The complete list of tax-deductible expenses in 2025/2026

When you’re running your own business, every penny counts. If you know what business expenses are tax-deductible, you can save money and master your finances. 

However, research shows that almost half of first-year founders (46%) are unfamiliar with key tax obligations, tax-deductible expenses and financial support schemes.

This guide is here to change that. We want founders to feel empowered and confident about business finances. It’s time to stop overpaying and start saving — let’s go!

Key takeaways:

• Tax-deductible expenses can reduce your taxable profit, lowering your tax bill
• They must be “wholly and exclusively” for business purposes
• Rules differ slightly for limited companies and the self-employed — make sure you check what’s right for your company structure before making a claim
• Keeping accurate records is crucial for claiming expenses correctly 

Tax-deductible expenses are costs that an individual or company can subtract from their total income to reduce their profit and, therefore, the amount of income tax or corporation tax owed to HMRC.

Example: If your business earned £50,000 in a tax year but you spent £10,000 in tax-deductible expenses, you would only pay tax on £40,000 of profit. 

That’s a huge saving! But, of course, there are rules about what is and what isn’t a tax-deductible expense:

• What’s included: Allowable expenses cover anything that HMRC considers as being made “wholly and exclusively” for the purposes of running your business. This includes day-to-day running costs, like stationery, heating your office or paying for marketing
• What’s not included: You generally can’t claim for any expense that has a “dual purpose.” The classic example is a suit you wear for work. Because you can also wear the suit outside of work, it has a private element, so it doesn’t count as a tax-deductible expense. But a uniform that you would only wear to work would count

Understanding these differences is key to you confidently claiming your tax-deductible expenses in the UK when it’s tax time.

Tax-deductible expenses for limited companies are governed by the rules of corporation tax.

Generally, the “wholly and exclusively” rule still applies. But certain expenses, particularly those related to directors and employees, are different when compared to other company structures. 

Here’s your essential guide to expenses deductible for tax purposes for limited companies:

Good news! Contributions made by your limited company into a registered pension scheme for you (as a director) or your employees are generally considered an allowable expense. 

This means your company can deduct these contributions from its profits before corporation tax is calculated, which is a fantastic way to save on tax while planning for the future.

What’s deductible:

• Employer contributions: Payments your company makes directly into a registered pension scheme for a director or employee

What’s not deductible: 

• Any personal pension contributions you make yourself from your personal bank account.  

Protecting your business from different types of risk is really important, and thankfully, the premiums you pay for most types of business insurance are tax-deductible expenses.  

What’s deductible:

• Professional indemnity insurance
• Public liability insurance
• Employers’ liability insurance (mandatory if you have employees)
• Business contents/property insurance

What’s not deductible: 

• Personal insurance policies, like critical illness cover and any private health insurance you pay for yourself 

Good to know: Private health insurance as a Benefit in Kind (BiK)

If your limited company pays for private health insurance for its directors or employees, the company can deduct the premium as a business expense. However, the health insurance is treated by HMRC as what’s called a Benefit in Kind.

A Benefit in Kind is a tax-deductible perk for the employee or director who receives it. The employee or director must pay income tax on the value of the benefit, and the company must pay the employer’s NI on that value too. So, while your company can save tax by deducting the private health premium, there’s a tax/NI cost for both the employee and company to consider. 

Getting the word out about your business is really important. The great news is that nearly all costs associated with marketing and advertising are allowable expenses deductible for tax purposes. 

What’s deductible:

• Website design, hosting fees, and maintenance costs
• Social media ads
• SEO services 
• Printing of leaflets, flyers, and brochures
• PR fees

Example: Imagine you’ve just launched a business and want to run £50 worth of Instagram ads to reach your local customer base. That £50 is a fully allowable tax-deductible business expense.

What’s not deductible: 

• Personal branding costs that don’t directly promote your business or marketing that isn’t “wholly and exclusively” for your business

One more thing to note: If you spend money on entertaining a customer (perhaps you take them to a football match), even if it’s for marketing purposes, it doesn’t count as an allowable expense. HMRC is very strict on client entertainment and doesn’t count it as a tax-deductible expense.

While most businesses operate digitally now, stationery and postage are still everyday essentials that many businesses rely on. The costs of keeping your office stocked are all allowable deductions.

What’s deductible:

• Pens, paper, printer ink, and envelopes
• Stamps and courier costs
• Printing services for non-marketing materials (e.g. invoices and contracts)

What’s not deductible: 

• Stationery purchased for purely personal use, or postage for personal mail

Equipment and machinery, like tools, office desks, heating systems, and lorries, purchased for business use are categorised as capital allowances, which is a different type of tax-deductible expense.

Capital allowances are fundamentally different from other tax deductions because they provide tax relief for capital expenditure (the money a business spends on long-term assets), not day-to-day business running costs (known as revenue expenditure). 

Capital allowances let you deduct some or all of the value of an item from your profits before you pay tax. You do this on your company’s corporation tax return, where there’s a separate capital allowances calculation. 

Limited companies can claim 100% of the cost of new, unused equipment and machinery in the first year after purchase, which is a huge benefit. 

Example: You buy a new machine for your construction business for £2,000 in your first month of trading. You can deduct the full £2,000 from your profits before tax.

What’s deductible:

• Desks, monitors, and other long-term office equipment
• Specialised machinery or tools
• Commercial vehicles (vans and lorries — cars are claimed differently via writing down allowances)
• Fixtures and fittings, including fire alarm systems 
• Core features of a building, like electrical systems, hot and cold water systems, and heating systems 

What’s not deductible: 

• Items purchased for personal use 
• Extravagant items that aren’t justifiable for your business’s operations, for example, claiming a £15,000 professional coffee machine for your two-person web design company

Note: Items must be purchased exclusively for business use to qualify for capital allowances. If used partly for personal purposes, only the business-use proportion can be claimed.

For more information on capital allowances, visit the Government’s official capital allowance page.

If your limited company has employees (even if that’s just you as a director), many of the benefits you provide your staff can be claimed as expenses deductible for tax purposes.

What’s deductible:

• Events: Workplace events like a Christmas party are deductible if the cost is £150 or less per person (per year) and the event is open to all employees
• Day to day: Employee training costs, work-related travel expenses and professional subscriptions 
• Welfare: Eye care vouchers and a few small items like an office fruit bowl or water cooler
• Trivial benefits: These must cost £50 or less, be cash-based and not given as a performance reward (like retail vouchers)

What’s not deductible: 

• Benefits that are not available to all employees, or those that are clearly for personal enjoyment without a business purpose
• Benefits in Kind (also known as ’employee perks’) are non-cash perks provided by an employer to an employee, like a company car, private medical insurance, and gym membership

Good to know: Benefits in Kind (BiKs)

BiKs require a two-part tax approach. It’s important to understand this because it affects both the company and the employee:

For the employee (taxable): The BiK is considered an extension of the employee’s pay. Therefore, the employee must pay income tax on the value of that benefit. The company must also pay the employer’s NI contributions on the value of the benefit

For the company (deductible): The cost of providing the BiK (for example, the cost of a gym membership) is generally a tax-deductible expense for a limited company 

Giving gifts can be a lovely gesture but there are strict rules around whether they are tax-deductible expenses. To be an allowable expense, gifts must meet specific criteria set by HMRC.

What’s deductible:

• Gifts to customers and suppliers are allowable if they cost £50 or less per person per year, include your business logo (or a clear advertisement for your business) and are not food, drink, tobacco or a voucher.

Example: A mug with your company logo on would be an allowable expense. 

What’s not deductible: 

• Gifts that exceed £50
• Gifts of food, drink, tobacco, hospitality or gifts that don’t carry your company’s branding
• Client entertainment (e.g. paying for a client’s meal or a theatre ticket as a gift) is never tax-deductible

For many limited company owners and employees, working from home is now the norm. Luckily, HMRC recognises that working from home can create some additional household expenses, and there’s plenty of opportunity to claim back some money.

What’s deductible:

There are two ways to claim for limited company owners to claim working from home expenses:

• Flat rate: You can claim tax relief at a flat rate of £6 a week (£26 per month, or £312 per year) without receipts, which covers minor expenses and simplifies your bookkeeping
• Or, tracked expenses: You’ll need to keep and record your receipts and bills for your home-based costs:

• Equipment
• Services 
• Supplies you give to your employees (like office chairs, pens, computers)
• Utilities, like gas and electricity 
• Phone and internet (business portion)

Good to know: Unless you opt to use the flat rate, you’ll need to calculate what percentage of your home uses utilities like gas and electricity “wholly and exclusively” for work purposes. One common way to do this is to divide your bill by the number of rooms you use when working from home, and/or the time spent working from home. 

What’s not deductible: 

• Fixed costs: Council tax, rent or mortgage interest. These are not classed as working from home expenses as you’d have to pay them regardless of where you work
• Personal items: Furniture that you also use privately at home
• Dual-purpose expenses (expenses that are for business and personal use): Internet and phone bills. However, if your contracts are in your limited company’s name, or if you can show HMRC that any usage of these services was carried out “wholly and exclusively” for running your business, then it’s allowable. For example, if you have a separate work phone. 

Good news for the movers and shakers: business travel is almost always an allowable expense, provided you’re travelling “wholly and exclusively” for work purposes. This includes getting to clients, visiting suppliers, or travelling to conferences.

Use of personal vehicles for business journeys is claimed back through reimbursement, which should match the approved mileage allowance rates for the vehicle type.

The company treats the reimbursed amount as an allowable business expense, reducing its Corporation Tax bill, and the company director (or employee) receives the money tax-free.

Here is a summary of the current approved mileage allowances:

Vehicle type	Rate for first 10,000 miles (per mile)	Rate after 10,000 miles (per mile)	Mechanism
Cars and vans	45p	25p	Tax-free reimbursement from the company to the employee/director
Motorcycles	24p	24p	Tax-free reimbursement from the company to the employee/director

You don’t need fuel receipts to claim mileage if you’re using these standard allowances, as your claim is based on the number of business miles driven, not fuel costs. However, you should keep a detailed mileage log to back up your claims in case HMRC runs a tax audit on your company. 

These other transport and subsistence expenses must be supported by receipts:

• Transport tickets: Train, bus, plane, or taxi fares for business trips
• Accommodation: Hotels or B&Bs for business-related overnight stays
• Food/drink: Reasonable costs for meals and drinks when you are on a business trip (“elaborate meals with fine wines” are not allowed)

What’s not deductible: 

• Commuting from home to your regular place of work (like a co-working space or shared office)
• Personal holidays
• Overly luxurious travel arrangements that aren’t justifiable or reasonable for your business
• Food and drink that is client entertainment 

If you’d like to find out more information about using a vehicle for work purposes, check out the current HMRC tax relief rules.

Sometimes you need to call in the experts, and the fees you pay for professional advice or necessary licenses are almost always tax-deductible expenses. Excellent! 

What’s deductible:

• Accountant and bookkeeping fees
• Solicitor or legal fees for things directly related to your business (e.g. drafting a contract)
• Professional or trade body membership fees (if relevant to your work)
• Licences required for your trade 

Example: If you’re a gas engineer, your Gas Safe registration cost is a tax-deductible expense. 

What’s not deductible: 

• Fines for breaking the law (e.g. parking or speeding fines) 
• Personal legal fees, or professional fees that aren’t related to your business activities

If your limited company has a dedicated business premises, the rent and the utility bills you pay for that space are an allowable tax-deductible expense. This covers everything from a small office to a large warehouse.

What’s deductible:

• Commercial rent
• Business rates (or Council Tax if you have a business exemption)
• Service charges and utilities (gas, electricity, water) 
• Building insurance 
• Costs of repairs and maintenance to the building (but not improvements — these would be categorised as capital allowances)

Example: You could claim back the cost of your building’s damp and rot treatment, or the cost to replace broken gutters, or mend a lift.  

What’s not deductible: 

• Rent for your personal home (unless you’re claiming a portion for working from home, as mentioned in the Working from Home section)
• Rent for any property you might own that’s not used for your business.

One of the biggest tax-deductible expenses a limited company can claim is the salary paid to its directors and employees. As long as these salaries are considered reasonable for the work performed, they are fully deductible against your company’s profits.

What’s deductible:

• Wages and salaries paid to your employees (including yourself as a director)
• Employers’ National Insurance Contributions (NICs)
• Fees paid to subcontractors or freelancers
• Employer-paid training courses related to the business

Example: You send your employee on a Photoshop course or a first aid course. 

What’s not deductible: 

• Drawings or dividends (these are taken from profit after tax, not before)
• Salaries that are clearly excessive for the role and services provided (HMRC expects salaries to be “wholly and exclusively”, reflective of the work level, and excessive salaries could be challenged as disguised dividends or tax avoidance).

Software and digital subscriptions are often the backbone of most businesses today. The costs associated with these purchases are generally tax-deductible expenses — which is great news, especially for businesses that operate remotely.

What’s deductible:

• Business software (e.g. design tools, project management apps)
• CRM systems 
• Project management tools
• Cloud storage and back-up services
• Industry-specific tools and subscriptions

What’s not deductible: 

• Personal entertainment subscriptions 
• One-off software purchases that are considered a capital asset (which could be claimed via capital allowances)

Example: You might have a personal Netflix account but you watch your Netflix shows on your work laptop — this doesn’t make your Netflix account a tax-deductible expense. 

Keeping connected is vital for almost every business, so the costs of your business phone and internet are usually tax-deductible expenses.

What’s deductible:

• The full cost of a dedicated business mobile phone contract
• The full cost of a dedicated business broadband line
• If you only have one phone/internet line, you must calculate the business use proportion (e.g. based on time or number of calls)

What’s not deductible: 

• The full cost of a personal phone or internet bill, if only a small portion is used for business
• Excessively high-end phone contracts that aren’t justified by business needs

While giving to charity is a wonderful gesture, donations made by a limited company are only tax-deductible under specific circumstances. They are generally treated differently from other business expenses. Here’s how:

What’s deductible:

• Donations to registered charities, provided they are made to a charity recognised by HMRC — you can check on the HMRC charity register 

What’s not deductible: 

• Donations to political parties or for political purposes 
• Gifts to individuals
• Sponsorships where the primary purpose is not business-related 

If you’re self-employed (a sole trader or in a partnership), the rules for tax-deductible expenses are very similar to those for limited companies, revolving around the “wholly and exclusively” principle.

Just like limited companies, sole traders have two options for claiming back tax-deductible expenses: using a flat rate or tracking every expense. But one of the greatest administrative benefits of operating as self-employed is the option to use the flat, simplified expenses method for certain business-related costs. 

This optional method allows you to claim fixed-rate allowances based on the number of hours you worked from home each month. You can choose to use simplified expenses for:

1. Working From Home 
2. Vehicle Costs
3. Flat-rate deductions for living accommodation (when living on your business premises)

Let’s look at these in more detail:

1. Simplified working from home expenses 

This method removes the need to calculate utility or mortgage or rent proportions.

Hours worked from home per month	Flat monthly rate that’s claimable	Annual equivalent
25 – 50 hours	£10	£120
51 – 100 hours	£18	£216
101+ hours	£26	£312

2. Simplified vehicle costs 

Instead of recording fuel, maintenance, insurance, and other vehicle costs, sole traders can claim a fixed rate per mile for business journeys.

• Cars and Vans: 45p per mile for the first 10,000 miles, then 25p per mile.
• Motorcycles: 24p per mile

3. Flat-rate deductions for living accommodation (when living on your business premises)

Some businesses use their business property as their home, too. For example, if you run a B&B, guesthouse, or small care home. You can choose to use the simplified expenses method instead of figuring out how to split what you spend on the business and your private life.

To do this, you calculate the total expenses for the entire property. Then you’d subtract a flat rate, based on the number of people in the business:

• 1 person – £350 flat rate
• 2 people – £500 flat rate
• 3+ people – £650 flat rate

Example: You run a guesthouse with 1 other person and you live there all year round. Your total business expenses are £20,000. Using the flat rate method: 12 months x £500 per month = £6,000

Therefore, you can claim £14,000 in tax-deductible expenses. 

Summary for self-employed: It’s a good idea to use a simplified expenses checker to cross check what you save vs working out the actual costs. But, many small-scale self-employed businesses choose to use simplified expenses because there’s less admin, which is a good enough reason!

Are you a sole trader who is ready to become a limited company? It starts with simple company registration. While the simplified expenses method does offer some good perks, generally, limited companies have a wider range of allowable expenses and more ability to manage tax efficiency. 

Dealing with what expenses are tax-deductible can feel a bit stressful but getting organised is key. However, if all this talk of expenses and bookkeeping has your head spinning, don’t worry — we’re here to help. 

Countingup can help handle your business finances. Our smart business current account app, with built-in tax-saving tools and SmartTax AI, can take care of your tax admin. From categorising your expenses as you spend, to working out your tax estimate in real-time, we’ll help you get ahead at tax time and make tax-deductible expenses easy peasy (lemon squeezy). 

Generally, private medical expenses are not tax-deductible expenses as they are considered personal costs. However, if your limited company provides private medical insurance as a benefit to all employees, this can be an allowable expense for the company, though it may be a taxable benefit for the employee.

Yes, if you own a rental property through your business, most expenses incurred in running and maintaining the property are tax-deductible expenses. This can include mortgage interest (with restrictions), repairs, maintenance, letting agent fees, legal fees for new tenants, and insurance.

Yes, expenses incurred for holding board meetings, such as room hire, necessary refreshments, and travel costs for directors attending the meeting, are generally tax-deductible expenses. However, lavish entertainment or meals not directly related to the meeting’s purpose would typically not be allowable.

For a limited company, if the vehicle is owned by the company, all running costs (fuel, insurance, repairs, MOT) are deductible, but there are often tax implications for the employee (e.g., benefit-in-kind). If using a personal vehicle for business, you can claim approved mileage rates. For the self-employed, you can claim actual costs or use simplified expenses (mileage allowance).