your household costs, but that’s a topic for another section.
Marketing and Advertising Expenses
Promoting Your Business
When it comes to promoting your business, you can claim back the costs for activities that directly target your audience. This includes digital advertising, social media campaigns, flyers, and even branded merchandise. The key is ensuring these expenses are purely for business purposes. For example, if you’re running a Facebook ad campaign to reach potential customers, you can log those costs as allowable business expenses. Remember, HMRC won't cover personal promotional efforts—it has to be all about the business.
Claiming PR and Advertising Costs
If you hire a PR agency or spend on creating advertisements, these are also claimable. This might include paying for a press release, hiring a graphic designer for a campaign, or even sponsoring a local event to spread the word about your company. However, keep in mind that excessive or unrelated costs, like splurging on extravagant gifts for influencers, might not qualify. Here’s a quick list of typical claimable advertising expenses:
Social media ad spend (e.g., Google Ads, Instagram promotions).
Traditional advertising (e.g., TV, radio, or newspaper ads).
PR agency fees for business-related campaigns.
Sponsorships and Charitable Contributions
Sponsoring events or making charitable donations can be a great way to enhance your company’s reputation. These costs are allowable, but there are conditions. For sponsorships, the event or organisation must provide a clear business benefit, such as displaying your logo or mentioning your company in their promotions. Charitable contributions, on the other hand, must go to a registered charity to qualify. You can even donate equipment or products instead of cash. Here’s a breakdown:
Type of Contribution | Allowable? | Notes |
|---|---|---|
Sponsorships | Yes | Must provide a business benefit. |
Monetary donations | Yes | Only to registered charities. |
Donations of goods/services | Yes | Must be business-related and reasonable. |
Always keep clear records and receipts for all your marketing and advertising expenses—HMRC will want proof if they come knocking.
Employee and Staff Benefits
Salaries and National Insurance Contributions
Paying yourself a salary as a director or paying your employees is a legitimate business expense. You can also claim the associated National Insurance Contributions (NICs). However, once your salary crosses the National Insurance threshold, NICs will need to be paid. Keeping your salary below this threshold can be a tax-efficient strategy.
Staff Gifts and Events
You can give your employees gifts and host events such as annual parties, provided they meet certain conditions:
Gifts must cost £50 or less, not be cash or vouchers, and not be tied to their performance.
Events, like a Christmas party, must not exceed £150 per head annually. This amount includes VAT and must primarily benefit employees. Partners can attend, but the event should focus on staff.
If you exceed these limits, the costs become taxable, so keep track of your expenditures.
Health and Wellbeing Allowances
Expenses related to employee health, such as eye tests or health checks, can also be claimed. If your staff work extensively with screens, the cost of prescription glasses specifically for screen use is tax-deductible. However, general-purpose glasses or contacts don’t qualify. Additionally, offering gym memberships or wellness programmes may be considered a taxable benefit, so it’s best to consult an accountant for clarity.
Professional Services and Fees
Accountancy and Legal Fees
Running a limited company often requires professional help, and the good news is that you can claim accountancy and legal fees as allowable expenses. Whether it’s for preparing your annual accounts, filing tax returns, or handling legal matters like contracts or debt recovery, these costs are fully deductible. However, if an accountant also manages your personal tax affairs, those costs must be treated separately and may not qualify as a business expense.
Professional Subscriptions
If you or your employees are members of professional organisations or require specific subscriptions to perform your roles, these costs can be claimed. For example, memberships to industry bodies or subscriptions to trade journals are allowable, provided they are directly relevant to your business. Just ensure that these expenses are paid from the company’s account to avoid complications.
Insurance Policies for Your Business
Business insurance is a must-have, and thankfully, it’s also tax-deductible. Policies like professional indemnity insurance, which protects against claims of negligence, and public liability insurance, which covers third-party injuries or damages, can be claimed as expenses. Other insurances, such as employer’s liability or key person insurance, also fall under this category. Make sure to maintain proper documentation to substantiate these claims.
Keeping accurate records of all professional fees and services is essential not only for compliance but also to avoid losing out on legitimate claims.
Home Office and Utility Costs
Claiming Household Expenses
If you use your home as an office for your limited company, you’re allowed to claim a proportion of your household expenses as a business cost. HMRC provides a flat rate of £6 per week, which totals £312 annually for the 2024/25 tax year. Alternatively, you can calculate exact costs by working out the percentage of your home used for business purposes. For instance, if you use one room exclusively for work and it takes up 10% of your home, you can claim 10% of your bills, such as rent or mortgage interest, council tax, and insurance.
Broadband and Phone Bills
Broadband and phone expenses can also be claimed, but only for the business portion of the usage. If your broadband is solely for business and registered in the company name, you can claim the full cost. However, for personal contracts, you’ll need to separate business and personal use and claim only the business percentage. For mobile phones, having the contract in the company’s name allows you to claim the entire bill as a business expense, provided personal use is minimal.
Energy and Utility Deductions
Energy bills, including electricity and heating, can be partially claimed if you work from home. Similar to household expenses, you’ll need to calculate the percentage of time and space used for business. For example, if your home office occupies 15% of your house and you work 40 hours a week, you can claim a proportional amount of your utility costs. Keep in mind, though, that HMRC expects these claims to be reasonable and well-documented.
It’s essential to maintain clear records of all expenses and calculations. Without proper documentation, HMRC may reject your claims.
Financial and Banking Charges
Business Loan Interest
If your limited company has taken out a business loan, you can claim the interest paid on it as an allowable expense. However, keep in mind that you cannot claim the actual loan amount itself—only the interest. This can be a straightforward way to reduce your taxable profits while keeping your finances in check.
Bank Account Fees
Running a business account often comes with associated charges, such as monthly maintenance fees or transaction costs. These fees are fully claimable as long as the account is strictly in your company’s name. If you’re using a personal account for business purposes, unfortunately, those fees won’t qualify.
Alternative Finance Payments
For those using non-traditional financing options like Islamic finance or hire purchase agreements, the associated charges and interest are also claimable. Just ensure you keep detailed records to validate these claims with HMRC if needed.
Tip: Always ensure your business expenses are paid directly from your company’s account. This keeps your records clean and makes it easier to justify claims during an audit.
Tax-Efficient Investments and Contributions
Pension Contributions
Making pension contributions through your limited company is a smart way to reduce your corporation tax. These payments are considered a business expense, so you can deduct them from your profits before tax is calculated. However, there are limits to how much you can contribute tax-free. For the current tax year, the annual allowance is £60,000, but unused allowances from the past three years can be carried forward if you qualify. It's a win-win: you save for retirement while lowering your tax bill.
Research and Development Tax Credits
If your company invests in innovation, you may be eligible for Research and Development (R&D) tax credits. These credits allow you to claim back a percentage of your R&D costs, either as a reduction in your tax bill or as a cash payment if your company is loss-making. Eligible activities include developing new products, processes, or services—or even improving existing ones. To claim, you'll need to provide detailed records of your R&D activities and costs, so keep everything well-documented.
Annual Investment Allowance
The Annual Investment Allowance (AIA) lets you deduct the full cost of qualifying assets, like machinery or equipment, from your taxable profits in the year of purchase. The current limit is £1 million per year, which is more than enough for most small to medium-sized businesses. This allowance can significantly reduce your tax liability, but remember—it only applies to assets used exclusively for business purposes. Cars, for example, are generally excluded from AIA claims.
Taking advantage of these tax-efficient options is not just about reducing your tax bill—it's about reinvesting in your business and planning for the future.
When it comes to investing, making smart choices can help you keep more of your money. Tax-efficient investments let you grow your savings while paying less tax. This means you can save more for your future. If you want to learn more about how to make the best investment choices, visit our website for helpful tips and advice!
Wrapping It Up
So, there you have it—a rundown of what you can and can’t claim as allowable expenses for your limited company. It’s all about keeping things strictly business and making sure you’ve got the receipts to back it up. While it might seem like a lot to keep track of, getting it right can save you a fair bit on your tax bill. If you’re ever in doubt, it’s worth chatting with an accountant to make sure you’re ticking all the right boxes. After all, the goal is to keep your company running smoothly without any hiccups from HMRC. Happy bookkeeping!
Frequently Asked Questions
What can I claim as a travel expense for my limited company?
You can claim costs like fuel, train tickets, or even taxis, as long as they are for business purposes. Accommodation and meals are also claimable if you’re travelling for work and staying overnight. However, extravagant claims, such as luxury hotels or lavish meals, may be questioned by HMRC.
Can I claim for office furniture and equipment?
Yes, items like desks, chairs, laptops, and printers that are essential for your business can be claimed. However, luxurious items like gaming consoles or high-end TVs are not allowable.
Are marketing and advertising costs tax-deductible?
Yes, expenses for promoting your business, such as online ads, sponsorships, and PR campaigns, can be claimed. Just ensure they are solely for business purposes.
Can I claim a portion of my home utility bills if I work from home?
Absolutely. You can claim a percentage of your household expenses, like electricity and broadband, based on the time and space used for business activities.
What staff benefits can I claim as expenses?
You can claim for employee salaries, National Insurance contributions, and even staff gifts under certain conditions. Events like Christmas parties are also allowable, up to £150 per person annually.
Are accountancy fees an allowable expense?
Yes, you can claim the cost of hiring an accountant for managing your business finances. However, if the accountant also handles your personal taxes, that portion cannot be claimed.
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