Last reviewed: 29 September 2026 · Reviewed by IFM's qualified accountant
There is no reliable master list that makes every purchase allowable. Purpose, business use, capital treatment, private benefit and the exact type of cost determine the result.
What should you know about start with the company's purpose?
The company is a separate legal person. An expense is not deductible merely because the director paid it or believes it helped them work. Ask what the company bought, why it bought it, who used it and whether there was a private purpose.
Some costs are specifically disallowed even where connected with business. Client entertaining is a common example for Corporation Tax, although staff entertaining has separate rules. Fines and penalties, most capital expenditure and dividends are not ordinary revenue deductions.
Record the gross amount, VAT treatment, date, supplier, business reason and payment route. If the director paid personally, credit the director's loan account and retain the invoice addressed appropriately where possible.
What should you know about office, software and professional costs?
Normal office supplies, business telephone use, software subscriptions, web hosting, insurance, accountancy and legal costs can be deductible where incurred for the trade. Mixed-use bills require a reasonable business allocation; the company cannot deduct the director's private share.
Professional fees connected with acquiring a capital asset or changing the capital structure may be capital rather than revenue. Legal costs relating to a trade dispute may be treated differently from costs of buying premises or shares. Classify the underlying purpose, not the supplier's job title.
Subscriptions to approved professional organisations can be exempt or deductible under particular rules. General club membership or a subscription carrying a substantial personal benefit needs separate review.
What should you know about equipment and capital items?
Computers, machinery, furniture and vehicles may be capital assets. Instead of deducting the purchase as an ordinary expense, the company may claim capital allowances where the conditions are met. The available allowance depends on the asset, use, purchase date and method of acquisition.
Do not quote a headline capital-allowance limit without checking the period and asset. Cars have their own rules linked to emissions, while leased assets and hire purchase require different accounting and tax analysis.
Keep the invoice, financing agreement, date brought into use and disposal record. VAT recovery is a separate question from Corporation Tax relief.
What should you know about travel and subsistence?
The company can meet qualifying business-travel costs, but ordinary commuting to a permanent workplace is private. Temporary-workplace rules, the 24-month expectation and the purpose of the journey matter.
For an employee or director using their own car or van, the approved mileage rate for 2026/27 is 55p per business mile for the first 10,000 business miles and 25p thereafter. For 2026/27 it is 24p for motorcycles and 20p for bicycles. Keep a mileage log with dates, start and end points, business purpose and distance.
Those are 2026/27 rates. The first car-and-van band increased from the rate used before 6 April 2026, so an old template can understate the approved amount.
Reasonable subsistence can follow qualifying business travel. A meal bought during a normal commute is not transformed into a business expense by paying with the company card.
What should you know about working from home?
Where a director regularly works at home under an agreement, the company can reimburse qualifying additional household costs. The flat amount that an employer can pay without supporting evidence remains £6 a week or £26 a month for 2026/27, provided the conditions are met; evidenced additional costs may support more.
This employer reimbursement is distinct from an employee personally claiming tax relief. From 2026/27, employees can no longer claim Income Tax relief from HMRC for non-reimbursed homeworking expenses, although prior-year claims may still be possible within the rules.
A formal licence for the company to use part of a home may produce rental income for the director and affect household, mortgage, insurance and Capital Gains Tax matters. Take advice before using a rent arrangement as a simple expense device.
What should you know about phones, broadband and training?
A mobile phone provided under a contract between the company and supplier can receive different treatment from reimbursement of a director's personal contract. Check ownership and the number of phones provided rather than treating every handset as exempt.
Business broadband installed for work may qualify where conditions are met, but reimbursing an existing private connection often involves mixed use. Allocate or report it correctly.
Training related to the director's duties or the company's existing trade can be deductible and may be exempt for the employee. Training that enables a person to begin a new, unrelated trade can have different treatment. Record the business case and course content.
What should you know about staff entertaining and trivial benefits?
For 2026/27, the annual staff-function exemption has a cost limit of £150 per head, including VAT and associated costs, where the event is annual, open to all relevant staff and the conditions are met. It is an exemption limit, not an allowance: if a function causes the limit to be exceeded, that whole function may become taxable unless covered another way.
For 2026/27, a qualifying trivial benefit must cost £50 or less, must not be cash or a cash voucher, must not reward work or performance and must not be contractual. Directors of close companies have an annual £300 cap on qualifying trivial benefits provided to them or members of their family or household.
Do not convert regular pay into gift cards and call it trivial. Keep a benefits record throughout the 2026/27 tax year.
What should you know about client entertaining and gifts?
Business entertaining is generally not deductible for Corporation Tax, and input VAT is normally blocked. Record it separately so it is added back in the tax computation rather than lost among travel or marketing.
Business gifts have detailed exceptions and limits. Items carrying a conspicuous advertisement, samples and gifts to charities can be treated differently, but food, drink, tobacco and vouchers have restrictions. Check the specific rule before promising tax relief.
What should you know about pAYE, benefits and reporting?
If the company pays a personal cost, the amount may be earnings, a taxable benefit or a director's loan. Identify the treatment at payment time. For 2026/27, benefits that are not validly payrolled generally need P11D reporting by 6 July 2027, and the P11D(b) and Class 1A National Insurance process must also be completed.
For 2026/27, Class 1A National Insurance on taxable benefits is generally 15%. Different National Insurance classes can apply to cash, vouchers and other items.
What should you know about a reliable approval process?
Adopt an expense policy that states required evidence, approval authority, travel definitions and treatment of personal elements. Reconcile company cards monthly and post director-paid costs promptly. Do not wait until year end to ask what an unexplained transaction bought.
See limited company accounts and tax support for the relevant service page. Use the Deadline Finder for standard first accounts, first confirmation statement and Corporation Tax dates. For VAT, payroll, personal tax and other obligations, check the tax deadlines calendar and your official records.
Review the policy after changes to homeworking, vehicles, benefits or company activity. A previously correct treatment can stop being correct when purpose, ownership or private use changes.
Keep the supporting explanation beside the transaction, while the commercial purpose is still clear, rather than trying to reconstruct it months later.
What should you read next?
Use the Deadline Finder for standard first accounts, first confirmation statement and Corporation Tax dates. For VAT, payroll, personal tax and other obligations, check the tax deadlines calendar and your official records.
What do people also ask about this topic?
What should you know about start with the company's purpose?
The company is a separate legal person. An expense is not deductible merely because the director paid it or believes it helped them work. Ask what the company bought, why it bought it, who used it and whether there was a private purpose.
What should you know about office, software and professional costs?
Normal office supplies, business telephone use, software subscriptions, web hosting, insurance, accountancy and legal costs can be deductible where incurred for the trade. Mixed-use bills require a reasonable business allocation; the company cannot deduct the director's private share.
What should you know about equipment and capital items?
Computers, machinery, furniture and vehicles may be capital assets. Instead of deducting the purchase as an ordinary expense, the company may claim capital allowances where the conditions are met. The available allowance depends on the asset, use, purchase date and method of acquisition.
What should you know about travel and subsistence?
The company can meet qualifying business-travel costs, but ordinary commuting to a permanent workplace is private. Temporary-workplace rules, the 24-month expectation and the purpose of the journey matter.
Which official sources support this guide?
- https://www.gov.uk/expenses-benefits-social-functions-parties/whats-exempt
- https://www.gov.uk/expenses-if-youre-self-employed
- https://www.gov.uk/expenses-benefits
General guidance, not advice for your situation.
