Expenses & Benefits

Claim legitimate business expenses and understand the tax implications of employee benefits.

Last updated: 15 July 2026

The Golden Rule of Expenses

To claim an expense against your company's profits, it must be incurred "wholly and exclusively" for business purposes. This is the fundamental test HMRC applies when reviewing expense claims.

Expenses that reduce your taxable profit also reduce your Corporation Tax bill, so understanding what you can legitimately claim is valuable knowledge.

What Expenses Can You Claim?

Office Costs

Rent, business rates, utilities, office supplies, equipment, furniture, and cleaning for business premises.

Staff Costs

Salaries, wages, employer's NI, pension contributions, bonuses, and recruitment costs.

Travel & Subsistence

Business travel (not regular commuting), hotels, meals while travelling for work, public transport, and taxis.

Professional Fees

Accountancy fees, legal fees relating to the business, professional subscriptions, and consultant fees.

Marketing & Advertising

Website costs, advertising, PR, brochures, business cards, trade show attendance, and sponsorship.

Insurance

Professional indemnity, public liability, employer's liability, buildings and contents for business premises.

Training

Courses, conferences, and training that update or maintain skills relevant to the business.

What Expenses Can't You Claim?

Entertainment

Client entertainment (meals, events, gifts) is not tax-deductible, although staff entertainment up to £150 per head per year is allowed.

Fines & Penalties

Parking fines, speeding tickets, late filing penalties, and any other fines are not deductible.

Personal Expenses

Everyday clothing (even if only worn for work), personal phone bills, commuting costs, and personal grooming.

Capital Items (Direct Cost)

The purchase cost of equipment, vehicles, or property isn't directly deductible, but capital allowances apply.

Working from Home

If you work from home, you can claim a proportion of your household costs:

Simplified Rate

Claim £6/week (£312/year) without keeping detailed records. This is the easiest approach for most home workers.

Actual Costs Method

Calculate the actual proportion of household costs attributable to business use. More complex but potentially higher claims.

For the actual costs method, you can include a proportion of:

Heating and lighting
Council tax
Mortgage interest or rent
Internet and phone
Insurance

Business Mileage

If you use your personal car for business travel, you can claim mileage at HMRC's approved rates:

Approved Mileage Rates

Cars and vans (first 10,000 miles)45p per mile

Cars and vans (over 10,000 miles)25p per mile

Motorcycles24p per mile

Bicycles20p per mile

Keep a Mileage Log

Record the date, destination, purpose, and mileage for each business journey. This is essential if HMRC ever queries your claims.

Employee Benefits

Benefits provided to employees (including directors) may attract tax and need to be reported on a P11D form:

Company Cars

Taxable as a benefit based on the car's list price and CO2 emissions. The employee pays income tax, and the company pays Class 1A NI.

Private Medical Insurance

The cost of medical insurance is a taxable benefit. Report on P11D and pay Class 1A NI.

Gym Memberships

If paid by the company, this is a taxable benefit unless it's an on-site facility available to all employees.

Trivial Benefits

Small benefits under £50 per occasion (not cash) that aren't a reward for work or part of a salary sacrifice are tax-free.

Which Benefits Are Tax-Free?

Some benefits can be provided tax-free:

Pension contributions: Employer contributions are tax-free (within limits)
Staff parties: Up to £150 per head per year for annual events open to all staff
Mobile phones: One phone per employee for business use
Cycle to work schemes: Through salary sacrifice arrangements
Eye tests: For VDU users
Childcare vouchers: For existing schemes (closed to new entrants)
Work equipment: Laptops, monitors etc. primarily for business use

Common Questions

Expenses & Benefits FAQs

Any cost incurred 'wholly and exclusively' for business purposes - that's the fundamental test HMRC applies. Common allowable expenses include office costs, staff salaries and pension contributions, business travel and subsistence, accountancy and legal fees, marketing and advertising, business insurance, and training that updates or maintains skills relevant to the business. Expenses that reduce your taxable profit also reduce your Corporation Tax bill.

No. Client entertainment - meals, events, and gifts - is not tax-deductible. Staff entertainment is different: annual events open to all staff, up to £150 per head per year, are allowed. Other common non-allowable costs include fines and penalties, everyday clothing (even if only worn for work), and commuting costs.

The simplest option is the flat rate of £6 per week (£312 per year) with no detailed records needed. Alternatively, you can use the actual costs method and claim the proportion of household costs attributable to business use, including heating and lighting, council tax, mortgage interest or rent, internet and phone, and insurance. It's more complex but can produce a higher claim.

HMRC's approved rates are 45p per mile for the first 10,000 miles in cars and vans, then 25p per mile after that. Motorcycles get 24p per mile and bicycles 20p per mile. Keep a mileage log recording the date, destination, purpose, and mileage of each business journey - it's essential if HMRC ever queries your claims.

Yes, benefits provided to employees (including directors) may attract tax and need to be reported on a P11D form. Company cars are taxed based on the car's list price and CO2 emissions - the employee pays income tax and the company pays Class 1A NI. Private medical insurance works the same way. Gym memberships are taxable too, unless it's an on-site facility available to all employees.

Trivial benefits under £50 per occasion (not cash) that aren't a reward for work or part of a salary sacrifice are tax-free. Other tax-free options include employer pension contributions (within limits), staff parties up to £150 per head per year for annual events open to all staff, one mobile phone per employee for business use, cycle to work schemes, eye tests for VDU users, and work equipment like laptops used primarily for business.

Sources

Rates and thresholds on this page come from the official HMRC and Companies House guidance below. Tax rules change, so check the source if you are relying on a figure.

Would you rather we handled this for you? See our Bookkeeping Services service, or read the full set of guides.

Ask us about your situation

Need help with this?

Let our expert accountants handle it for you so you can focus on running your business.