This article has been produced and published by TreyBridge Accountants and Aaron Gilmore.
We’ve had a lot of people contact us recently to ask which types of expenses they can claim through a limited company. Seeing how it’s such a popular topic, we thought it would be useful to put together everything you need to know in one place, from how it all works, to a list of items that are eligible. You never know, sparing five minutes to read this article could save you hundreds or even thousands of pounds in tax every year.
How expenses work for limited companies
Whilst there are multiple examples of expenditure that can be claimed against, it’s crucial that you follow certain rules. Namely, the expenses need to be wholly applicable to business purposes and recorded through receipts or bills.
If, for example, you’re on a business trip and decide to go shopping for fun whilst you’re there, the travel and accommodation can be claimed for but not the souvenirs you buy for your friends. This may sound obvious, but you’d be surprised what some business owners try to claim as expenses, only to be disappointed further down the line.
Whilst we recommend that expenses are paid for using your business bank account, you also have the option to pay using a personal account and then claim a reimbursed expense. Employees can also claim expenses, in which case we suggest creating a clear policy and form that explains what’s eligible and what isn’t (we can help you with this if it’s too much admin).
Examples of limited company expenses
Starting with the most common examples, a limited company can claim against transport, accommodation and food and drink associated with business trips. The same applies to any business insurance, such as public liability insurance, contents insurance, and any other protection that’s specifically for your limited company. Then there’s marketing, advertising and PR activity, so everything from the occasional social media advert and printed flyer to monthly consultancy services are all on the approved list.
Most owners of limited companies that we talk to know about all of the above, but they’re often missing out on many other opportunities for claiming expenses. Below are some additional costs that can be claimed against, which can make a significant difference to your cash flow.
- Fees, interest and charges to your business bank account.
- Use of a home office, including any equipment and supplies required.
- Phone bills and broadband (it might be worth using a separate mobile phone for your business, as that way the full bill can be claimed for).
- Childcare expenses – limited companies can receive up to £243 of childcare vouchers every month.
- Professional subscriptions, such as any clubs, societies, magazines, journals, websites and other communities related to your business.
- Technology, hardware and software, ranging from new computers and domain names, to Office 365 and Dropbox.
- Professional development is usually a valid expense, such as any training you require in order to advance your business.
- Equipment and furniture covers anything you need for your company to function, so make sure to keep the receipts for things like office chairs, stationery, printer toner, even paperclips.
- If you pay yourself a salary as an employee of the business, this can be claimed as an expense alongside your National Insurance Contributions.
- You can also claim against pensions through a registered provider, allowing 100% tax relief up to the £40,000 threshold (at which point you’ll begin to pay tax on contributions).
- Health checks and eye tests for you and your employees can be claimed for, as long as you can prove that they’re in the best interests of the company.
- Entertainment is a tricky one. Overall, the money used to entertain clients can’t be claimed against, although it’s always worth double checking with us.
- Travel costs associated with the daily commute between home and your workplace sadly can’t be claimed for. However, travelling to meetings, temporary workplaces and industry events all qualify for a claim against petrol, parking, road tolls and congestion charges, as well as any vehicle insurance and repairs associated with this activity.
- Staff parties can be claimed as a business expense as long as it’s an annual event (such as a Christmas party or a summertime gala, but not a Friday night session in the pub). It also has to be open to all staff and no more than £150 can be claimed against each guest.
BONUS: A gift for a member of staff doesn’t require a tax payment if it fits the following criteria.
- It’s not included in their contract
- It’s not given as a reward for their performance
- It isn’t cash or a gift voucher
- It costs £50 or less
So as an example, you splash out £50 and present Karen with a luxury box of chocolates for her birthday – that’s fine, you can claim the tax back. The next day you give Jim a £100 bonus for landing that new client – sorry, but you absolutely need to pay tax on this.
Ask us anything
We’re passionate about helping businesses to become more lucrative and sustainable. If you’d like a free chat about any of the above, give us a call on 01482 235575, fill in our contact form or connect with Aaron on LinkedIn.