Claiming the right business expenses can reduce your taxable profit, which means you only pay tax on the profit your business has genuinely made. However, the rules are not always as simple as keeping every receipt and putting it through the business.
Some costs are fully allowable, some are partly allowable, and others cannot be claimed at all. Getting this wrong can mean either overpaying tax or creating problems if HMRC reviews your records.
This guide explains the main types of expenses UK businesses may be able to claim against tax and where professional tax advisory support can help.
What are allowable business expenses?
Allowable business expenses are costs that are incurred for the purpose of running your business.
For sole traders and partnerships, these expenses are deducted from income to calculate taxable profit for Income Tax purposes. For limited companies, allowable business costs are deducted when calculating taxable profits for Corporation Tax.
A key principle is that the expense must usually be incurred “wholly and exclusively” for business purposes. In simple terms, this means the cost must be genuinely connected to running the business.
If a cost has both business and personal use, only the business portion may be claimable, provided it can be clearly separated and supported with proper records.
Common expenses UK businesses can claim
The exact expenses a business can claim will depend on its structure, sector and how the cost is used. However, common allowable expenses include the following.
Office and premises costs
Businesses can usually claim costs linked to running an office, workspace or business premises.
This can include:
Rent for business premises
Business rates
Utility bills
Property insurance
Security costs
Repairs and maintenance
Office supplies
Printing, postage and stationery
Business phone and internet costs
Software subscriptions used for the business
If you work from home, you may be able to claim a proportion of household costs where they relate to business use. This needs to be calculated carefully, as personal use cannot be claimed.
Travel and vehicle expenses
Business travel costs may be allowable where the travel is necessary for work.
This can include:
Train, bus, taxi or air fares for business journeys
Hotel costs for business trips
Meals during overnight business travel
Parking for business journeys
Vehicle insurance, servicing, repairs and fuel where used for business
Mileage costs where simplified mileage rates are used
However, normal commuting between home and a regular workplace is generally not claimable. Fines and penalty charges are also not allowable.
For vehicles used for both business and personal journeys, only the business portion can usually be claimed.
Staff and subcontractor costs
If your business employs staff or uses subcontractors, many of these costs may be allowable.
This can include:
Salaries and wages
Employer National Insurance contributions
Pension contributions
Bonuses
Staff benefits
Agency fees
Subcontractor costs
Training related to the business
Training must normally be relevant to the work being carried out by the business. Personal development or unrelated training may not qualify.
Professional fees and financial costs
Many businesses also claim costs linked to professional advice and financial services.
This can include:
Accountancy fees
Legal fees for business matters
Tax advisory services
Professional indemnity insurance
Bank charges
Business loan interest
Overdraft fees
Card processing fees
Leasing or hire purchase interest
There are exceptions. For example, legal fees connected to buying property or machinery may be treated differently, and fines for breaking the law are not allowable.
This is an area where tax compliance advice can be particularly useful, as the treatment of costs depends on the reason for the expense.
Marketing and website costs
Marketing expenses are generally allowable where they are directly related to promoting the business.
This can include:
Website development and maintenance
SEO support
PPC campaigns
Social media advertising
Email marketing
Design and branding costs
Printed marketing materials
PR activity
Photography or video for business promotion
Some website or software-related costs may need to be considered carefully, especially where they create a long-term asset for the business.
Insurance costs
Business insurance policies are usually allowable where they are needed for the company or trade.
This may include:
Public liability insurance
Employer’s liability insurance
Professional indemnity insurance
Business premises insurance
Equipment insurance
Relevant vehicle insurance
Personal insurance policies are not usually claimable unless there is a clear and allowable business purpose.
Equipment and assets
The rules for equipment can be more complex.
Smaller items used in the day-to-day running of the business may be treated as allowable expenses. However, larger assets that are expected to be used for several years, such as vehicles, machinery, computers or major equipment, may be treated as capital assets.
Capital assets are not usually deducted in the same way as everyday running costs. Instead, businesses may be able to claim capital allowances.
This is one of the most common areas where business owners need tax advisory support, as the correct treatment depends on the type of asset, how it is used and the accounting method applied.
What expenses cannot usually be claimed?
Not every business cost is tax deductible.
Common examples of costs that cannot usually be claimed include:
Personal expenses
Non-business travel
Client entertaining
Fines and penalties
Loan repayments
Clothing that is not a uniform or protective clothing
Costs with no clear business purpose
Private use of phones, vehicles, premises or equipment
A useful rule of thumb is to ask whether the cost exists because of the business, and whether it can be clearly evidenced as a business expense.
If the answer is unclear, it is worth getting advice before claiming it.
Why accurate records matter
Claiming expenses is not just about knowing what is allowable. Businesses also need to keep accurate and detailed records.
This includes:
Receipts
Invoices
Bank statements
Mileage logs
Supplier records
Payroll records
Notes explaining mixed-use costs
Evidence of business purpose where needed
You do not usually need to send proof of every expense when submitting a tax return, but you do need to keep records in case HMRC asks for them.
Good record keeping also makes tax compliance easier, reduces the risk of errors and helps your accountant identify legitimate opportunities to reduce tax.
How tax advisory support can help
Allowable expenses can seem straightforward at first, but there are many grey areas.
For example:
Is a cost revenue or capital?
Is there mixed personal and business use?
Can part of the expense be claimed?
Does the cost meet the “wholly and exclusively” test?
Is the business claiming too much or not enough?
Are the records strong enough if HMRC reviews them?
A tax compliance service can help ensure your business is claiming expenses correctly, reducing the risk of mistakes while also helping you avoid overpaying tax.
For growing businesses, professional tax advisory services can also help with wider planning, such as company structure, director expenses, capital allowances, VAT considerations and future investment decisions.
Need help with business tax compliance?
Understanding what your business can claim against tax is an important part of managing cash flow, profitability and compliance.
At Wisteria, we support UK businesses with tax compliance, tax advisory and accounting services, helping business owners stay compliant while making informed financial decisions.
If you are unsure whether your business is claiming expenses correctly, or you want to review your current tax position, our team can help.