Stop Overpaying Tax: Navigating Limited Company Expenses and Claiming Everything You Can

Stop Overpaying Tax: Navigating Limited Company Expenses and Claiming Everything You Can


Running your own limited company comes with a long list of perks. You can enjoy more flexibility, embrace a higher earning potential and have the freedom to design your working life the way you want it. But, that freedom comes at a price. It also brings the responsibility of managing your business finances correctly, especially when it comes to expenses, which is no easy feat and leaves a lot of contractors scratching their heads.


At Go Limited, we’ve worked with a lot of limited company contractors, and one thing is clear - understanding allowable expenses can make a significant difference to your tax bill, whilst helping you stay compliant with HMRC. But, do you know what you need to know? You need to know how to take advantage of what’s in front of you, the benefits that are presented to you as a limited company contractor. To help you out, we’ve taken a look at exactly what limited company expenses are, which ones you can claim, and the common pitfalls to avoid.

You have 45 days to return items for a full refund, with or without a receipt. Items must still have their original tags.

You have 45 days to return items for a full refund, with or without a receipt. Items must still have their original tags.

You have 45 days to return items for a full refund, with or without a receipt. Items must still have their original tags.

• contractor weighing pros and cons of limited company IR35

What Exactly Are Allowable Expenses for a Limited Company?

Every business has running costs, they’re hard to avoid. But, not all of them qualify as deductible expenses. Allowable expenses are the costs your business can subtract from its income before tax is calculated. Claiming correctly means you only pay tax on your actual profit, not on money you’ve spent trying to keep your business operational. If you don’t claim correctly, you could end up overpaying tax, costing you more than it needs to and leaving you with less money in the business. 


However, if you want to claim a limited company expense, you need to follow HMRC’s biggest rule - it must be wholly and exclusively for business purposes. If a purchase benefits you personally - even if it only benefits you slightly - you can only claim the business portion. This requires clear reasoning and documentation showing how you’ve worked out the split.


Which Limited Company Expenses Can Contractors Claim?

As no two businesses are alike, you won’t automatically be able to claim the same expenses as other contractors you know, even if you do a similar job and work in the same industry. You might be able to claim some of the same things, but there’s likely to be a few small differences, based on what you use as a business and how you operate.


Travel and Subsistence

If you travel to a temporary work location, the related costs are often claimable. This includes train, bus and taxi fares, mileage if you use your own car and hotels for overnight stays. You can often claim meals and drinks whilst travelling for business too. However, once a workplace becomes a permanent location, travel to and from that site is no longer treated as a business journey and therefore can’t be claimed.


Office Costs and Equipment

Running your business requires tools, and most of those tools are deductible. You can claim expenses such as office furniture, laptops, smartphones, printers, business phone contracts, WiFi, stationery, postage and the maintenance of office equipment. If you work from home, you can either calculate the proportion of household bills used for business or use HMRC’s simplified allowance, which is £26 per month for more than 101 working hours.


Professional Fees and Subscriptions

Most contractors incur professional charges, many of which qualify for tax relief. This includes accountant or bookkeeper fees, legal advice relating to your business, subscriptions to professional associations and business bank account charges. As long as the fee directly supports your trade, it’s usually allowable.


Insurance and Compliance Costs

To operate safely and legally, your business might need different forms of insurance. These are commonly claimable, including professional indemnity insurance, public liability insurance and employers’ liability insurance, if you have staff.


Marketing, Advertising and Promotion

Promoting your services is part of being in business, and most marketing costs are allowable. This includes website design and hosting, domain renewals, online ads and paid promotions, business cards and branded materials, and social media marketing tools. If the goal is to win work or build your business presence, it’s usually claimable as a limited company expense.


Training and Professional Development

Training expenses can be claimed if they improve or develop skills you already use in your business. However, courses that prepare you for an entirely new profession are usually disallowed. This means you can claim for a course that updates software skills you currently use, but not for a course that’s related to an unrelated field.


Don’t Make a Mistake: Limited Company Expenses You Can’t Claim

You don’t want to make a mistake with HMRC, as it can be expensive, time-consuming and stressful to sort out. This is why it’s so important to know what you can’t claim. It’s one thing to know what limited company expenses are allowable, but you don’t want to accidentally claim for something that’s not allowed.


Commuting to a Permanent Workplace

Regular travel to a long-term workplace or client site counts as a personal commute, not a business expense, even if you’re an independent contractor. This means the cost can’t be claimed.


Client Entertainment

Meals, drinks, gifts or hospitality for clients or potential clients can’t be claimed as a limited company allowable expense, even if they’re part of business development. 


Everyday Clothing

There are situations where you can claim clothing as a legitimate expense, but not always. Only specialised or protective clothing qualifies as a limited company allowable expense. Ordinary clothes, even if you only wear them at work, are not deductible.


Training for an Entirely New Profession

Training that’s related to your current role or industry can be claimed as a limited company expense, but that doesn’t mean all training can be. If a course helps you switch careers or trains you in new, unrelated skills, you can’t claim it as a business expense.


Items with Personal Use

It might be tempting to throw in a personal purchase or two, but it’s not a risk worth taking. If something is shared between business and personal use, you can only claim the business related proportion. You should always be able to show evidence of how you calculated the split, as claiming any aspect of an item’s personal use isn’t allowed, and HMRC will pull you up on it.


Tips for Managing Limited Company Expenses Effectively

Though there’s a fair amount to keep on top of, handling expenses doesn’t have to be complicated. As a limited company contractor, you can simplify things by picking up a few good habits, all of which can make the process much smoother:

  • Use cloud accounting tools - such as QuickBooks or Xero - to track receipts automatically, to save you the job.
  • Keep accurate records, including receipts and invoices, for every claim.
  • Enter expenses as and when they occur, rather than trying to catch up months later.
  • Use a dedicated business bank account to keep company finances clean, transparent and far away from any personal spending.
  • Review expenses regularly to spot errors, unusual spending or items that might not be allowable.


There’s no ‘hacks’ to make managing limited company expenses quick and easy, but the above tips will help to make the entire task a lot simpler, smoother and less time-consuming. This gives you more time to focus on liaising with clients, planning projects and delivering the work you’re tasked to do.


Why Many Contractors Choose to Work With an Accountant

With so much to juggle as a limited company contractor, navigating allowable expenses is too much to think about. Managing expenses can become time-consuming and confusing, especially as your business grows, and it’s not something every contractor wants to deal with. That’s why many contractors choose to hand over expense management to a specialist accountant.


Claim Everything You’re Entitled To

Accountants know the rules inside and out, and can identify allowances you might overlook. You can then submit your expenses, knowing everything that can be included, has been included.


Reduce Mistakes and Avoid Investigations

Incorrect claims, even accidental ones, can trigger HMRC scrutiny. An accountant minimises that risk and you can relax, knowing an expert has looked over everything. This reduces the chances of HMRC investigations, stress and the task of rectifying any mistakes.


Free Up More Time to Work

Instead of chasing receipts or recalculating spreadsheets, you can focus on winning contracts and doing the work you’repaid for. A lot of contractors underestimate just how time-consuming expense management can be, and that takes away time you could be spending driving your business forward. 


Managing limited company expenses doesn’t have to feel overwhelming. At Go Limited, we’re confident that with a solid understanding of what’s allowable (and what’s not!), the right systems in place and expert support from those in the know, you can reduce your tax bill legally, stay compliant with HMRC and run your business with confidence.

accountant advising on IR35 compliance

FAQ's


What expenses can I claim through my limited company?

You can claim costs that are wholly, exclusively and necessarily for the purpose of running your business. Allowable expenses reduce your company’s taxable profit, which lowers your Corporation Tax bill.

Common business expenses include:

  • Office equipment such as laptops, software, and stationery
  • Mobile phone and broadband costs for business use
  • Accountancy fees and professional subscriptions
  • Tools and protective equipment
  • Business travel, mileage, and accommodation
  • Marketing and website costs
  • Business insurance policies

A director can pay for expenses directly from the company or pay personally and reimburse through the business. Maintaining good bookkeeping helps ensure HMRC compliance.


Do I need receipts for business expenses?

Yes. You should keep receipts, invoices, mileage logs, and notes explaining the business purpose of each expense. HMRC accepts digital copies, but they must be clear and accessible. Without evidence, the claim can be challenged.


Can I claim my phone bill as a business expense?

If the mobile contract is in the company name, the full cost is typically allowable. If the contract is in your personal name, only the business-use proportion can be claimed. Many directors prefer a separate company phone to keep things simple.


Can I buy a laptop through my limited company?

Yes, if it is needed for work. A laptop used for business is usually fully deductible and may qualify for capital allowances such as the Annual Investment Allowance. If there is significant personal use, it may need to be reported as a benefit in kind.


Can contractors claim food expenses?

Subsistence costs can be claimed when travelling to a temporary workplace, meaning a location where you expect to work for less than 24 months. This includes travel days, overnight stays, and work away from your normal client site.

Everyday meals at home or your regular workplace are not allowable.


Are client entertainment expenses tax deductible?

Generally no. Client entertainment is not deductible for Corporation Tax and VAT is usually not recoverable. Small promotional gifts can qualify if they cost less than £50 per person per year, are branded with your company details, and are not food, drink, tobacco, or vouchers.


Can I claim clothing as a business expense in the UK?

Only protective clothing, a branded uniform, or performance-related costumes are allowable. Regular business clothing, including suits worn exclusively for work, is considered to have personal benefit and is not deductible.


Can directors claim mileage?

Yes, if using their own vehicle for business travel. Approved mileage rates are:

Car or van: 45p per mile for the first 10,000 miles, then 25p per mile

Motorcycle: 24p per mile at all distances

This covers fuel, insurance, and wear and tear. Commuting to a permanent workplace is not claimable.


Are business gifts tax deductible?

Only if they are branded promotional items costing less than £50 per person per year and are not food, drink, tobacco, or vouchers. Entertainment-style gifts are not deductible.


What are home office expenses for limited company directors?

You can claim either:

  • HMRC’s flat rate of £6 per week, or
  • A proportion of actual home running costs, such as utility bills, rent, and broadband

Any calculation must be reasonable and based on genuine business use. Mortgage capital cannot be claimed.


Can I claim gym membership as a business expense?

Usually no. HMRC treats this as a personal benefit unless you work in a role where maintaining physical fitness is essential, such as a professional performer or security worker. In most cases, gym membership becomes a taxable benefit.


Can I claim training expenses through my limited company?

Training required to maintain or improve skills directly related to your current role is allowable. Training for a new career,or courses with no direct business connection, is not permitted.


How do I record expenses for HMRC?

Best practice includes:

  • Keeping digital receipts and evidence
  • Using accounting software such as Xero or QuickBooks
  • Maintaining a company expense policy
  • Reimbursing directors through payroll or the directors’ loan account

Good record keeping reduces risk during tax reviews.


What about IR35 — can I still claim expenses?

If your contract is outside IR35, you can claim normal limited company expenses. If inside IR35, you are treated like an employee for that assignment and expense claims are much more restricted. Only certain travel expenses may still apply depending on the arrangement. Many contractors opt for umbrella companies when inside IR35 due to reduced expense allowances.

personal service company
Speak to a Specialist

Important

 

Any rates and thresholds mentioned in this article are correct at the time of publishing and may be subject to change.

 

When choosing an accountant, look for one with proven experience and expertise in the contracting sector, particularly around areas like IR35, limited company tax matters and off-payroll working. Formal qualifications are important, but relevant hands-on knowledge matters just as much — especially in a complex and fast-changing landscape like this.

How Tax Works When You Set Up a Limited Company as a Contractor

April 15, 2026
How Tax Works When You Set Up a Limited Company as a Contractor For a lot of contractors in the UK, setting up a limited company is the most flexible, professional and - if you do things the right way - tax-efficient way to work. However, the tax responsibilities that come with running your own limited company are more complex than working as a sole trader, freelancer or under an umbrella company, which can complicate things ever so slightly. As a limited company contractor, you are both a company director and (usually!) a shareholder, which means tax applies at both company and personal levels. If you’re new to running a limited company, this will be a huge change to what you’re used to. At Go Limited , we know how important it is to understand how tax works when you set up a limited company as a contractor. In fact, it’s essential for staying compliant with HMRC and making informed financial decisions. Below, we’ve taken a look at how limited company tax works, what taxes you need to pay and the mistakes that commonly catch contractors out.

Closing a Limited Company: What You Need to Know

By Vita Martin • April 15, 2026
Closing a Limited Company What You Need to Know There’s a lot to love about running a limited company. You have the flexibility of managing your workload and being your own boss, and the freedom to run your business in a way that works for you. But, regardless of the advantages, there might come a time when you’re ready for something new. Whether you’re heading back to full-time employment, retiring or deciding to pursue a new profession, having a limited company doesn’t have to hold you back, but you will need to draw things to a close beforehand. At Go Limited , we know how much effort goes into setting up a limited company, and we know deciding to close doesn’t come easily. Once you’ve made the decision, you probably want things to move along relatively quickly, which is why you need to know how to close things down properly.

Are Contractor Accountants Worth the Cost?

By Vita Martin • April 15, 2026
Are Contractor Accountants Worth the Cost?  As a contractor, you’re probably used to doing a lot of things yourself. You run your own business, manage your own workload and decide which projects to take on. Whether you’re a sole trader, freelancer or contractor operating through a limited company, you are in control. However, this can become a burden when it comes to business finances. Unless you have a fair amount of experience with managing business accountants, keeping on top of expenses and planning for tax, everything can spiral into a huge stress. At Go Limited , we understand the appeal of handling everything yourself as a contractor. But, if you want to truly dedicate time to your business, clients and professional growth, it’s likely that something needs to be delegated. More often than not, it makes sense for this to be accounting. This is where contractor accountants come in.

Selecting the Right Accountant for IT Contractors

By Vita Martin • April 15, 2026
Selecting the Right Accountant for IT Contractors Regardless of the specific IT services you provide, how long you’ve been contracting for and how experienced you are at managing your own business, the idea of hiring an accountant has probably come up. When you consider the time, stress and energy that goes into contracting accounting, it’s easy to see why many contractors don’t want to take a do-it-yourself approach. Though there’s nothing wrong with DIY accounting as an IT contractor, it’s a lot easier if you hand everything over to a professional. But, you can’t enlist the help of the first person you find. At Go Limited , we know how daunting it can be to put your accounting, bookkeeping, tax and expenses into someone else’s hands. That’s why we help you to find an accountant you can really rely on. To get the most out of working with an expert, you need to select the right accountant for IT contractors.

How to Reduce the Risk of a Tax Investigation

By Vita Martin • April 15, 2026
How to Reduce the Risk of a Tax Investigation There are a lot of reasons to become a contractor. Whether you decide to approach contracting as a sole trader or set up a limited company, there are a lot of benefits to doing so. But, there’s one thing that holds some people back - the risk of a tax investigation. At Go Limited , we know the idea of undergoing a tax investigation is enough to fill you with dread. But, what if we told you it’s nothing to worry about? Armed with the right information and an idea of how to reduce the risk of an investigation, you can throw yourself into contracting without a second thought. As long as you stay on the right side of HMRC, a tax investigation isn’t something you need to worry about.

Expense Tracking Tools for Contractors

By Vita Martin • April 15, 2026
Expense Tracking Tools for Contractors There are a lot of financial benefits that come with running a limited company as a contractor. But, there’s also a lot of responsibility, especially when it comes to bookkeeping and accounts. For a contractor with a limited company, one of the key areas to pay attention to is expenses. When done properly, expense tracking can reduce your Corporation Tax bill in a considerable way, ensuring you claim every allowable business cost. However, expense tracking is often overlooked, which can lead to missed tax reductions, confusing accounts and potential issues with HMRC. At Go Limited , we’ve seen for ourselves how important expense tracking is and why having a limited company expenses spreadsheet isn’t enough. Below, we’ve taken a look at the tools limited company contractors commonly use, and we’ve shared some of top tips to help stay organised, compliant and on top of expense tracking.

What Expenses Can You Claim as a Limited Company Director?

By Vita Martin • April 15, 2026
What Expenses Can You Claim as a Limited Company Director? There’s nothing quite as rewarding as running your own business, especially if you’ve gone from being a sole trader or freelancer, to a contractor who’s set up your own limited company. Being a limited company director gives you a lot of flexibility, control, and the opportunity to grow your business on your own terms. But, with that freedom comes responsibility, especially when it comes to managing finances and understanding what expenses you can claim. At Go Limited , we’ve seen even the most experienced limited company directors miss out on tax savings because they’ve forgotten to claim tax deductible expenses, and we’ve seen others get dangerously close to HMRC penalties for claiming the wrong thing. Below, we’ve taken a deep dive into what you can and can’t claim as a limited company director.

How Contractors Can Reduce Overheads — Without Risking Quality

By Vita Martin • April 15, 2026
How Contractors Can Reduce Overheads — Without Risking Quality Running your own business can be incredibly rewarding; you’re in charge of your workload, your clients, the projects you take on and the way your business is managed. But, with that comes responsibility and one of the biggest challenges contractors face is keeping overheads under control, whilst also making sure service quality doesn’t suffer. At Go Limited , we know that overheads are inevitable in any business, but that doesn’t mean they should eat into your profits. We’ve taken a look at how you can reduce overheads, without compromising quality.

Why Budgeting Matters for Contractors

By Vita Martin • April 15, 2026
Importance of budgeting for contractors The world of contracting is evolving, with more and more professionals realising the benefits of being a self-employed, ‘be your own boss’ worker. There’s freedom and flexibility, and a number of financial benefits to enjoy. But, that’s only the case if you keep on top of things. Though your focus is likely to be on completing projects, speaking to clients and business growth, you do need to think about the financial side of things. This includes expense management, an area that relies heavily on budgeting. At Go Limited , we know that budgeting and expense management aren’t the most exciting parts about being a contractor. We know that you didn’t set up a limited company because you wanted more paperwork to deal with. But, we also know that limited company expenses are how you operate in a tax-efficient, compliant and organised way. To take full advantage, you need to understand the role of budgeting in expense management, and what that means for you as a contractor.

Managing Unexpected Expenses in Your Limited Company

By Vita Martin • April 15, 2026
Managing Unexpected Expenses in Your Limited Company It doesn’t matter if you’re a pro at managing your limited company and you’ve got a lot of years’ experience behind you, you’re still going to face unexpected costs. This is the case regardless of industry, market or sector, and both internal and external factors can be to blame. Without warning, you could be faced with an expense you haven’t planned for, leaving you struggling to come up with the cash. At Go Limited , we’re here to make your life easier, so check out our expert advice on managing unexpected expenses as a limited company contractor.
More Posts