Business Expenses Guide

A detailed guide to business expenditure, tax deductions, evidence, mixed-use costs, travel, equipment and the common mistakes that can make expense records unreliable.

What you can claimRecordsTax treatment

Business expenses

Business Expenses Guide for UK Businesses

A detailed guide to business expenditure, tax deductions, evidence, mixed-use costs, travel, equipment and the common mistakes that can make expense records unreliable.

Key distinction: an expense can be commercially sensible without automatically being fully deductible for tax. The tax treatment depends on the applicable rules and the business structure.

Expense categories

Category	Examples	Key control
Premises	Rent, utilities, business rates	Consider business use and contracts.
Office	Stationery, software, equipment	Separate ordinary costs from capital purchases.
Professional	Accountant, solicitor, consultant	Retain invoices and establish business purpose.
Marketing	Advertising, design, website	Keep supplier evidence and campaign records.
Travel	Mileage, rail, hotels	Record business purpose, route and dates.
Staff	Wages, training, benefits	Reconcile to payroll and employment records.
Finance	Bank charges, interest	Classify correctly and retain statements.

Revenue versus capital

Day-to-day revenue expenditure and capital expenditure can have different accounting and tax treatment. A laptop, vehicle or major piece of equipment may require consideration of capital allowances or other rules rather than being treated as an ordinary expense without further thought.

Mixed business and private use

Home, phone, vehicle and other costs can involve both business and private use. Keep a reasonable basis for apportionment where the rules require it. Do not claim 100% of a mixed-use cost simply because the item is useful to the business.

Home working

Home-based businesses should distinguish genuine business costs from normal household expenditure. There are specific rules and simplified options in some circumstances. Keep evidence of the basis used and avoid double counting costs.

Travel and mileage

Maintain a mileage log with date, destination, business purpose and miles where relevant. Commuting to a normal permanent workplace is not automatically business travel. If the business uses mileage rates, apply the appropriate rules for the vehicle and journey.

Client entertainment and hospitality

Business hospitality has specific tax rules and should be separated from ordinary marketing or staff costs. Record who attended, the business purpose and the amount. Do not assume that a cost being incurred for a client makes it automatically deductible.

Staff costs and benefits

Salary, employer National Insurance, pension contributions and certain benefits can create payroll and reporting obligations. Some staff welfare costs may have specific exemptions or limits. Review unusual benefits before processing them.

Evidence checklist

Supplier name.
Date.
Amount.
VAT information where relevant.
Description of goods or services.
Business purpose.
Payment method.
Apportionment basis for mixed use.

Expense policy for a small business

Even a small company benefits from a written expense policy. State what employees can claim, approval limits, mileage requirements, receipts, hospitality rules and deadlines. This makes bookkeeping cleaner and reduces disputes.

Common mistakes

Claiming personal expenditure as business expenditure.
Using the bank statement as the only evidence.
Ignoring capital treatment.
Failing to reconcile expense claims.
Forgetting VAT treatment.
Recording expenses months after they occurred.