Many UK company directors often ask the same question: “What expenses am I actually allowed to claim?”
It sounds simple, but the rules can be confusing—especially during the January to March period, when tax deadlines and company year-end pressures build up.
This guide explains exactly what UK directors can and cannot claim. Everything is aligned with HMRC rules, helping you stay compliant while legally reducing your company’s tax bill. This is also the type of guidance Spondoo UK provides daily, ensuring directors avoid unnecessary tax and unnecessary stress.
HMRC applies one central test when deciding whether an expense is allowable:
An expense must be incurred wholly and exclusively for the purpose of the business.
For directors, this means:
A clear business purpose must exist.
Mixed-use items must be apportioned accurately.
Personal benefit automatically disqualifies an expense—unless negligible.
Every claim must be reasonable, justified, and evidenced.
When interpreted correctly, this rule empowers directors to make confident and compliant financial decisions. When misunderstood, it leads to rejected claims, penalties, or unnecessary tax payments.
The categories below represent the expenses HMRC generally accepts without challenge—provided they are genuinely business-related and supported by documentation.
Directors may claim expenses incurred while travelling for business purposes, including:
Mileage when using a personally owned vehicle
Public transport fares
Taxis and ride-hailing services
Overnight hotel accommodation
Subsistence meals during trips
Travel between home and the normal, permanent workplace is commuting, not business travel, and is therefore not allowable.
However, travel to a temporary workplace—defined by HMRC as one you attend for less than 24 months—is allowable.
This rule has significant implications for consultants, contractors, and directors with multiple work locations.
With remote and hybrid working now mainstream among UK directors, HMRC permits two valid methods for claiming home-based business expenses:
A modest fixed amount per month based on business hours worked.
A more precise, often more beneficial approach that apportions:
Rent or mortgage interest
Utilities (electricity, gas, water)
Broadband and internet
Council tax
This method is especially advantageous for directors in high-value UK regions such as London, Oxford, Cambridge, and the South East.
HMRC recognises these costs as essential to responsible company management. Allowable expenses include:
Accountant fees (e.g., Spondoo UK)
Legal and consultancy fees
Professional indemnity insurance
Public liability insurance
Directors’ insurance (where strictly business-related)
These expenses strengthen governance and reduce business risk—two areas increasingly scrutinised in UK corporate compliance.
In the digital age, directors rely heavily on technology. Allowable costs include:
Laptops, computers, monitors, and accessories
Mobile devices (company-owned)
Industry-specific software
Cloud storage and cybersecurity tools
Subscriptions for work-critical digital services
Where equipment has mixed use, directors must apply logical, evidence-based apportionment.
These costs are fully allowable because they directly contribute to delivering business value:
Salaries and employer NI contributions
Subcontractors and freelance specialists
Outsourced bookkeeping, payroll, and tax services
Virtual assistants, marketing teams, or technical contractors
For growing companies, outsourcing provides cost-effective access to expertise while remaining tax deductible.
Some expenses are not entirely business-related and can only be claimed proportionally.
HMRC’s stance is strict:
Company-owned mobile contracts: Fully allowable
Personal mobile contracts: Only the business percentage is allowable
Directors should maintain logs or usage evidence to support apportionment.
HMRC allows:
PPE equipment
Protective gear
Branded uniforms
However, standard business clothing is never allowable—not even suits, dresses, or office wear—even if only worn for work.
Allowable training must maintain or enhance skills relevant to your current role.
Examples include:
CPD requirements
Regulatory training
Leadership courses directly related to your responsibilities
Not allowable:
Training that prepares you for a new trade, profession, or business activity.
This distinction aligns with HMRC’s long-standing view that self-development for career change is a personal investment.
Company cars often attract Benefit-in-Kind (BIK) charges, making them less tax-efficient for most directors.
More tax-efficient alternatives include:
Using your personal vehicle
Claiming mileage under HMRC’s approved rates
Considering electric vehicles where BIK is significantly lower
This area requires careful planning to avoid unexpected tax liabilities.
Understanding what is not allowable is as important as understanding what is.
A frequent misconception.
HMRC does not permit tax relief for entertaining clients, suppliers, or external stakeholders.
However:
Staff events (e.g., annual parties up to £150 per employee) are allowable.
Directors often unintentionally misclassify expenses such as:
Amazon orders containing both personal and office items
Software platforms used for both family and business
Business trips extended for personal holidays
HMRC expects honest, evidence-supported apportionment.
HMRC requires directors to retain records for six years.
Acceptable formats include:
Digital receipts
Scanned copies
Photographs
Digitally generated invoices
Without evidence, HMRC can challenge or disallow claims—even if the cost was genuinely business-related.
Directors should adopt structured, reliable systems for record-keeping.
Best practices include:
Using cloud accounting (Xero, QuickBooks, FreeAgent)
Uploading receipts immediately using receipt-capture tools
Reconciling expenses monthly
Separating personal and business transactions clearly
Spondoo UK supports directors with compliant workflows and software integrations that significantly reduce error rates.
Once a client signs up for Spondoo’s monthly accounting services, our specialists take full responsibility for ensuring every business expense is reviewed, correctly categorised, and fully compliant with HMRC’s guidance. This reduces the risk of misclaims, protects you during HMRC enquiries, and ensures your financial records remain accurate throughout the year.
Monthly accounting clients receive continuous, proactive tax planning support designed to help directors stay ahead of financial obligations. This includes:
Corporation tax forecasting to avoid unexpected liabilities
Director loan account monitoring to prevent overdrawn balances
Dividend planning to optimise personal and company tax efficiency
Pre–year-end tax optimisation to identify savings opportunities before deadlines arrive
This strategic approach ensures directors maintain clarity, control, and strong financial governance.
For directors enrolled in monthly accounting services, Spondoo also provides full Self Assessment tax return preparation and filing. We ensure all director income, dividends, expenses, and tax obligations are accurately reported and submitted on time—reducing stress during the UK’s busiest filing season and preventing HMRC penalties.
Ready to claim expenses correctly, minimise tax, and stay fully HMRC-compliant? Join Spondoo’s monthly accounting service and get expert expense management, year-round tax planning, and full Self Assessment preparation and filing. Speak to Spondoo UK today and let our specialists support your business with accuracy, clarity, and confidence.
