Running a limited company means keeping two pockets: the company's and yours. Most confusion about expenses comes from forgetting which pocket is paying. This guide sets out what a company can pay for and deduct, what it can pay for but you will be taxed on, and what should never touch the company account, using the rules as they stand for 2026/27.

The one rule that decides everything

A cost is an allowable business expense if it is incurred wholly and exclusively for the purposes of the trade. The company deducts it from its profit, so it saves Corporation Tax at 19% to 25%, and nobody pays personal tax on it.

Where a cost has a personal element, one of two things happens. Either you apportion it and claim only the business share (a phone bill, say), or, if the company pays for something that benefits you personally, HMRC treats it as a benefit in kind: the company still gets its deduction, but you pay Income Tax on the value and the company pays 15% Class 1A National Insurance. Sometimes that is still worth it; often it is not. Knowing which side of the line a cost falls on is the whole game.

Clear yes: put it through

  • Accountancy, legal and professional fees for the company's affairs. Your accountant's fee for your personal tax return is technically yours, though many practices roll it into one fixed fee.
  • Software and subscriptions used for the business: accounting software, cloud storage, design tools, industry data.
  • Insurance: professional indemnity, public liability, employer's liability, business contents.
  • Salaries and employer pension contributions, including your own. Employer pension contributions are one of the most efficient ways to take value out of a company: deductible, no National Insurance, no personal tax.
  • One mobile phone per employee, provided the contract is in the company's name. The company pays the whole bill and there is no benefit in kind, even with private use. A phone in your own name reimbursed by the company does not get this treatment.
  • Equipment: laptops, monitors, tools, office furniture. Companies get full expensing on most plant and machinery, so the whole cost comes off taxable profit in the year of purchase.
  • Business travel: train fares, flights, hotels and taxis for journeys to clients, suppliers and temporary workplaces. Not the journey between home and your permanent base, which is commuting.
  • Mileage in your own vehicle for business journeys. See below, because the rate changed this year.
  • Meals while travelling on business, when the journey itself qualifies. A sandwich at your desk does not.
  • Work-related training that maintains or updates skills you use in the business. For a company this is generous: employer-paid training linked to the job is exempt from tax on you as well.
  • Professional subscriptions to bodies on HMRC's approved list, and trade journals.
  • Marketing: website, hosting, advertising, business cards, branded materials.
  • Bank charges and interest on business borrowing.
  • Pre-trading costs: expenses incurred up to seven years before the company started trading, for the purpose of the trade, are treated as if spent on day one.

Mileage: the 2026/27 change most guides have missed

If you use your own car for business journeys, the company can reimburse you tax-free at HMRC's approved rate, and deduct the payment. That rate rose to 55p a mile for the first 10,000 business miles, backdated to 6 April 2026, the first increase since 2011. Above 10,000 miles it stays at 25p. Motorcycles are 24p, bicycles 20p, and you can add 5p a mile for each colleague you carry.

Worked example: 8,000 business miles in the year is 8,000 × 55p = £4,400 paid to you tax-free and deducted by the company, against £3,600 under the old rate. If you have been paying yourself 45p since April, top up the difference. Keep a log of date, destination, purpose and miles; HMRC asks for it, and a phone app makes it painless.

Two boundaries. Commuting between home and your normal workplace is never business mileage. And if the company pays you more than the approved rate, the excess is taxable pay.

Grey areas: allowed, with rules

Working from home. Three routes. The simplest is the HMRC flat rate of £6 a week (£312 a year), paid to you tax-free with no receipts. Second, the company reimburses a reasonable business proportion of your actual extra costs (heating, electricity, broadband), which needs a defensible calculation. Third, for a dedicated office, you grant the company a licence to use part of your home and it pays you rent; the rent is a company deduction but personal income for you, and it needs a written agreement and a market rate. Most directors are best off with the £6, unless the home office is substantial.

Subsistence. Meals count when you are travelling on business away from your normal place of work. HMRC's benchmark rates, £5 for five hours away, £10 for ten, £25 for fifteen or more, can be paid without receipts if you have a system for checking the trip happened; actual costs with receipts also work.

Entertaining. Two different rules. Client entertaining, taking a customer to lunch or a match, is never deductible for Corporation Tax and the VAT cannot be reclaimed, however clearly it is business. The company can still pay for it; it just gets no tax relief. Staff entertaining is deductible, and an annual event, or events, costing up to £150 a head in total across the year is also tax-free for the people attending. The £150 applies to every guest, so partners can come too: a director and their partner give the company £300 of headroom for the event. Go a pound over per head and the whole amount becomes a benefit.

Trivial benefits. A gift to you or an employee costing £50 or less, not cash or a cash voucher, not a reward for work, and not in the contract, is tax-free for everyone and deductible. Directors of small companies are capped at £300 a year. Flowers, a bottle of wine, a birthday meal voucher; it adds up over a year, and it is one of the few genuinely free things in the tax system.

Gifts to clients. Deductible only if they carry a conspicuous advertisement for the business, cost under £50 per recipient per year, and are not food, drink, tobacco or vouchers. Branded notebooks yes; a nice bottle no.

Clothing. Everyday clothing worn for work is not allowable, even a suit you only wear to client meetings, because it also provides warmth and decency; that case was lost in court decades ago. Uniforms, protective clothing and items carrying a permanent, visible logo are fine.

Eye tests and glasses. The company can pay for an eye test for anyone who uses a screen for work, tax-free. Glasses are only allowable if prescribed specifically for screen use; general glasses you also wear elsewhere are a benefit.

Training in something new. Courses that update skills you already use are clearly fine. A course in a wholly new field has historically been harder to justify for the company's deduction, though HMRC's approach has softened; if the skill is for the business, the case is usually good. Ask before booking the expensive one.

Clear no: keep it out of the company

  • Personal spending of any kind on the company card: groceries, holidays, your own car's repairs. It is not an expense; it is money you owe the company, which brings us to the loan account below.
  • Commuting to your normal workplace, by any means.
  • Everyday clothing, haircuts, grooming.
  • Gym or health club membership: the company can pay, but it is a benefit taxed on you, and rarely worth it.
  • Fines and penalties: parking tickets, speeding fines, late-filing penalties. Never deductible.
  • School fees, childcare (outside an approved scheme), family holidays dressed up as conferences.

How to pay for things, and the director's loan trap

The cleanest habit is simple: business costs go through the company's own bank account, with the receipt captured the same day in your accounting software. If you pay for something business-related on a personal card, record it as an expense claim and have the company reimburse you; that is perfectly fine and common.

The trap is the reverse. Every personal cost paid from the company account, and every pound drawn out without a payslip or a dividend voucher behind it, goes on your director's loan account: you now owe the company money. If the loan is not repaid within nine months of the company's year end, the company pays a temporary tax charge linked to the higher dividend rate, and if it exceeds £10,000 at any point it becomes a taxable benefit for you as well. Directors do not usually get into trouble through one bad claim; they get there through two years of blurred lines. Keep the pockets separate from day one and none of this arises.

The honest summary

If a cost exists only because the business exists, put it through and keep the receipt. If it also makes your personal life better, expect to be taxed on it, and decide whether it is still worth it. Use the free things the system gives you: the 55p mileage rate, the £6 a week, trivial benefits, the £150 staff event, and above all employer pension contributions. And keep the company's money in the company's account until it has been paid to you properly as salary or dividend.

Every SJE Capital client gets a plain list of what their particular business can claim, and a receipt-capture setup that makes keeping the records take seconds rather than evenings. It is included in every plan.

Sources: HMRC guidance on GOV.UK for expenses and benefits for employers, mileage and fuel rates, trivial benefits and working from home. Correct for the 2026/27 tax year and reviewed September 2026. General guidance, not advice on your circumstances.

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