Contractor Expenses: What Can Your Limited Company Claim in 2026?
As a limited company contractor, legitimate business expenses reduce your Corporation Tax bill. This guide covers what you can and cannot claim.
The Golden Rule
Expenses must be wholly and exclusively for business purposes. Personal expenses cannot be claimed, even if convenient.
Allowable Expenses
1. Professional Equipment
| Item | Allowable? | Notes |
|---|---|---|
| Laptop/computer | Yes | 100% if business use only |
| Monitor, keyboard, mouse | Yes | |
| Software licenses | Yes | Business software only |
| Mobile phone | Yes | Business line, or % of personal |
| Office furniture (home) | Yes | Desk, chair for home office |
2. Professional Services
| Item | Allowable? | Notes |
|---|---|---|
| Accountant fees | Yes | Fully deductible |
| Legal fees (business) | Yes | Contract reviews, etc. |
| Professional indemnity insurance | Yes | Essential for contractors |
| Public liability insurance | Yes | If required |
| Professional memberships | Yes | Industry bodies |
3. Travel Expenses
| Item | Allowable? | Notes |
|---|---|---|
| Travel to temporary workplaces | Yes | Under 24-month rule |
| Mileage (45p/25p) | Yes | First 10k/thereafter |
| Parking at client site | Yes | |
| Public transport to clients | Yes | |
| Hotels for overnight stays | Yes | Business trips |
| Subsistence (food when travelling) | Yes | Reasonable amounts |
4. Home Office
| Item | Allowable? | Notes |
|---|---|---|
| Proportion of utilities | Yes | Based on use calculation |
| Proportion of broadband | Yes | Business % |
| Home office equipment | Yes | |
| Simplified flat rate | Yes | £6/week without receipts |
5. Training & Development
| Item | Allowable? | Notes |
|---|---|---|
| Training for current role | Yes | Updates existing skills |
| Certifications | Yes | Relevant to your work |
| Industry conferences | Yes | With clear business purpose |
| Books (technical) | Yes | Related to your work |
Non-Allowable Expenses
Definitely Not Claimable
| Item | Why Not |
|---|---|
| Commuting to permanent workplace | Not temporary workplace |
| Suits and normal clothing | "Dual purpose" |
| Childcare | Personal expense |
| Gym membership | Personal benefit |
| Training for new career | Capital expenditure |
| Food at your regular workplace | Personal expense |
| Fines and penalties | Not business expense |
Grey Areas
| Item | Rule |
|---|---|
| Client entertainment | Not allowable since 2008 |
| Glasses | Only specialist computer glasses |
| Flu jab | Only if company policy for all |
The 24-Month Rule
Travel to a client site is only claimable if:
- It's a temporary workplace, AND
- You expect to work there for less than 24 months
Once you know (or should know) you'll exceed 24 months, expenses stop being claimable.
Example:
- Month 1-12: 12-month contract, travel claimable
- Month 12: Contract extended to 30 months total
- Month 13 onwards: Travel no longer claimable
Claiming Home Office Expenses
Simplified Method (Recommended)
Claim £6/week (£312/year) without keeping receipts.
Detailed Calculation Method
Calculate proportion of home used for business:
- Count rooms (exclude bathrooms, hallways)
- Home office = 1 room / total rooms
- Percentage of bills = above fraction
Example: 4-bedroom house, 1 room as office
- Proportion: 1/5 = 20%
- Annual utility bills: £3,000
- Claimable: £600
IR35 and Expenses
Outside IR35
- Full range of expenses claimable
- Corporation Tax relief on all allowable expenses
- VAT recovery on applicable items
Inside IR35
- Limited expenses available
- Mainly pension contributions and some travel
- Most expenses not deductible from deemed payment
Frequently Asked Questions
Can I claim the cost of my car?
The car itself is a benefit in kind (taxable). Instead, claim mileage at 45p/mile (first 10,000 miles) or 25p/mile (thereafter).
What about client entertainment?
Since 2008, entertaining clients is not tax-deductible. You can pay for it, but it won't reduce your tax bill.
Can I employ my spouse?
Yes, if they do genuine work at a market rate. This can be tax-efficient but must be legitimate.
How long should I keep receipts?
Keep records for at least 6 years after the end of the financial year they relate to.
Related Calculators
- Corporation Tax Calculator - Calculate tax savings
- Mileage Calculator - Work out travel claims
- Salary vs Dividend Calculator - Extraction planning