Hello NewcoThe “wholly and exclusively” test
A cost is allowable for Corporation Tax if it's incurred wholly and exclusively for the purposes of the business. If something has a mixed business and personal use, only the business part may count.
What usually counts
- Equipment, computers and software you use for the business
- Business phone and broadband
- Accountancy, legal and other professional fees
- Business insurance
- Advertising, website and marketing
- Business travel, hotels and subsistence on business trips
- Training that keeps your existing skills up to date
Using your own car
If you drive your own car for business, the company can pay you a tax-free mileage allowance of 55p a mile for the first 10,000 business miles in the tax year. Ordinary commuting to your usual workplace doesn't count.
The catches
- Personal costs get taxed. If the company pays for something personal, it's usually treated as extra salary or a benefit in kind, so tax is due on it.
- Client entertaining isn't deductible. Taking clients or suppliers out may be good for business, but it doesn't reduce your Corporation Tax.
Keep the receipts
Every claim needs evidence. Keep receipts and invoices (photos are fine) and note what each one was for.
Quick answers
What expenses can a limited company claim?
Costs incurred wholly and exclusively for the business, such as equipment and software, business phone and broadband, professional fees, insurance, marketing, business travel and training that keeps existing skills up to date.
How much can my company pay me for using my own car?
A tax-free 55p a mile for the first 10,000 business miles in the tax year. Ordinary commuting to your usual workplace does not count.
Can I put client entertaining through the company?
You can pay for it, but client entertaining is not deductible, so it does not reduce your Corporation Tax.
What if the company pays for something personal?
It is usually treated as extra salary or a benefit in kind, so tax is due on it.
Video transcript
Read what's said in the part 4 video
Part four: what can you actually put through your company?
One: the test. A cost must be wholly and exclusively for the business. If it's partly personal, only a clear business part can count.
Two: usually fine. Equipment and software, stock, business travel, a business phone, insurance and your accountant's fees.
Three: using your own car for business trips? The company can pay you 55p a mile, tax-free, for your first 10,000 business miles this tax year.
Four: the catches. Everyday clothes and your normal commute aren't business costs. If the company pays for them, they're usually taxed as a benefit or added to your director's loan. And entertaining clients isn't tax-deductible.
And keep a receipt for everything.
This is general information, not advice. Follow for part five: VAT, and when you have to register.