Guide to limited company expenses

As a limited company contractor, your company can claim a wide range of expenses against profits – from director’s salaries to the cost of IT training.

Some types of expenses are treated in a straightforward manner by HMRC, whereas others (such as company car expenses) are complex and you should refer to your accountant for further advice.

All expenses must have been genuinely incurred solely for the purposes of running a contracting company.

Typical limited company contractor expenses

  • Company director and employee salaries.
  • Employers’ national insurance contributions.
  • Contributions made to executive pension.
  • Subsistence when working away from your permanent workplace.
  • Accommodation costs when working away.
  • Cost of travel and parking (if using your own vehicle, you can claim 45p/mile (first 10,000 miles), and 25p/mile thereafter).
  • Costs of IT training, if related to contract work.
  • Postage, printing, advertising and stationery costs.
  • Limited company insurance, including professional indemnity cover.
  • Costs incurred prior to company formation (although the actual company formation fee is treated as a capital cost).
  • Telephone, broadband, smartphone and mobile costs (if contract is in the company name).
  • Cost of business phone calls, if made on a residential line.
  • Cost of running a home office (HMRC allows a £4/day flat rate without the need for expenses).
  • IT/Computing equipment and software.
  • Costs of renting office space, or using a virtual office service.
  • Confirmation statement fees.
  • Business books, guides, magazines.
  • Bank charges, such as transaction charges.
  • Hire Purchase agreements (in the company name).
  • Accountancy and other professional fees.
  • You can give business gifts of up to £50/person with no questions asked.
  • The costs of an annual party for director and partner, up to £150/head.
  • Flat rate overnight expense if working away from home (£5/night in the UK, £10/night overseas).
  • Some subscriptions to professional publications are allowed by HMRC (if specifically allowed).
  • All company employees who use computers can be provided with an eye test.
  • You can reclaim the cost for an annual health assessment (such as BUPA).

Further Considerations

If you purchase any products or services on behalf of your company, make sure you get a VAT receipt, and where possible have your limited company name added to the receipt.

If you are caught by IR35, rather than claiming for individual expenses via your company, you are provided with a one-off 5% ‘expenses allowance’ to cover costs of running your company. Read more here.

If you are on the flat rate VAT scheme, you do not reclaim the VAT on individual expenses, as the estimated amount of purchases has already been factored into the percentage used by most contractors (14.5%, 13.5% in the first year). If you are likely to claim a lot of expenses via your company, you should seek professional advice as to which VAT scheme would be most beneficial to your company.

Last updated: 4th December 2018