Guide to Expenses for Limited Companies

Allowable expenses for self-employed people operating through a limited company

Your company is going to incur costs but what are allowable expenses?

As a contractor or freelancer operating through a limited company, you can claim certain allowable expenses that have been incurred wholly and exclusively for the purpose of running your business.

These expenses can be deducted from your company’s income before your corporation tax liability is calculated which can reduce your taxable profit, resulting in a lower corporation tax bill.

It’s important to keep accurate records to simplify the process of claiming expenses. You should maintain organised records of invoices, receipts and any other relevant documentation to support your expense claims. These records can be stored physically or digitally and should be retained for a minimum of 6 years.

Read on for the typical allowable expenses that you can claim, along with the criteria that have to be met in order to successfully claim.

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Temporary Workplace - 24 Month Rule

To claim any travel, subsistence and accommodation expenses, your workplace should be considered temporary. A workplace is normally considered temporary if you work, or expect to work at the site, for no more than 24 months.

If you work continuously at a site for more than 24 months, this would usually be seen as a permanent workplace and you should not claim for any travel, subsistence and accommodation expenses. If you undertake work at multiple sites, you may still be able to claim travel-related expenses for any sites where you spend no more than 40% of your working time.


Travel-related expenses can be claimed for trips that are wholly and exclusively for business purposes as opposed to regular everyday commuting between your home and place of work.

Examples include travelling between different workplaces for the same job, travelling to a temporary workplace or trips that are taken to complete work such as deliveries. Expenses such as parking and road toll fees and congestion charges can also be claimed.


Whilst working at a temporary workplace, you can claim for the cost of your lunch if this is an additional cost that would not have been incurred if you were not working at the temporary workplace.

As an example, the cost of buying ingredients and preparing a lunch would not be seen as an additional cost so should not be claimed. When an overnight stay is needed, the cost of any necessary meals such as breakfast and an evening meal can be claimed.

If you are travelling overnight, you can also claim for incidental expenses such as buying a newspaper and laundry costs. For these expenses, you can claim an additional £5 per night (or £10 per night if the travel is outside of the UK) without any tax implications.


If you need to stay away overnight whilst working at a temporary workplace, the cost of the accommodation can usually be claimed. The accommodation must be necessary and reasonable for the nature of the work you do. If the accommodation is used for a mixture of business and personal use, you can only claim against the business expenses.

Accountancy Fees

Your company can claim tax relief on the cost of the accountancy fees. However, if you have to make an additional payment for your own self-assessment tax return, this should be paid for personally and should not be claimed as a company expense.

Working at Home

If you use a part of your home for business purposes, you can claim for the extra costs that have been incurred as a result of working at home. You can claim up to £26 per month (or £6 per week) without needing to keep any records.

Computer Equipment

If computer equipment is purchased just for business use, your company can claim tax relief on the cost and there will be no tax implications on you as the employee. If the computer equipment is used personally, this could be considered a taxable benefit that would need to be reported to HMRC.

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Businessman in office talking on phone

Mobile Phones

As an employee, your company can provide you with a mobile phone with no tax implications. The contract should be in your company name and paid directly from your company bank account. If your company reimburses you for the cost of a personal mobile phone contract, there may be tax implications on you individually.


Your company can cover the cost of any subscriptions relating to your work. For those subscriptions that appear on the HMRC list of approved professional bodies, there will be no tax implications on you as the employee.


Any stationery that is needed can be claimed by your company. This includes expenses such as printing and postage.


Costs for training can be claimed if it is work-related training. This would normally be if the training was in place to enhance or improve current skills that are needed for work. There would be tax implications on you as the employee if training was paid by your company but it did not relate to your work.

Business Entertaining

Your company can claim for entertaining current or potential clients but this will not be eligible for relief from Corporation Tax. It may still be beneficial to claim the cost as an expense through your company so you are not using your own funds to make payment personally.


For clothing to be claimed as an expense, it should either be protective clothing that is needed for work or a uniform that can only be worn at work. If your company purchased clothing for an employee that was not protective clothing or a uniform, the cost should be reported to HMRC as a taxable benefit.

Pension Contributions

Making pension contributions can be a tax-efficient way for contractors to save towards a retirement income. You will usually get tax relief on any contributions made into a pension and any gains or income made on the fund held within the pension will also be free of tax, up until the point of retirement and when you begin drawing down on the pension pot.

Business Insurance

You should consider taking out business insurance to protect your company from various risks and liabilities. Common policies include Professional Indemnity, Public Liability and Employers Liability.  to protect it from various risks. Business insurance can be considered a necessary and tax-deductible expense meaning you can protect your business and help to optimise your tax position.

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Annual Events

Your company can provide an annual event for employees. To have no personal tax implications, all the following must apply:
  • The cost does not exceed £150 per head
  • The event is annual, such as a Christmas party
  • The event is open to all employees
Your company can have more than one annual event but the total combined cost of the events must be no more than £150 per head. If any of the above conditions are not met, the full costs of the annual events will be a taxable benefit for the employee. The £150 per head is not an allowance that can be set against the cost of the event.

Trivial Benefits

You can provide trivial benefits to employees with no tax implications on you as the employee if all of these apply:
  • Each benefit must not cost more than £50
  • The benefit cannot be cash or a cash voucher
  • The benefit cannot be a reward for work or performance
  • There is no contractual entitlement to the benefit
For a close company (a company run by 5 or fewer shareholders), a director cannot receive trivial benefits worth more than £300 in a tax year. By maximising your expense claims whilst remaining tax-compliant, you can optimise your tax position and increase profitability. Expenses and tax deductions can be complex so if you have any queries, or if you’d like to appoint Gorilla, request a call back here or speak to an accountant on 0330 024 0406.

Allowable Expenses

Insurance policies

Your business will need to be covered for Public Liability and Professional Indemnity (the level of cover will be detailed in your contract). Gorilla has partnered with Kingsbridge to provide cost-effective insurance policies.

Mobile phone

The company can provide you with a mobile phone, as a tax-free benefit.


Any costs incurred in relation to carrying out the trade of the business for example, mileage, train fares, hotel costs etc.


The business can purchase assets for you to use in carrying out its trade. Typically these include computers and mobile devices.

Your salary

Paying a wage helps reduce your company’s Corporation Tax bill.


Your business can donate to charity and receive tax relief on it.


Your company receives tax relief on the fees it pays Gorilla Accounting. This makes us even better value!

Christmas party

That’s right, your company can treat you to a Christmas party up to £150 per employee.

If you’re ready to take the next step and form your limited company, get in touch with a member of our New Business Team by calling:

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