Every company has overhead expenses and business costs to balance, ranging from phone bills and stationery to computer software and travel expenses. You can claim tax relief on these expenditures as a limited company owner through business expenses, which keeps your company more tax-efficient by lowering your profit and Corporation Tax payment.
You’ll have a better grasp of your upcoming tax bill and possibly a higher take-home pay if you know what you can and cannot claim.
Here, we look at the allowable tax deductible expenses your limited company may claim, how to deduct them, and what to watch out for to keep HMRC happy when you pay tax.
How to claim expenses as a limited company
If you choose to pay for your limited company’s costs out of your own pocket, you can do so either directly from your business account or as a reimbursed expense.
Since employees can also claim for business expenses, it is important to establish a business expense form and policy to ensure that everyone is clear on how much they can spend, what pre-approval is required and where.
10 Limited Company expenses you can claim
Salary
If you choose to pay yourself a salary as a Director of your limited company, both that salary and the associated National Insurance Contributions (NIC) are allowable expenses. Keep in mind that you will be required to begin paying NICs once you hit the National Insurance threshold.
Pensions
Once you have established a pension scheme , you can contribute to your pension pot and receive 100% tax relief as a limited company expenditure. You should be mindful that the maximum amount your business can contribute tax-free to a pension plan is £40,000 per annum. You can also contribute personally from your own funds but your maximum contribution depends on your ‘relevant earnings’ – plus it’s usually more tax efficient to do it straight from a Limited company.
Equipment costs
The tools you need to perform your duties as a limited company director, such as computers, software, scanners, and printers, can be written off as business expenditures. If used primarily for work, office furniture such as chairs and desks can also be claimed.
Phone bills
Contracts for business mobile phones and internet service are allowable business expenses. You can deduct the complete cost of your mobile phone bill if it is in your company’s name and is used exclusively for work-related activities.
If the contract is personal, you must distinguish between business and personal use and deduct only the costs that are related to your company. In today’s world that can be difficult as most people are on inclusive minutes and texts plans meaning it is hard to identify a direct cost to your company. We therefore recommend contracts in the business name. For the calls you made on behalf of your limited company from your personal phone line, you can also claim those costs.
Home office
If your home is where your company is based, you can deduct a portion of your utility and household expenses as business expenses. This expense may be deducted typically at the rate of £6 per week or £312 per annum or by calculating the number of hours you spend in each area for work-related activities.
Other expenses
As long as they are used only for business reasons, you can also deduct the costs of lighting, heating, postage, printing, accountancy, and legal services as limited company expenses.
Advertising and marketing
Through your advertising, marketing, and PR efforts, you put a lot of effort into promoting your services. If the investment has been used exclusively for business purposes, it can be claimed as one of your limited company expenses whether it is a one-time fee or an ongoing charge.
Business insurance
As long as they are only used for business-related activities, the cost of your business insurance policies may be deducted from your limited company expenditures. All business insurances, such as contents insurance, professional indemnity insurance, employers liability insurance, and public liability insurance, are allowable costs.
Startup costs
For a period of up to seven years before a business begins trading as a startup company, startup costs may be written off as limited company expenditures. Laptops, computer software, internet and domain name fees, travel costs, as well as professional services like accounting and legal assistance, are typical pre-formation company expenses.
Health checks
Your workers may deduct eye exams as authorised business expenses if a significant portion of their work involves using a computer screen. Only if they are solely required for screen-based work as part of their job are the costs of prescription glasses or contact lenses eligible for reimbursement as business expenses.
Entertainment expenses
In general, company entertainment costs aren’t deducted from profits as an allowable expense However, staff entertainment is deductible and it is important to identify these separately. You may also have to spend your own money on business entertainment as part of your responsibilities as a limited company director. These expenses for business entertainment would still not be included in calculating the company profits for tax purposes, providing you the same outcome as not claiming them at all.
Keeping a record of limited company expenses
When it comes to keeping track of the business expenditures for your limited company, you need to run a tight ship. Inaccurate record keeping could result in HMRC rejecting your expenditure claim.
It’s crucial to preserve both paper and digital versions of all pertinent receipts, whether they relate to equipment, fuel expenses, or company mileage. You might want to make an expenditures spreadsheet that you can modify and update as the year progresses.
Looking For Expert Accounting Support For Your Small Business?
RAW Accounting can provide you with individual guidance and assist you in keeping track of your tax affairs and expenses for limited companies, if you need assistance paying corporation tax.
In order to make sure you are fulfilling your responsibilities to HMRC while lowering your corporation tax bill, our expert team can assist you in managing all aspects of small business taxes.
Contact us today for a free discovery chat.
Limited company expenses FAQs
How much can I pay myself as a director of a limited company?
The business must be registered for PAYE with HMRC in order to do this. Additionally, you must make sure that all taxes and national insurance payments—both company and employee—are made to HMRC. The present personal allowance (2022–2023) is £12,570.
Can limited companies pay for broadband?
The monthly cost of the broadband service is a tax deductible expenditure for the company for corporation tax purposes if the contract is signed in the name of a limited company and the service is provided at the residence of a Director or employee but paid for directly by the company.
