Allowable Expenses for a Limited Company: What Directors Can Claim

“Can I put this through the company?” It is the question we field more than almost any other from directors across Kent — and the nervousness behind it is understandable. Claim too little and you pay more corporation tax than you need to; claim the wrong things and you invite trouble. The good news is that the rules, while not always intuitive, are learnable. This guide covers what a limited company director can legitimately claim, where the traps are, and why the treatment differs from being self-employed.

Important: if you trade as a sole trader rather than through a company, this is not your guide — the rules are genuinely different. See our separate post on sole trader versus limited company and our self-employed expenses guidance instead. Applying company rules to a sole trade (or vice versa) is a common and costly mix-up.

The one test that governs everything: wholly and exclusively

A cost is allowable against corporation tax only if it is incurred wholly and exclusively for the purposes of the business. That is the whole rule, and it is stricter than it sounds. “Wholly and exclusively” means the expense must be for the business and nothing else — not mostly business, not business-with-a-personal-perk.

Where people come unstuck is on mixed-purpose costs: things with a genuine business use and a genuine personal use rolled together. A single mobile contract used for work and family calls, a coat you wear to client meetings and the supermarket, a trip that combines a conference with a couple of days’ sightseeing. Sometimes a clear, fair split is allowable; sometimes the personal element taints the whole claim. If in doubt, keep the business and personal genuinely separate rather than hoping a mixed cost slips through.

Two ways to pay — both fine

There are two mechanically different ways to meet a company cost, and both are perfectly acceptable:

• Pay direct from the company bank account. The cleanest option — the company incurs and settles the cost itself.
• Pay personally and reclaim. You meet the cost from your own pocket and the company reimburses you. Entirely legitimate.

What matters is not which method you use but the record-keeping: a receipt or invoice for every claim, and a clear trail showing the business purpose. Reimbursed expenses need the same evidence as company-paid ones. Keep it clean and the whole exercise is straightforward.

Home office as a director — different from a sole trader

This is one place the company rules diverge from self-employment, so be careful. As a sole trader you can apply HMRC’s simplified flat-rate home-working allowance. As a director you generally cannot use that sole-trader flat rate. Instead you have two routes:

• The HMRC homeworking allowance the company can pay you as an employee/director — a modest fixed weekly amount to cover additional household costs, payable free of tax and NIC without the need for receipts.
• A formal licence or rental agreement between you and your company for use of part of your home, based on a reasonable, evidenced proportion of actual costs. This can be worth more than the fixed allowance but must be documented properly, and there can be knock-on considerations — so take advice before setting one up.

The point to take away: do not simply copy what a self-employed friend claims. The director route is its own thing.

Mileage and travel

Business travel is allowable, but two rules catch directors out constantly:

• Ordinary commuting is not allowable. Travel from home to a permanent workplace is treated like anyone’s commute — not a business cost.
• The 24-month rule for temporary workplaces. Travel to a genuinely temporary workplace can be claimed — but once you expect to be, or actually are, at the same site for more than 24 months, it is reclassified as a permanent workplace and the relief stops. For contractors moving between client sites this matters a great deal, and the “expect to” part means a long engagement can lose relief before the 24 months are even up.

For business mileage in your own car, the company can pay you the HMRC approved mileage rate free of tax. Those rates rose for 2026/27 to 55p per mile for the first 10,000 business miles in the tax year and 25p per mile thereafter (the increase was announced in May 2026 and backdated to 6 April 2026). See our dedicated mileage post for the detail.

Equipment and capital items

Laptops, tools, office equipment and other kit bought for the business are allowable — but larger, longer-lasting items are usually treated as capital rather than an everyday running cost, and relieved through capital allowances (often the Annual Investment Allowance) rather than deducted straight off. The distinction affects timing more than the eventual relief. Our post on capital allowances walks through how this works and what the 2026/27 rates now look like.

Training

Training is allowable where it maintains or updates skills you already use in the business. Where training gives you an entirely new skill or qualification — effectively an investment in a new capability rather than the upkeep of an existing one — HMRC may treat it as capital or personal and disallow it. A contractor keeping a current certification up to date is on far safer ground than one funding a qualification for a different line of work.

Pension contributions

Employer pension contributions the company makes on your behalf are a deductible business cost and one of the most efficient ways to extract profit — no income tax or NIC at the point of contribution. There is enough to this to warrant its own article: see our post on company pension contributions as profit extraction.

The traps — costs that look allowable but usually are not

• Everyday clothing. A suit or smart outfit is not allowable, even if you only wear it for work — the rule requires clothing to be protective or a genuine uniform. “I need to look professional” does not pass the test.
• Client entertaining. Wining and dining clients is specifically disallowed for corporation tax, however commercially sensible it feels. (Staff entertaining is treated differently and within limits.)
• Anything with a personal benefit. Costs that also benefit you personally either fail the wholly-and-exclusively test or create a taxable benefit-in-kind. If you gain personally, expect a tax consequence.

Why receipts and a clean bank account make all of this easy

Almost every expenses headache we untangle traces back to the same root cause: business and personal money run through one account, with receipts missing. Keep a dedicated company bank account, run everything business through it, and keep the paperwork, and allowable expenses stop being a source of anxiety. It also makes your year-end quicker and cheaper, and puts you in a far stronger position if HMRC ever asks. We cover this in our post on keeping business and personal finances separate.

How MCC Partners can help

We help company directors across Gravesend, Dartford, Medway and the wider Kent area claim everything they are genuinely entitled to — and nothing that will cause them grief later. If you have a stack of “can I claim this?” questions, bring them to us; that is exactly the sort of thing a quick review sorts out.

Figures and tax rules are correct as at the date of writing (October 2026) and reflect the 2026/27 tax year. Tax rules change — and with a new Chancellor and an Autumn Budget expected, some may change again. Please check the current position or speak to us before acting on anything in this article.