Business expenses explained: What you can and can’t claim

When you’re running a business in the UK, managing your cash flow is one of the most important jobs on your plate. One of the best ways to keep more of your hard-earned money is by understanding business expenses.

In simple terms, a business expense is a cost you incur to keep your firm running. The reason they matter so much is that most of these costs are tax-deductible. This means you can subtract them from your total income to figure out your taxable profit. The lower your profit, the lower your tax bill.

But you can’t just claim everything as an expense. HMRC has strict rules on what counts as allowable business expenses, and getting it wrong can lead to headaches further down the line. In this guide, we’ll break down exactly what business expenses are, provide a comprehensive business expenses list, and explain the process of claiming business expenses correctly.

What are business expenses?

HMRC’s golden rule for an allowable expense is that it must be incurred "wholly and exclusively" for the purposes of your trade.

If you buy a laptop that you only use for work, that’s a clear-cut business expense. However, if you buy a laptop and use it for Netflix and personal gaming half the time, it gets more complicated. In those cases, you can usually only claim for the business proportion of the cost.

It’s important to remember that business expenses aren't "free money". You still have to pay for the item upfront; you’re simply getting a discount on your tax bill later.

What business expenses can you claim?

To help you stay organised, we’ve categorised the most common business expenses listed by HMRC. While this list of business expenses covers the essentials, it’s always a good idea to chat with an accountant if you’re unsure about a specific purchase.

1. Office and stationery

Whether you work from a rented office or your kitchen table, you can claim for:

• Stationery, postage, and printing

• Phone, mobile, and internet bills (business use only)

• Rent, rates, and utility bills for your business premises

• Software and app subscriptions used for work

2. Travel and vehicles

Travel is a major part of growing a business, but the rules are specific. You can claim for:

• Fuel, parking, insurance, and repairs for your business vehicle

• Train, bus, plane, and taxi fares for business trips

• Hotel stays and "reasonable" meals on overnight business trips

However, you can’t claim your daily commute from home to your regular place of work.

3. Professional fees and insurance

Running a business safely often requires expert help and protection. These costs are almost always allowable:

• Accountancy and legal fees

• Professional indemnity insurance and public liability insurance

• Business bank charges and interest on business loans

• Professional membership fees for trade bodies

4. Marketing and advertising

Finding new customers is essential, and HMRC helps by letting you deduct:

• The cost of your website (hosting and maintenance)

• Online advertising, such as Google Ads or LinkedIn

• Physical marketing materials, like business cards or flyers

5. Staff costs

If you have employees, you can claim for:

• Salaries, bonuses, and pensions

• National Insurance contributions

• Staff training that’s relevant to the business

What can’t you claim as business expenses?

HMRC is very clear about "dual-purpose" items. If a cost provides a personal benefit, it’s usually disallowed. Common examples include:

• Entertaining: Taking a client out for dinner? Unfortunately, business entertainment is not an allowable expense. You can pay for it through the business account, but it won't reduce your tax bill.

• Clothing: You can’t claim for a suit or "work clothes" even if you only wear them for work. You can only claim for uniforms or protective gear (like hi-vis or steel-toe boots).

• Fines: Parking tickets or late tax penalties are never tax-deductible.

Simplified business expenses

If you’re a sole trader or in a partnership and you work from home for 25 hours or more a month, you don't necessarily need to calculate the exact cost of every lightbulb.

According to GOV.UK guidance, you can use "simplified expenses". This is a flat rate based on the hours you work from home. For example, if you work 51–100 hours a month from your home office, you can claim a flat £18 per month. While it might be less than your actual costs, it saves you a mountain of paperwork.

How to claim business expenses

The key to claiming business expenses successfully is record-keeping. Whether you use a business credit card or pay with cash, you need evidence.

1. Keep your receipts: Whether digital or paper, you must keep records for at least five years after the 31 January submission deadline of the relevant tax year.

2. Separate your finances: It’s much easier to track expenses if you have a dedicated business bank account.

3. Use software: Tools like Tide Accounting allow you to auto-categorise your business expenses automatically, making your tax return much simpler. Or you can use expense cards to help you keep track of your business purchases.

4. Log your mileage: If you use your personal car for work, keep a log of every business journey. You can claim 45p per mile for the first 10,000 miles (and 25p thereafter) instead of tracking actual fuel and repair costs.

Managing your business expenses to fuel growth

Understanding your expenses isn't just about tax - it’s about knowing exactly where your money is going. By keeping a tight grip on your allowable business expenses, you're ensuring your business is as lean and profitable as possible.

Managing these costs often highlights where you might need a bit of extra help. If your expenses are mounting because you’re investing in new stock or equipment, you might need a cash flow boost to bridge the gap.

Ready to invest in your business growth?

Don't let the cost of doing business hold you back from your next big project. Whether you need to cover a large invoice, invest in new kit, or simply manage your monthly overheads, we can help. At Funding Options by Tide, we match UK businesses with the right financial products in minutes.

See your funding options today and find a business loan that works for you.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.