Money’s tight when you’re a startup. The last thing you want
is to miss out on reclaiming expenses you incur as you start to build your business.
But while you’re busy assembling a team, working on
developing your product or service, marketing your brand and doing all the
other things that new business owners need to do worry about, it’s easy to
forget about keeping an eye on the finances.
Looking for help online isn’t always easy either. There’s
plenty of information spread around on gov.uk, but its guides run to more than
100 pages and finding and reading all that certainly can be …
So, what expenses can startup businesses claim? Here’s our
roundup of the most common areas where you can (and can’t!) claim expenses for
If you’re in any doubt about what you can or can’t claim, speak to your accountant. Or set up a call with us and let’s talk about how we can support your startup business as it grows.
The golden rule for what you can claim as a business expense
Claim only for the expenses that you incur which are wholly,
exclusively and necessary
during the everyday running of your business.
Capturing all your costs is the key to not missing out. We
often see startups not claiming for expenses that are perfectly legitimate. So,
hold on to your receipts, because expense claims for the following are likely
to be tax deductible.
It’s easy to assume that you can claim for expenses only
after you start your business. In fact, limited companies can claim relevant
expenses for up to 7 years before the
business begins operations.
Here are some areas where business expenses may be tax
- computers & software
- internet & web domain fees
- travel costs
- professional services
Laptops and tablets can be a grey area for expenses, because
their portability means they’re often used at work and at home. If you’re
confident that you can justify the expenditure based on a real business need,
you should be fine to claim these.
Professional services can include the costs associated with accounting
and legal help, such as company formation and the drafting of contracts.
There may be some items that count as business expenses but
that are not allowable as tax deductions. Not all business expenses are tax
Try to maintain an accurate record of pre-formation and
running costs, including VAT receipts. Doing so helps you justify your actions should
your business expenses claims be queried.
Business insurance expenses
You can claim the cost of your business insurance policies
as limited company expenses, so long as they’re used strictly for business
Allowable expenses for business insurances include:
- public liability insurance
- employers’ liability insurance
- professional indemnity insurance
- contents insurance
- vehicle insurance (if you have company vehicles)
Advertising, marketing and PR expenses
Promoting your startup is an important part of building
momentum for your new business. So, the following are claimable on your company
- advertising (online, print & other media)
- social media campaigns
These expenses can be for one-off promotions or ongoing
costs, so long as the investment relates solely to business purposes.
Travel and accommodation expenses
Travelling and overnight stays put a strain on your time as
a business owner, but many of the related expenses can be reclaimed:
- accommodation costs for business trips with
- reasonable food, drink and subsistence costs
- business mileage costs
There is an HMRC-approved scheme for claiming mileage. Keeping
a mileage log and using this scheme is a quick, easy way to reclaim travel
costs. Keep in mind that you have to satisfy the following for your expenses to
- You’re responsible for paying the travel costs.
- The travel is necessary for work purposes and you need to be present at the destination in question for business purposes. (This doesn’t include the everyday commute between your home and permanent workplace.)
If you use your personal car or van to travel to a temporary
place of work and you’ve paid for the fuel out of your own pocket, you can
claim the following rates as limited company expenses:
- car/van – 45p per mile for the first 10,000
miles and then 25p for every mile thereafter.
- motorcycle – 24p per mile
- bicycle – 20p per mile
Claiming the above rates doesn’t just lower your total
Corporation Tax bill, it also means you can reimburse yourself for the amount
As well as the mileage rates listed above you can also claim
the following as business expenses:
- parking costs (but parking fines are not
- road toll fees
- congestion charges
- hotel rooms (within reason)
- food and drink on overnight trips
- public transport, including train, bus, air and
- vehicle Insurance (company vehicles only)
- vehicle repairs and servicing (company vehicles
Note that travel doesn’t have to mean long distances: trips
to banks, solicitors and other short but necessary business travel can all be
claimed. It may not seem like much, but it all adds up over the course of a
Keeping your money safe and handling transactions are
necessary parts of doing business. Therefore, bank fees charged to your
business accounts can be claimed as valid business expenses. That also includes
claims for credit card and loan interest.
Use of home as office
While most businesses run on their own or rented property,
but it’s also possible to run a business from home.
If you do this, you’re able to claim a percentage of your
household costs and utility bills as business expenses.
The easy approach is to claim a simple rate of £4 per week
(£208 per year). Alternatively, you may wish to work out what rooms you use for
your business needs and the amount of time they’re used for work purposes.
You’ll also be able to claim back other related costs
related to working from home, so long as they’re incurred solely for the
purposes of business:
- postage & printing
Gifts, entertainment and trivial benefits
Staff entertainment and staff gifts can be claimed as
business expenses. However, there are limits to what can be allowed for tax
Cash gifts to staff, or gifts that are performance related (such
as rewards), are taxable on the employee, whereas flowers for a staff member
would be perfectly acceptable.
For staff events and parties, the costs of entertaining your
employees can be claimed as a business expense if it’s an annual event open to
all staff members and costing less than £150 per person.
Any client entertaining, even if it’s a genuine business
expense, is not allowable for tax purposes.
Communication utilities, including phone and broadband
access, can be claimed as a limited company expense.
If your mobile phone contract is in your company’s name and it relates solely to business purposes, you can claim the entire bill as a business expense.
If it’s a personal contract, you’ll need to separate the
business and personal use and then claim for only the business-related
expenses. You can also claim limited company expenses for the business calls
you’ve made from your home phone line.
HMRC have looked closely at this issue in recent years. If
your phone contract is used for both personal and business but you easily
identify what the business costs are, you’re advised not to claim any of it.
Plant and equipment purchases can be claimed so long as
they’re used mainly for business purposes. Examples include:
- company vehicles
These costs will likely be treated as capital expenditure
and end up as assets on your Balance Sheet rather than your normal expenditure.
You’ll get the tax deduction for them in your Corporation tax return, under
HMRC’s Capital allowance rules.
Professional development expenses
Personal development and training courses can be claimed as
limited company expenses. Any training has to be wholly and exclusively for the
purposes of your trade. If in doubt, check eligibility before adding such expenses
to your records.
You’re also allowed to claim expenses for magazine
subscriptions, journals and books.
If your startup is a limited company and you’re a director, it’s
normal for you to pay yourself a salary as an employee of your business. That
salary and the corresponding National Insurance Contributions (NIC) can be
claimed as allowable expenses.
Once you reach the National Insurance threshold, you’ll have to start paying NIC.
Though it goes beyond the scope of this article, we’d
encourage you to think about how you’re paying yourself. For example, some
business owners take a minimal salary and then use dividends to help with their
Our team are used to talking people through what’s best for their personal tax circumstances. Get in touch if you’d like to explore this further with us.
Thoughts of pensions might be a long way off when you’re just getting rolling with a startup business.
But if you’re the type to think ahead, keep in mind that your
limited company can pay into your pension scheme.
As an employer contribution, this would be an allowable tax
deduction from the company profits, therefore reducing the tax payable by the
There are limits on how much money the company can pay into
your pension in any one tax year.
Common expenses that your startup business can’t claim for
Remember that you can claim only for the expenses that you
incur which are wholly, exclusively
and necessary during the everyday running of your
You can’t claim for expenses that have a dual purpose for
business and personal use. For example, if you decide to extend a business trip
abroad for leisure purposes, you can claim only for the business days.
As per the section about phone bills, you need to
differentiate clearly between business and personal use in order to claim
expenses on a personal mobile contract. That’s why it’s probably best to set up
your contracts in your business name.
Here are some general examples of expenses that can’t
be claimed for:
- home to work journey
- most client entertaining
- business trips that you extend for personal
- anything for personal use
In practice, that hasn’t stopped some of our clients trying
to claim for expenses that were never going to make it through.
Here are some real examples that again can’t
be claimed for:
- trips abroad being claimed as annual AGM costs
for their spouse’s company
- family meals out being claimed as shareholder
- sports season tickets being claimed as
- kids’ bikes being claimed through the cycle to
- petrol receipts being claimed through the
business, when the company owns only a diesel vehicle
- multiple iPhones/iPads going through the
business around December time, despite there being only one director/employee
in the company
- games consoles described as computers in the
Remember to stick with what’s reasonable: only genuine
business expenses count.
If you’re in doubt about what’s a reasonable expense, do
check with your accountant. And if there’s a grey area, you might be safest not
Business expenses may be paid through your company’s bank
account, or you can reclaim the costs of business expenses paid by you and
later reimbursed via your company.
As you can see from the lists above, there’s a vast array of things that startup businesses can claim for as well as a few things that definitely can’t be claimed for! Most business owners can easily overlook one or more of these areas, so keep this article handy and make sure you’re always holding on to your receipts for your expenditures.
And again, if your expenditure is for something wholly, exclusively and necessary during the everyday running of your business, you can probably claim for it as a business expense.
If you’d like to find out more about how we can
help you get your tax right and not miss any of the expenses your startup
business can claim, contact us now.