There are plenty of benefits to running your business as a Limited Company or being Self-employed, but getting your expenses wrong can cost you — either in overpaid Tax or HMRC scrutiny.
This guide explains which expenses are allowed, which aren’t, and where people often slip up.
The HMRC Rule: “Wholly and Exclusively”
To be deductible, an expense must be wholly and exclusively for the purposes of your trade. If it has both personal and business use, it must be apportioned fairly.
Allowable Expenses (If Used for Business Only)
Here are common expenses you can usually claim:
Office & Admin:
- Use of home as office (flat rate or actual costs)
- Phone and internet (business portion)
- Office supplies and stationery
- Software subscriptions (e.g. accounting, design)
People & Staff:
- Salaries and wages
- Employer pension contributions
- Staff training (to maintain existing skills)
- Trivial benefits (Ltd Co only, under £50, non-cash)
Travel & Vehicle:
- Mileage using HMRC rates (45p/mile up to 10,000 miles)
- Travel and accommodation for business trips
- Subsistence during travel (modest food and drink)
- Parking and tolls
Professional & Other:
- Accountancy and legal fees (business-related)
- Business bank charges
- Insurance (e.g. liability, indemnity)
- Advertising and marketing
Disallowed or Restricted Expenses
These are either never allowed, or only allowed in strict circumstances:
- Client entertainment (even if business-related)
- Normal clothes (even if worn only for work)
- Fines and penalties (e.g. parking tickets)
- Home improvements
- Commuting to a regular workplace
- Training for new skills or qualifications
- Gifts over £50 or without branding
- Personal costs paid through business accounts
Special Cases That Trip People Up
Staff Parties: Allowed for Ltd Co only, up to £150/head, annual event, open to all staff. If you go over £150, the whole amount becomes taxable.
Mileage vs Fuel: You can claim mileage using HMRC’s flat rate — but not both mileage and petrol.
Use of Home: You can use HMRC’s flat rate or apportion actual bills — but keep records.
Common Mistakes
- Claiming 100% of phone/internet bills — these must be apportioned
- Claiming mileage and fuel together — you must pick one
- Logging vague or generic descriptions — HMRC may disallow them
Let an Accountant Help You Get It Right
The rules aren’t always obvious — and HMRC won’t accept “I didn’t know.” If you want to make sure you’re claiming everything you’re entitled to (without crossing the line), speak to a qualified accountant.
For advice tailored to your situation, contact us at Grace Certified Accountants on info@gracecertifiedaccountants.co.uk.