What Expenses Can You Claim as a Director of a Limited Company?

As one of the leading media accountants across London and the UK for over 2 decades, it’s safe to say that we understand how to help directors like you minimise your tax burden while maximising your company profits - and only through the correct means.

Below we’ve outlined the core areas in which a director of a limited company can expense business costs:

Salaries and Benefits

As a director of a limited company, you’re entitled to receive a salary and benefits. Here are some of the expenses you can claim as a director of a limited company:

Director's Salary

As the director of a limited company you can pay yourself a salary. The salary that you pay yourself is an allowable expense for your company, which means it can be deducted from your company's profits before tax is calculated. It’s important to note that although you can choose how much you pay yourself, it must be reasonable for the work you do.

Directors typically structure pay with a mix of salary and dividends. Keeping salary at or just above the National Insurance threshold can be tax-efficient, as the company also receives Corporation Tax relief on the salary expense.

Pension Contributions

As the director you can also make contributions to your pension scheme.
These contributions are also an allowable expense for your company provided it is a company pension scheme where the payments are employer contributions.  The contributions you make to your pension scheme will reduce your company's profits, which in turn means that you’ll pay less tax.

Employer pension contributions are usually deductible for Corporation Tax purposes, provided they are “wholly and exclusively” for business. HMRC guidance stresses that contributions must be reasonable for the size and profitability of the company.

Benefits in Kind

Benefits in kind are non-cash benefits that you receive from your company. These benefits can also be claimed as an allowable expense for your company. Examples of benefits in kind include company cars, private medical insurance, and mobile phones. However, it’s important to note that there are tax implications for receiving benefits in kind; you may need to pay tax on the value of the benefit, and your company may need to pay Class 1A National Insurance contributions.

HMRC requires directors to report benefits in kind annually via form P11D (or payroll them), and Class 1A NICs must be paid by the company. The tax treatment of benefits depends on the type (e.g. electric cars are taxed at lower benefit-in-kind rates than petrol/diesel cars).

Office Expenses

Additionally as a limited company director, you are entitled to claim certain office expenses to reduce your company's tax bill. These expenses can include rent and utilities, office supplies, equipment and furniture, but remember these expenses should be in the name of your company and considered wholly and exclusive for business.

Use of Home

If you don’t have a separate business premises, you may need to work from home, where you can claim the flat rate of £6 per week use of home allowance.  

Office Supplies

You can also claim the cost of office supplies such as stationery, printer ink, postage, and computer software. However, you should be wary when claiming for items that are used for both personal purposes as well as business purposes.

For hybrid items (such as mobile phones or software subscriptions used both personally and for work), HMRC expects a sensible business-use percentage to be claimed rather than the full cost. Having separate business-only contracts can make the claim simpler.

Equipment and Furniture

Equipment and furniture that are being used solely for business purposes can be claimed against, such as a computer, laptop, tablet, printer, desk or chair. However, where items that are used for both personal purposes as well as business purposes, such as a mobile phone or laptop that are owned personally by the director, you would only be able to claim for a proportion of the expense.

It’s important to keep receipts and records of all your office expenses to support your claims in case of an audit. By claiming legitimate office expenses, you can reduce your company's tax bill and free up more money for your business.

For company-owned equipment, the full cost can usually be claimed as a business expense or capital allowance (depending on the item and value). If the equipment is personally owned, only the business-use proportion is allowable. Where private use is significant, the expense may be treated as a taxable benefit-in-kind.

Travel and Accommodation

In your role as director, you may incur travel and accommodation expenses while carrying out your business duties. These costs are commonly categorised as follows:

Mileage Allowance

If you use your own vehicle for business purposes, you can claim a mileage allowance. The current mileage rate for cars and vans is 45p per mile for the first 10,000 miles and 25p per mile thereafter. You can claim this allowance for business travel, such as visiting clients or suppliers, attending meetings or conferences, or travelling between different business locations.

These HMRC-approved rates are intended to cover fuel, insurance, servicing, and depreciation. You cannot claim these costs separately in addition to mileage. If the company owns or leases the vehicle, instead of mileage you can reclaim actual running costs, but this usually triggers a taxable benefit-in-kind if there is private use.

Hotel Expenses

If you need to stay in a hotel while carrying out your business duties, you can claim the cost of the hotel room as an expense. You can also claim for any meals you have to buy while staying in the hotel, as long as they are reasonable and necessary. However, you cannot claim for any personal expenses, such as room service, mini-bar, or leisure activities.

The company can reimburse directors for reasonable overnight accommodation and meals without creating a taxable benefit, provided the trip is “wholly and exclusively” for business. Keep itemised receipts rather than claiming per diem allowances unless using HMRC’s benchmark subsistence rates.

Subsistence Costs

If you have to travel away from your normal place of work and incur additional expenses for food and drink, you can claim subsistence costs. This includes meals, snacks, and non-alcoholic drinks. 

HMRC allows reimbursement either by actual cost (with receipts) or by benchmark scale rates (e.g. £5 for qualifying travel of 5+ hours, £10 for 10+ hours, £25 for 15+ hours with late return). Alcohol is not allowable. Subsistence is only claimable for business-related journeys, not your ordinary commute.

Professional Services

You can also claim for professional services that are necessary for the running of your business. Here are some examples of professional services that you can claim:

Accountancy Fees

You can claim for accountancy fees that are incurred in the preparation of your company's annual accounts and tax returns. This includes fees for bookkeeping, payroll, and other accounting services that are necessary for the running of your business.

Accountancy fees for personal tax returns (e.g. a director’s own Self Assessment) are not deductible for the company, but can sometimes be claimed by the individual. HMRC only allows the company to deduct costs that relate to its own statutory accounts and taxes.

Legal Fees

You can claim for legal fees that are incurred in the course of your business activities. This includes fees for drafting contracts, defending legal claims, and other legal services that are necessary for the running of your business. However, you can’t claim for legal fees that relate to personal matters.

Some types of legal costs are also restricted. For example, legal fees related to the purchase of fixed assets (like property) are usually treated as capital expenditure rather than allowable revenue expenses.

Insurance Premiums

You can claim insurance premiums that are necessary for the running of your business. This includes premiums for public liability insurance, professional indemnity insurance, and other types of insurance that are necessary for the protection of your business.

It’s very important that you keep accurate records of all professional service expenses that you claim, including receipts and invoices. This will help to ensure that you are able to provide evidence of your expenses if required by HMRC.

Other common examples include employer’s liability insurance (a legal requirement if you employ staff) and directors’ and officers’ liability insurance. Insurance that relates to non-business activities, such as personal life insurance, is not deductible for Corporation Tax.

In need of support to make sure you stay on the right side of HMRC? Speak to the team at Blue Skies today on 01767 699996 or thecrew@blue-skies.tv for more information.