What expenses can a UK business actually claim?

Understanding Allowable Expenses

The fundamental principle for claiming business expenses in the UK is that the cost must be incurred "wholly and exclusively" for the purposes of your trade, profession, or property business. This means there should be no significant personal use or benefit from the expense. If an expense has a dual purpose (both business and personal), you generally cannot claim the full amount unless you can clearly identify and separate the business portion.

The specific rules can vary slightly depending on your business structure:

• Sole Traders and Partnerships: Expenses are deducted from your business income to calculate your taxable profit for Self Assessment.
• Limited Companies: Expenses reduce your company's profit, thereby lowering your Corporation Tax liability. The company reimburses directors or employees for their business expenses.
• Landlords: Expenses related to managing and maintaining your rental property can be claimed against your rental income.

Common Categories of Claimable Expenses

Many everyday business costs are allowable expenses. Keeping accurate records and receipts for all your outgoings is essential.

Here are some common categories:

• Office Costs:
• Stationery and postage
• Phone, mobile, and internet bills (business portion only)
• Software subscriptions used for operations
• Rent, business rates, and utilities for business premises
• Repairs and maintenance to business equipment and premises (not improvements or alterations)
• Travel Expenses:
• Fuel, parking fees, train, bus, and air fares for business journeys
• Hotel accommodation for business trips
• Mileage: If you use your personal car or van for business, you can claim approved mileage allowance payments (AMAPs). For the 2026/27 tax year, the rate is 55p per mile for the first 10,000 business miles and 25p per mile thereafter. This covers fuel, insurance, servicing, and depreciation, so you cannot claim these separately.
• Normal commuting to your regular place of work is generally not an allowable expense.
• Training and Professional Development:
• Costs for training courses are allowable if they help you maintain or update existing skills, keep pace with industry changes, or develop ancillary skills for your current business.
• This includes online course fees, conference tickets, and related travel and accommodation.
• Training that prepares you for a new trade or profession is generally not tax-deductible.
• Marketing and Advertising:
• Website costs, online advertising, and traditional marketing materials.
• Staff Costs:
• Salaries, bonuses, and employer National Insurance Contributions (NICs)
• Pension contributions for employees
• Subcontractor payments
• Staff entertainment (e.g., a Christmas party) has limited exemptions, typically up to £150 per head per year.
• Professional Fees:
• Accountancy, legal, and other professional fees directly related to your business.
• Materials and Goods for Resale:
• The cost of stock or raw materials you buy to sell on.
• Insurance:
• Business insurance policies, such as public liability or professional indemnity.

Specific Expense Considerations

• Pre-trading Expenses: You can claim for certain expenses incurred up to seven years before your business officially started trading, provided they would have been allowable if incurred after the business began. This includes items like equipment, marketing, legal, and accountancy fees. However, pre-trading training costs are generally not deductible.
• Capital Allowances: For larger assets that provide a lasting benefit to your business (e.g., machinery, equipment, business vehicles), you claim tax relief through Capital Allowances instead of treating them as a regular expense. The Annual Investment Allowance (AIA) provides 100% tax relief on most qualifying plant and machinery up to £1 million per year. Cars have specific rules and generally do not qualify for AIA, but new zero-emission cars can qualify for a 100% First Year Allowance (FYA) until 31 March 2027.
• Home Office Expenses: If you work from home, you can claim a proportion of your household costs.
• Limited Companies: Your company can pay you a flat rate of £6 per week (£312 annually) without needing receipts, or you can claim a proportion of actual additional costs (e.g., increased electricity, heating, phone bills) with evidence. Fixed costs like mortgage interest or council tax are generally not claimable unless a formal rental agreement is in place.
• Sole Traders: You can claim a proportion of costs like heating, electricity, council tax, mortgage interest/rent, and internet/telephone use based on business usage. Alternatively, you can use simplified expenses based on hours worked from home.
• Food and Subsistence: Generally, food and drink are considered personal expenses. However, you can claim for reasonable food and drink costs (subsistence) if you are travelling for business away from your normal place of work, and the expense is additional to your normal daily costs. Client entertainment is explicitly not a tax-deductible expense in the UK.

Common mistakes

• Claiming personal expenses: Mixing personal and business expenses is a frequent error. Only costs incurred "wholly and exclusively" for business are allowable.
• Lack of records: HMRC requires you to keep accurate records and receipts for all claimed expenses, typically for at least six years.
• Misunderstanding training rules: Believing all training is claimable. Training for a new trade is generally not allowable, only for maintaining or improving existing skills.
• Claiming client entertainment: Meals or hospitality for clients are not tax-deductible.