Business Expense Claims Guide UK 2026/27: What You Can & Can't Claim
Comprehensive guide to claiming business expenses correctly. Learn which expenses HMRC allows, proper documentation requirements, and how to maximize legitimate tax deductions while staying compliant.
The Golden Rule of Business Expenses
To be allowable for tax purposes, an expense must be incurred "wholly and exclusively" for business purposes. This means the expense must be necessary for your business operations and not have a significant personal benefit element.
Commonly Allowable Business Expenses
Here are the main categories of expenses most UK businesses can claim:
Office Costs
Rent, business rates, utilities (electricity, gas, water), property insurance, security
If working from home, claim a proportion based on business use
Equipment & Supplies
Computers, office furniture, stationery, postage, printing costs
Capital items over £500 may need to be claimed via capital allowances
Travel & Vehicle Costs
Business mileage (45p/mile first 10,000 miles), public transport, hotels, parking fees
Home to regular workplace commuting is NOT allowable
Staff Costs
Salaries, employer NI, pensions, training, recruitment fees, staff welfare
Properly documented and within market rates
Professional Fees
Accountancy, legal advice, professional subscriptions, business insurance
Must be for business purposes, not personal matters
Marketing & Advertising
Website costs, online ads, print advertising, promotional materials, networking events
All promotion activities to generate business revenue
Financial Costs
Bank charges, business loan interest, hire purchase interest, merchant fees
Interest on loans used for business purposes only
Software & Subscriptions
Accounting software, CRM systems, cloud storage, business apps, trade magazines
Monthly or annual subscriptions for business tools
Telephone & Internet
Business phone line, mobile contracts, broadband, video conferencing tools
Claim business proportion if used for personal and business
Stock & Raw Materials
Goods for resale, raw materials, packaging, delivery costs
Cost of goods sold directly related to business income
Expenses You CANNOT Claim
Understanding what's NOT allowable is just as important to avoid HMRC penalties:
Personal Expenses
Personal shopping, gym memberships, personal clothing (unless branded workwear), personal mobile costs
Commuting Costs
Travel from home to your regular place of work (non-deductible ordinary commuting)
Entertainment Costs
Client entertaining (meals, events, hospitality), gifts over £50 per person per year
Fines & Penalties
Parking fines, speeding tickets, HMRC penalties, late payment charges
Political Donations
Donations to political parties (charitable donations may be allowable)
Depreciation
Depreciation in accounts (claim capital allowances instead for tax purposes)
Special Cases: Partly Business Expenses
Some expenses have both business and personal elements. You must apportion these fairly:
Working From Home
Two options for claiming home office expenses:
- Simplified expenses: £10-26 per month depending on hours worked (no receipts needed)
- Actual costs: Calculate business proportion of mortgage interest/rent, utilities, internet, council tax (requires accurate records)
Example: If your office occupies 1 room out of 5, and you work 40 hours/week, claim 20% of household costs.
Record-Keeping Requirements
HMRC requires you to keep expense records for at least 5 years after the Self Assessment deadline:
What to Keep
- • Receipts and invoices
- • Bank and credit card statements
- • Mileage logs with dates, destinations
- • Purchase orders
- • Contracts and agreements
- • Till rolls and cash books
Best Practices
- • Digitize receipts immediately
- • Use accounting software
- • Separate business & personal
- • Record expenses weekly
- • Note business purpose
- • Regular reconciliation
Maximizing Your Expense Claims
1. Keep Every Receipt
Use mobile apps to photograph receipts immediately. Lost receipts = lost deductions.
2. Categorize Expenses Properly
Use consistent categories aligned with HMRC classifications for easier tax return completion.
3. Review Annually
End of year review to ensure you haven't missed any allowable expenses throughout the year.
4. Seek Professional Advice
Accountants identify expense opportunities you might miss and ensure HMRC compliance.
⚠️ Warning: Common HMRC Investigation Triggers
- • Disproportionately high expenses vs income
- • Excessive "entertainment" or "miscellaneous" claims
- • Round numbers without supporting documentation
- • Claiming 100% business use of personal assets
- • Inconsistent claims year-on-year without explanation