What expenses can a business claim?
UK businesses can claim expenses that are incurred wholly and exclusively for business purposes, with eligibility depending on use, evidence and HMRC rules.
Business expenses are the everyday costs you incur while running your company. When an expense is allowable, it can usually be deducted from your profits before tax, which reduces the amount of tax the business pays.
All allowable expenses are judged against the same core principle set out by HMRC: the cost must be incurred wholly and exclusively for business purposes.
That rule applies whether you’re a sole trader, partnership or limited company. It sits at the heart of how expenses work across income tax and corporation tax.
HMRC sets out the general position here:
Expenses if you’re self-employed
Expenses and benefits A-Z
What does “wholly and exclusively” mean in practice?
An expense meets the test when it relates directly to running your business and supports your trading activity.
Clear examples include tools you need to do the work, software that supports delivery or professional fees linked to compliance. Where things get less clear is when a cost has both business and personal use.
When there’s mixed use, only the business portion can usually be claimed. That business element needs to be identifiable and supported by records.
This approach keeps claims fair, proportionate and in line with HMRC’s expectations.
Common types of allowable business expenses
Most businesses will see the same core categories appear in their accounts year after year. The exact treatment can vary depending on your structure and how the cost is used, but these are some of the most common areas.
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Expenses linked to the day-to-day running of your business are usually allowable. This can include:
• Office rent or co-working space
• Utilities such as electricity, heating and water
• Business rates
• Office supplies and stationery
If you work from home, you can usually claim a proportion of household costs that relate to business use, such as heating, electricity or broadband.
HMRC explains the available methods here.
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Digital tools are now part of everyday trading. Allowable costs often include:
• Accounting software
• CRM systems
• Industry-specific tools
• Cloud storage and business apps
These costs are generally straightforward where they support your work and are used by the business.
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Payments to employees and freelancers are usually allowable where they relate to business activity. This can include:
• Salaries and wages
• Employer’s National Insurance
• Pension contributions
• Freelance and subcontractor fees
These costs must be properly recorded and supported through payroll or invoices.
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Travel costs can be claimed when the journey is undertaken for business reasons. Typical examples include:
• Mileage or fuel for business journeys
• Train, taxi or air fares
• Hotels when travelling for work
Ordinary commuting between home and a regular place of work is not classed as a business journey, which is an important distinction when reviewing claims.
HMRC guidance on travel expenses can be found here.
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Many professional costs are part of staying compliant and protected. These often include:
• Accountancy and bookkeeping fees
• Legal advice related to the business
• Business insurance policies
• Regulatory or professional memberships
Where the cost supports the business rather than a personal role, it’s usually allowable.
Expenses with mixed business and personal use
Some costs naturally sit across both business and personal life. Common examples include:
• Mobile phones
• Vehicles
• Home broadband
• Laptops or equipment used outside work
In these cases, the claim is usually limited to the business proportion. That split needs to be reasonable, consistent and supported by how the item is actually used. Clear records make this much easier to justify if HMRC ever asks.
Expenses that are usually not allowable
Some costs sit outside the scope of business expenses, even if they feel connected to work. These often include:
• Personal clothing that is not a uniform
• Everyday meals at work but not when not travelling or entertaining for work
• Fines and penalties
• Personal expenses put through the business
Understanding where the boundary sits helps avoid accidental over-claims and later adjustments.
Why good records matter
Claiming expenses is about accuracy as much as entitlement. HMRC expects businesses to keep clear records that show:
• What the expense was
• When it was incurred
• How it relates to the business
Digital bookkeeping systems make this easier by storing receipts, categorising costs and keeping everything in one place. Up-to-date records also give you a clearer picture of profitability and cash flow, not just tax savings.
How expenses fit into your bigger financial picture
Expenses affect more than your tax bill. They shape your profit, influence cash flow and feed into decisions about drawings, dividends and reinvestment.
When expenses are recorded correctly and reviewed regularly, they become part of understanding how the business is really performing, not just a compliance task completed once a year.
Get clarity on what your business can claim
Every business is different, and small details often affect whether an expense is allowable and how it should be treated. Getting clear advice early helps you claim what you’re entitled to while keeping everything compliant.
If you’d like support reviewing your expenses, setting up clearer systems or understanding how costs affect your wider financial position, get in touch. We can help you bring clarity to the numbers and make sure your business is working as efficiently as it can.