What Can I Claim as a Business Expense? A Practical Guide for UK Small Businesses
“Can I put this through the business?” is one of the most common questions small business accountants hear.
It’s a fair question. Most business owners don’t want to overclaim, but they also don’t want to miss genuine costs and pay more tax than they need to. The tricky part is that the answer isn’t always yes or no. Sometimes it depends on who paid, why the cost was incurred, whether there was any personal use, and whether the business is a sole trade or a limited company.
The basic idea is simple enough: you can usually claim costs that are genuinely for the business. For sole traders, HMRC often talks about expenses being wholly and exclusively for business purposes. For limited companies, the company can claim costs incurred for the business, but personal benefit for directors or employees can create extra tax issues.
This guide explains the common allowable business expenses UK small businesses ask us about, including the grey areas that often cause confusion.
Why claiming the right expenses matters
Every legitimate business expense reduces the taxable profit of the business. If a sole trader misses £1,000 of allowable costs, they could pay more income tax and National Insurance than necessary. If a limited company misses the same amount, it could pay more corporation tax.
That doesn’t mean everything should be claimed. Putting personal costs through the business can cause problems later, especially if HMRC asks questions. At best, the expense may be disallowed. At worst, there may be extra tax, interest, penalties, or director loan account issues.
A good rule of thumb is to ask:
Was this cost incurred for the business?
Can I explain the business reason clearly?
Is there any personal use?
Do I have evidence, such as a receipt, invoice or mileage record?
If the answer feels awkward, it’s worth checking before claiming it.
Everyday costs that are usually claimable
Most small businesses have a core set of running costs. These are often straightforward, provided the business reason is clear and records are kept properly.
Working from home
If you work from home, you can usually claim something towards household costs.
Sole traders can either claim a reasonable proportion of actual household costs or use HMRC’s simplified expenses method, where a flat rate is based on hours worked from home. Actual costs might include part of heating, electricity, rent, mortgage interest, council tax and broadband, depending on the circumstances.
Limited company directors have slightly different options. A company can usually pay a modest homeworking allowance if the director works from home regularly. Claiming a larger proportion of household costs through a company needs more care and should be supported properly.
For example, a freelance designer working from a spare room four days a week may be able to claim a fair proportion of household bills. A company director answering the odd evening email from the sofa is in a much weaker position.
Mobile phones and internet
Business mobile phone costs are commonly claimed, but personal use matters.
If a sole trader uses one phone for both business and personal calls, they should claim only the business proportion. If 70% of use is business related, claiming 70% of the bill may be reasonable if that split can be justified.
For limited companies, a mobile phone contract in the company’s name can often be more tax-efficient, especially if there is only one phone per employee or director. If the contract is in the director’s personal name and the company reimburses it, the treatment can be different.
Internet works in a similar way. If broadband is used at home by the whole household, claiming the full cost is unlikely to be correct. A reasonable business proportion is safer.
Computers, equipment and software
Laptops, monitors, printers, tools, cameras and other equipment can usually be claimed if they’re needed for the business. The tax treatment may depend on whether the item is a day-to-day expense or a capital asset, but either way it often reduces taxable profit through the correct accounting treatment.
Software subscriptions are usually claimable too. That includes bookkeeping software, design tools, cloud storage, project management apps, antivirus software and industry-specific systems.
A photographer buying editing software for client work has a clear business reason. A Netflix subscription is harder to justify, unless the business genuinely reviews film and television content as part of its trade.
Travel, meals and being away from base
Travel is one of the areas where small mistakes are common. The key question is whether the journey is genuinely for business.
Mileage and business travel
Business mileage can usually be claimed when travelling to see clients, suppliers, temporary workplaces, networking events or training connected to the business.
For sole traders, motor costs can be claimed using either actual costs with a business-use adjustment or simplified mileage rates. Limited company directors often claim mileage from the company when using their own car for business journeys.
Ordinary commuting is not normally allowable. If you rent a small studio and travel there every day, that journey is usually commuting, not business travel. By contrast, driving from your usual workplace to a client site is much more likely to be claimable.
Keep a mileage log showing:
Date of journey
Start and end point
Business reason
Number of miles
A diary entry saying “client meeting in Leeds” is much better than trying to recreate a year’s worth of journeys in January.
Hotels, meals and subsistence
If you travel for business and need to stay overnight, hotel costs are usually claimable. Meals while travelling for business may also be allowable, provided they are reasonable and linked to the business journey.
For example, a consultant travelling from Bristol to Manchester for a two-day client project can usually claim the train, hotel and evening meal. A normal lunch bought near home between jobs is less clear, especially for a sole trader, because everyone has to eat.
For limited companies, reimbursed subsistence for employees or directors can be allowable where the travel itself qualifies as business travel. Again, records matter.
Professional, marketing and office costs
Some costs are easy to overlook because they’re boring. These are often the ones that quietly reduce profit throughout the year.
Professional fees are usually claimable when they relate to the business. Accountancy fees, bookkeeping support, legal advice, business banking charges and trade body memberships are common examples. If the legal cost relates to something personal, such as a private house purchase, that wouldn’t become claimable just because the business owner paid the bill from the business account.
Marketing costs are normally allowable when they promote the business. That might include website costs, printed leaflets, photography for your website, directory listings, email software, signage, or sponsorship with a clear business purpose.
Office costs can include stationery, postage, printer ink, small office furniture, business books and other supplies. Rent for business premises, utilities and cleaning costs are also usually claimable where the premises are used for business.
Insurance is another common category. Professional indemnity, public liability, employer’s liability, cyber cover and business equipment insurance are typical examples. Personal insurance, such as private home insurance, needs apportionment or may not be claimable at all unless there is a clear business element.
The grey areas that catch people out
This is where the “what can I claim as a business expense” question becomes more interesting. Many costs have a business connection, but that doesn’t automatically make them allowable.
Clothing
Ordinary clothing is one of the biggest misconceptions.
If you buy a smart jacket, black trousers or comfortable shoes to wear for client meetings, that is normally not allowable. HMRC’s view is that ordinary clothing has a dual purpose. It keeps you clothed as a person, even if you only choose to wear it for work.
Claimable clothing is usually limited to uniforms, protective clothing or costumes used for performance. A branded polo shirt for a tradesperson may be allowable. Steel toe-capped boots for site work are usually easier to justify. A suit for client meetings usually isn’t.
Training
Training can be allowable when it updates or improves existing business skills. A self-employed web developer paying for a course on a new coding framework is likely to have a good business case.
Training that gives you a completely new trade or qualification can be treated differently, especially for sole traders. For example, a marketing consultant training to become a yoga teacher is not simply updating an existing skill.
For limited companies, training paid for employees or directors can often be allowable where it relates to the company’s trade, but there can still be benefit and purpose questions.
Gifts
Business gifts can be tricky. Small promotional gifts may be allowable if they advertise the business and meet the relevant conditions. Think branded pens, calendars or notebooks.
Expensive gifts to clients are much more likely to be disallowed, especially food, drink, tobacco or vouchers. If you buy a client a £150 hamper after a successful project, don’t assume it will reduce your tax bill.
Entertaining
Client entertaining is usually not tax deductible for corporation tax or income tax purposes. That includes taking a client out for lunch, drinks, sporting events or hospitality.
The confusion comes because the payment may still go through the business bank account for record-keeping purposes, but it isn’t normally an allowable deduction for tax.
Staff entertaining is different. A staff summer event or Christmas party may be allowable, and there are specific rules around annual functions for employees. Directors can be included, but one-person companies need to be careful, especially where the event is really personal rather than for staff.
In plain English: buying lunch for a client is different from holding a genuine staff event.
Sole trader or limited company matters
It’s risky to assume the same answer applies to every business structure.
A sole trader and the business are legally the same person, so costs are usually considered through the lens of business purpose and private use. If there is mixed use, the private part generally needs to be excluded.
A limited company is a separate legal entity. If the company pays for something that personally benefits a director or employee, there may be benefit-in-kind reporting, PAYE, National Insurance or director loan account consequences.
For example, if a limited company pays for a director’s family holiday and calls it “travel”, that’s not a business expense. It may be treated as money taken by the director, with tax consequences. If the company pays for a director to attend a genuine industry conference, with hotel and travel, that is much more likely to be allowable.
Mixed-use costs need sensible treatment. A laptop used 90% for business and 10% personally may still be claimable in some situations, but the details matter. A home broadband bill used by the whole family should not be claimed in full without a strong reason.
Keep records like future you will need them
Receipts are not just admin. They are evidence.
Good records help your accountant claim everything you’re entitled to, prepare accounts faster and answer questions if HMRC ever asks. They also stop small costs disappearing. A train fare here, a software subscription there, postage, parking and stationery can add up over a year.
Keep:
Receipts and invoices
Bank and credit card statements
Mileage logs
Notes explaining unusual costs
Evidence of business purpose, such as calendar entries or emails
Cloud bookkeeping software can make this much easier. Take a photo of the receipt while it’s fresh, add a short description, then move on. “Lunch with supplier after Birmingham trade show” is much better than “meal” six months later.
Quick guide to common business expenses
Expense | Usually claimable? | Watch out for |
Homeworking costs | Yes, in part | Use a fair method and don’t claim personal household use |
Mobile phone | Yes, if business-related | Personal use or contract in the wrong name |
Internet | Yes, in part | Household use needs apportionment |
Laptop and equipment | Yes | Personal use and capital allowance treatment |
Software subscriptions | Yes | Must relate to the business |
Mileage and travel | Yes | Ordinary commuting is not normally allowable |
Hotels and meals | Yes, when linked to business travel | Everyday meals near home are harder to justify |
Professional fees | Yes | Personal legal or financial advice is different |
Marketing | Yes | Must genuinely promote the business |
Training | Sometimes | New trade training can be treated differently |
Clothing | Limited | Ordinary clothing is usually not allowable |
Staff costs | Yes | Payroll, pension and reporting rules apply |
Gifts | Sometimes | Client gifts have strict limits |
Client entertaining | Usually no | Record it separately for tax treatment |
Staff entertaining | Often yes | Specific rules and limits may apply |
FAQs about putting expenses through the business
Can I claim something if I paid for it personally?
Yes, if it was genuinely for the business and you have evidence. Sole traders can record it as a business expense. Limited company directors can usually reclaim it from the company, but the receipt and business reason should be kept.
Can I claim part of a cost if it has personal and business use?
Often, yes. The business part can usually be claimed if you can make a reasonable split. For example, a sole trader might claim 60% of a mobile bill if that reflects business use. Don’t claim 100% unless the cost is genuinely all business.
Can I put meals through the business?
Sometimes. Meals linked to qualifying business travel may be allowable. Client entertaining, such as taking a customer out for lunch, is normally not tax deductible. Keep the receipt and write down who attended and why.
What happens if I claim something I shouldn’t?
HMRC can disallow the expense, which increases taxable profit. There may also be extra tax, interest and penalties. For limited companies, the cost may create a benefit-in-kind or director loan issue.
Do I need receipts for every expense?
You should keep receipts or invoices wherever possible. Bank statements prove payment, but they don’t always prove what was bought or why. A clear receipt plus a short note is much stronger.
If you’re unsure, ask before guessing
Most expense questions come down to business purpose, evidence and the type of business you run. Some claims are straightforward. Others sit in a grey area where a small detail changes the answer.
Claiming legitimate expenses helps you avoid paying more tax than necessary. Claiming personal costs can create problems you don’t need.
If you’re unsure whether a cost should go through your sole trade or limited company, Beyond Bookkeeping Accountants can help you make the right call, keep proper records and claim what you’re entitled to with confidence.
This article is general guidance only and isn’t a substitute for advice based on your own circumstances.
Comments