What expenses can I claim through a limited company?

You can claim a variety of expenses through a limited company. However, the types of expenses you can claim tax relief on must be directly related to your contractor business and are classed as tax-deductible.

If you incur an expense that is tax-deductible, your limited company can receive a Corporation Tax saving on this expense. Corporation Tax, which is 19-25% for the tax year 2023/24 depending on your companies profits, which is all income less tax-deductible deductions, including expenses, National Insurance, and PAYE.

For the 2023/24 tax year, the claimable amount for cars and vans is 45p per mile on the first 10,000 miles in the tax year and 25p per mile on each additional mile. When using public transport, you may only claim expenses related to business travel if you operate outside IR35 legislation or if you are inside IR35, you are making a non-ordinary business-related trip.

Accommodation

The same rule that applies to mileage and travel applies to accommodation as well because it is classed as an expense under Travel & Subsistence. Therefore, qualifying limited company contractors will still be able to claim the costs of hotels, Bed & Breakfasts (B&Bs) and rented accommodation. If you are staying in a hotel or B&B, you can also claim the cost of breakfast and dinner.

Home office costs

If your home office is where the majority of your time is spent, you are able to claim a percentage of gas and electricity bills, metered water costs and business phone bills when using a residential telephone line. These are calculated based on the time spent in your home office, the energy usage in your office, and the physical size of your office. You can also claim broadband internet expenses where the broadband is used for business purposes and is registered and paid for in the name of your limited company. If you only use your home office for paperwork and accounting, you can claim a flat £6 per week in order to recoup costs incurred with regards to utility bills.

Directors Pension contribution

Pension contributions made by your company to a pension scheme are allowable expenses providing the overall contributions do not exceed the annual allowance of £60,000 for the 2023/24 tax year. You may also be able to bring forward earlier years allowance if available.

If you prefer you can pay into a pension personally and receive tax relief in a different way. It’s important to note that if you make pension contributions personally the tax relief is capped at 100% of your salary. Individuals who have ‘adjusted taxable income’ for the year greater than £260,000 will have their annual pension allowance of £60,000 for that year restricted potentially down to just £10,000. However, the tapered reduction doesn’t apply to anyone with ‘threshold income’ of no more than £200,000.

Childcare

You can get up to £500 every three months (up to £2,000 a year) for each of your children to help with childcare costs. This goes up to £1,000 every three months if a child is disabled (up to £4,000 yearly). If you get tax-free childcare, you’ll need to set up an online childcare account for your child. For every £8 you pay into this account, the government will pay £2 towards the cost of your provider. You can get tax-free childcare at the same time as 30 hours of free childcare if you’re eligible for both.

Please note this claim is entirely separate from your limited company, and no childcare should be claimed via the limited company. The only exception is if you are using the old childcare voucher scheme, which ceased to new applicants in October 2018.

Training

You can claim tax relief on training course fees through your limited company as long as the training is relevant to your line of work and business, and if it acts as an extension to your existing expertise. You may also claim the costs of training books and manuals if they are necessary to complete the training. If you are changing your career, any training needed to enable this should be treated as capital expenditure and not a trading expense.

Examples:
Where a person employed as a solicitor wants to train to be an accountant, training required to change their career should be capitalised. Where a person is employed as an accountant, any training to become a qualified accountant or expand their knowledge as an accountant is an allowable expense.

Computer equipment and software

Computer hardware or software can be claimed through your limited company as a business expense if the value of each item is equal to or is less than £1,000. If the item costs more than £1,000, it will be treated as a capital expense. This may be particularly useful if you are an IT Contractor.

Annual work event

You can claim the expenses of hosting an annual event through your limited company, provided the following conditions are met: it is an annual event that takes place at any time during the year; the event is open to all employees in the company; the cost per head does not exceed £150 (including VAT).

Accountancy fees

As the fee you pay to your contractor accountant is directly related to your business, you can claim this fee as an expense through your limited company for a saving on Corporation Tax. This excludes personal tax-related fees.

Eye tests

If you work with display screen equipment daily for at least an hour at a time, you can have your regular eye tests paid for by your limited company. If you require corrective lenses, the company can only pay for the prescription eyewear on your behalf, and claim the expense against the company’s Corporation Tax bill, if the results of the eye test can show that the prescription is for display screen work only. Otherwise the purchase could be subject to income tax and NICs as it would be a benefit in kind by the company.

Stationery and printing costs

You can claim the cost of reasonable business expenses relating to stationery and printing, such as postage, stationery supplies, printing and printer ink. Providing that the above expenses are entirely business related, you can claim them against your pre-tax profit.

Professional memberships

If you are a member of a professional or trade association, which benefits your business and you would not have otherwise joined as an individual, you may be able to claim this cost against Corporation Tax. The subscription fees of such industry bodies can only be tax-deductible if it appears on HMRC’s ‘List 3’ of approved organisations.

Health insurance

Medical and health insurance can be an allowable expense. However, the policy needs to be a specific Permanent Health Insurance (PIH) policy. The policy needs to be in the company name, and payments should be made from the company bank account. Alternatively, if you take out insurance in your own name rather than the company, claims will be payable to you personally and not subject to Corporation Tax. However, businesses can often receive better value insurance cover than an individual.

How can Fusion Business Services help you?

Operating your contractor business through your own limited company allows you to claim expenses on many business-related costs which aren’t possible through an umbrella company. This gives you freedom, flexibility and control over your finances and helps you to maximise your take-home pay. This is why many contractors are opting to set up their own limited company instead of working through an umbrella company.

While operating a limited company does involve some administration, UK Contractor Accountants Fusion Business Services help to ease the burden by assisting with your invoicing, payroll, bookkeeping, the filing of accounts and much more. We can also guide you through the process of claiming expenses and advise you of the expenses you can claim through your limited company (personal service company).

Our accountancy service is fully customisable, meaning you can select which features you would like and which ones you would prefer not to include. Please complete the short form here to schedule a free consultation with one of our professionals. Alternatively, you can call our team now on 0800 2294020 or complete the short from on this page, and we will get back to you shortly.