What if my company doesn't reimburse me?

If your company doesn't reimburse you, the amount you've paid personally effectively becomes a loan from you to the company, recorded in the director's loan account. The company still benefits from the expense for Corporation Tax purposes, but you remain out of pocket until the company repays you.

Is there a limit to how much I can claim?

There isn't a specific monetary limit on how much you can claim, as long as the expenses are legitimate, wholly and exclusively for business purposes, and you have valid records. However, HMRC expects expenses to be "reasonable" for the nature of the business.

Do I pay tax on the reimbursement?

No, you do not pay personal income tax on the reimbursement of legitimate business expenses. This is because the money is simply repaying you for a cost you incurred on behalf of the company, not providing you with additional income.

What if I'm a sole trader?

If you're a sole trader, the process is simpler. You don't "claim back" expenses from a separate company entity. Instead, you directly deduct your allowable business expenses from your business income when calculating your taxable profit for your Self Assessment tax return. You still need to keep excellent records.

How long do I need to keep records?

You must keep your business records, including expense receipts and invoices, for at least five years after the 31 January submission deadline of the relevant tax year. For example, for the 2026/27 tax year, you would need to keep records until at least 31 January 2033.

Paying for business expenses personally: how to claim them back

Yes, you can claim them back

As a director, contractor, or small business owner operating through a limited company, it's common to pay for business expenses out of your own pocket. The good news is that your company can reimburse you for these costs. This process ensures your company's accounts accurately reflect its true expenses and that you are not out of pocket for costs incurred solely for the business.

When your company reimburses you, it treats the payment as a business expense, which can reduce its taxable profit. For you, the reimbursement is not considered income, so you won't pay personal income tax on it. This is a key benefit of separating your personal and business finances, even when you initially use personal funds.

How to claim your expenses

The process for claiming back expenses you've paid personally is straightforward, but it requires good record-keeping.

Keep detailed records: For every expense, you need proof of purchase. This typically means a receipt, invoice, or bank statement showing the payment. Make sure these records clearly show:

The date of the expense.
The amount paid.
What the expense was for (e.g., "train ticket London-Manchester").
The supplier's name.

Submit an expense claim: Create an expense report or simply list the expenses you've paid for. Include all the details from your records. Many accounting software packages have features to help you do this efficiently.
Company reimbursement: Your company then pays you back the total amount of the approved expenses. This payment should be recorded in the company's books, usually against a "director's loan account" or "expenses payable" account.
Company records the expense: The company records these reimbursements as business expenses in its accounts. This reduces the company's profit and, consequently, its Corporation Tax liability.

What counts as a business expense?

For an expense to be reclaimable by your company, it must be incurred "wholly and exclusively" for the purpose of the trade. This means the expense must be solely for business use, with no significant personal benefit.

Common types of allowable business expenses include:

Travel costs: Fuel, public transport fares, parking, tolls, and accommodation for business trips.
Subsistence: Reasonable costs for food and drink while working away from your usual place of work.
Office costs: Stationery, postage, phone bills, internet, and software subscriptions.
Professional fees: Accountant fees, legal advice, and other professional services.
Training: Courses directly related to your business activities.
Equipment: Tools, computers, and other assets used in your business.

Remember, if an expense has a dual purpose (partly business, partly personal), you can generally only claim the identifiable business portion. For example, if you use your personal mobile phone for business, you can claim a proportion of the bill.

VAT on personal expenses

If your company is registered for Value Added Tax (VAT), it may be able to reclaim the VAT on expenses you paid for personally, even if the receipt is in your name. This is possible as long as:

The expense was for the business and not for personal use.
Your company is the recipient of the supply (i.e., the goods or services were for the company).
You have valid VAT receipts or invoices.
The company reimburses you for the expense.

The key is that the underlying supply must be to the business. For example, if you buy office supplies for the company with your personal card, the company can reclaim the VAT. However, if you buy a personal item, even if you later decide to use it for business, the VAT generally cannot be reclaimed.

Common mistakes

Not keeping records: Without receipts or invoices, HMRC may disallow the expense, meaning your company can't claim it, and you might be out of pocket.
Claiming personal items: Attempting to claim expenses that are clearly for personal use can lead to penalties from HMRC.
Delaying claims: While there's no strict deadline for directors to claim expenses from their own company, it's best practice to process them regularly to keep your accounts up-to-date and avoid large outstanding balances.
Mixing personal and business bank accounts: While you can pay for business expenses personally, it's much clearer and easier to manage if you use a dedicated business bank account for company transactions.

Frequently asked questions

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