Allowable Business Expenses: What You Can and Can’t Claim
- Ben Davies
- Mar 30
- 4 min read
With the end of the tax year approaching, a popular question when sitting down with my clients is “what can I actually claim for?”. Here’s a straightforward guide to what you can and can't claim as allowable business expenses.
What are allowable business expenses?
Allowable expenses are costs that are “wholly and exclusively” for the purpose of running your business.
Key points to remember:
The cost must have a genuine business purpose, not mainly personal.
You need evidence (invoices/receipts, mileage logs, etc.).
The rules differ slightly for sole traders vs limited companies, but the principles are similar.
Home office expenses
If you work from home, you can usually claim a reasonable portion of your household running costs.
There are two main approaches:
Flat‑rate simplified method
HMRC allows a fixed monthly amount based on the number of hours you work from home each month.
This avoids complex calculations and suits very small setups.
Actual cost method
You apportion costs like heating, electricity, council tax, rent and broadband based on the space and time you use for business.
For example, if you use one out of five rooms as an office, for most of the week, you might claim 20% of eligible bills.
Travel and subsistence
Travel is an area HMRC looks at closely, so it is important to apply the rules consistently.
Generally allowable:
Travel to temporary workplaces (clients, suppliers, meetings and training) that are not your normal permanent place of work
Public transport fares, parking, tolls, and congestion charges when travelling for business
Reasonable meals and accommodation when you are working away from your normal base
Generally not allowable:
Commuting from home to your regular, permanent workplace
Travel that is mainly personal with a minor business element tagged on
Good practice:
Keep records of where you went, when, and for what purpose
Keep receipts for trains, taxis, hotels and meals
Avoid extravagant “meals” that look like entertainment
Motor expenses
You can usually claim for business use of a car, van or motorbike, but the method depends on your setup:
Simplified mileage method
Claim the HMRC simplified mileage rate of 45p per business mile for the first 10,000 miles in the tax year, then 25p per mile there after
You must keep a mileage log showing date, journey, and miles
Actual cost method
Claim a proportion of fuel, insurance, repairs, servicing, MOT, road tax, and breakdown cover based on business vs private use
Using separate logbook or app to track mileage makes it much easier to justify your business percentage if HMRC ever asks.
Equipment, tools and technology
Most businesses need equipment – laptops, phones, tools, software – to operate.
Typically allowable:
Computers, printers, phones and tablets used for business
Tools, machinery, and specialist equipment
Business software subscriptions (e.g. accounting software, CRM, design tools).
Office furniture such as desks and chairs.
Tax treatment:
Larger items usually qualify for capital allowances (meaning tax relief may be available either in full in the year of purchase or over several years, depending on the type of item)
Smaller, everyday items may be treated as normal expenses and deducted in full
If items have mixed use (e.g. a phone used for both business and personal), only a reasonable business proportion should be claimed.
Entertaining, client gifts and staff costs
This is one of the most misunderstood areas.
Client and business entertainment:
Meals, drinks, golf days, events or corporate hospitality for clients or prospects are generally not tax‑deductible
You can still pay for it from the business, but it will not reduce your taxable profit
Gifts:
Small client gifts may be allowable only if they meet strict conditions (for example, costing below a certain low value limit per person per year, carry a clear advertisement for your business and are not food, drink, tobacco or vouchers)
Promotional items like branded pens or notepads are usually fine as long as they stay within HMRC value limits
Staff costs:
Salaries, employers’ National Insurance, workplace pension contributions, and most staff training are allowable
An annual staff event (e.g. a Christmas party) can often be allowable within certain cost limits per head, provided it is open to all staff
It is very important to get the right distinction between client entertaining and staff costs, as the tax treatment is very different.
Other common allowable expenses
There are many smaller categories that add up over the year:
Professional fees: accountancy, legal fees for business matters, professional subscriptions to recognised bodies
Insurance: business insurance, professional indemnity, public liability, contents for business premises
Marketing: website costs, advertising, social media ads, business cards, networking event fees
Premises costs: rent, business rates, light and heat for business premises
Bank charges and interest on business borrowing (subject to some restrictions)
How to stay compliant and maximise your claims
To make the most of allowable expenses without attracting unwanted HMRC attention:
Separate personal and business finances wherever possible (separate bank account and card)
Keep digital copies of receipts and invoices, ideally in cloud accounting software
Maintain simple logs for mileage, home working hours, and any mixed-use items
Review expenses monthly rather than once a year – this reduces missed claims and mistakes
Final thoughts and next steps
Used correctly, allowable expenses are a legitimate way to reduce your tax bill and keep more cash in your business. If you are unsure if a cost is allowable or not, keep the receipt and ask for professional guidance before you submit your return. This is also an ideal time, before the end of the tax year, to review your expenses and check you are not leaving money on the table rather than leaving it to January.
If, after reading this, you feel you need further guidance, LedgerFix offer a free 30-minute discovery call to support business owners and help them understand how to reduce their tax bill within HMRC guidelines.
07487879177
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