A quick note: this article is general information, not personal advice. Tax and accounting rules change and everyone's situation is different, so please don't act on anything here without checking how it applies to you. We'd be happy to help — get in touch before making any decisions.
Most business owners know they can claim the obvious costs — stock, rent, wages and the like. What surprises people every single year is how many perfectly legitimate expenses go unclaimed, simply because nobody ever told them the rule existed. Having reviewed hundreds of sets of accounts over the years, we see the same missed deductions again and again. Here are the ones worth knowing about.
A quick word first. The golden rule for most business expenses is that they must be incurred “wholly and exclusively” for the purposes of the trade. A handful of the reliefs below are specific statutory exemptions with their own conditions, so I’ll flag those as we go. Get the conditions right and these are all genuinely allowable; get them wrong and HMRC can claw them back with interest, so it pays to be precise.
1. The annual staff party — up to £150 a head
This is the classic one people underclaim. Your company can spend up to £150 per head, per year, on annual social events for staff, completely free of tax and National Insurance. That covers the whole cost — food, drink, entertainment, transport home and even overnight accommodation — including VAT.
The conditions matter:
- It must be an annual event (a Christmas party or summer barbecue counts; a one-off celebration does not).
- It must be open to all employees, or to all employees at a particular location.
- The £150 is a limit, not an allowance. Go a penny over and the whole amount becomes a taxable benefit, not just the excess.
You can split the £150 across more than one event — say £100 at Christmas and £50 in the summer — as long as the total per head stays within £150 for the year. It also covers partners and guests, so if an employee brings a spouse you effectively have £300 of budget for the pair.
2. Trivial benefits — £50 at a time
The trivial benefits exemption lets you give employees small perks with no tax and no reporting at all. Each benefit must:
- cost £50 or less (including VAT);
- not be cash or a cash voucher (a normal store gift card is fine);
- not be a reward for work or performance; and
- not be written into anyone’s contract.
Think birthday gifts, a bottle of wine, flowers, a Christmas hamper or a meal out to mark a personal occasion. For ordinary employees there is no limit on how many you can give in a year. For directors of close companies — which covers most owner-managed firms — there is an annual cap of £300. That is still six £50 gifts a year to yourself, entirely tax-free.
3. Use of your home as an office
If you run the business from home, you can claim a share of the cost. Directors and employees who are required to work from home can claim a flat £6 a week (£26 a month) with no receipts needed. If your actual costs are higher, the company can pay a fair proportion of heating, lighting, broadband and so on under a formal home-office licence.
Sole traders have their own version: either HMRC’s simplified monthly flat rate based on the hours you work from home, or a calculated proportion of your household running costs. Whichever route you take, keep a note of how you worked the figure out.
4. A company mobile phone
Provide one mobile phone per employee with the contract in the company’s name, and it is completely tax-free — even if it is used privately. The trick that catches people out is whose name is on the contract: if it is in your personal name, you can only claim the cost of business calls, not the whole bill.
5. Mileage in your own car
If you use your own vehicle for business journeys, the company can pay you tax-free mileage under HMRC’s approved rates. For the 2026/27 tax year this rose to 55p per mile for the first 10,000 business miles in the year (up from 45p — the first increase since 2011), then 25p a mile after that. If you carry a fellow employee on the same business trip in a car or van, you can add a further 5p a mile on top. Motorbikes are 24p a mile and bicycles 20p. Keep a simple mileage log and this adds up quickly.
6. Professional subscriptions and trade journals
Membership of a professional body, and subscriptions to journals or trade publications relevant to your work, are allowable. For professional bodies the catch is that they must appear on HMRC’s approved list (List 3) — most of the well-known institutes are on it, but it is worth a quick check.
7. Eye tests and glasses for screen users
If you or your staff use a computer screen as part of the job, the company can pay for an eye test tax-free. It can also cover glasses where the test shows they are specifically needed for screen work and they are prescribed for that purpose — everyday glasses for general use do not qualify.
8. Staff refreshments and welfare
Tea, coffee, milk, water and similar refreshments provided in the workplace are an allowable staff-welfare cost and are not a taxable benefit. The same goes for genuinely work-related welfare provision — it is a small claim, but a legitimate one that people often leave out.
9. Health screening and medical checks
You can provide employees with one health-screening assessment and one medical check-up per year free of tax. Beyond that, an employee eye test as above is exempt, and some other work-related medical provision can be too. It is a genuine perk that many owner-managed businesses never think to run through the company.
10. Business gifts to clients — within tight limits
Gifts to customers are usually not allowable, but there is a narrow exception. A gift is deductible if it:
- costs no more than £50 per person, per year;
- carries a conspicuous advert for your business; and
- is not food, drink, tobacco or exchangeable vouchers.
So a branded diary, mug or pen for a client is fine; a bottle of wine or a hamper is not.
11. Pre-trading expenses — up to seven years back
Costs you incurred before the business started trading — up to seven years earlier — can be claimed as if they were incurred on your first day of trading. Website costs, equipment, professional fees and market research all commonly qualify, and they are very often missed because they predate the accounts.
12. Employer pension contributions
Contributions the company makes into your pension are a deductible business expense, reduce the corporation tax bill, and are not treated as a benefit in kind. For many owner-directors this is one of the most efficient ways of all to extract profit, and it is worth planning properly rather than leaving to the year-end.
13. Training that keeps your skills current
Training that updates or extends the skills you already use in the business is generally allowable — courses, conferences and the professional development your trade depends on. The line to watch is training to start a completely new venture, which HMRC tends to treat as a capital cost rather than a day-to-day expense.
14. Relevant life insurance
A relevant life policy is a death-in-service style life insurance policy the company takes out on a director or employee. Done correctly, the premiums are a deductible business cost and are not a taxable benefit on the individual — a far more efficient route than paying for personal life cover out of taxed income.
15. Capital allowances on equipment
Larger purchases — computers, machinery, tools, commercial vehicles, office fit-outs — are claimed through capital allowances rather than as everyday costs. The Annual Investment Allowance gives 100% relief on up to £1 million of qualifying spend each year, and companies buying new qualifying equipment can also use full expensing for an immediate 100% deduction. The point people miss is that the timing of a purchase around your year-end can make a real difference to the tax.
The ones that catch people out
A few costs feel like they should be deductible but are not. Client entertainment — taking a customer to lunch, to the golf or to a corporate box — is never allowable for corporation tax, however good it is for business. Ordinary commuting from home to your normal workplace is not allowable either, and everyday “could be worn anywhere” clothing does not qualify (genuine protective gear and branded uniforms do). Knowing what you cannot claim is just as valuable as knowing what you can.
The bottom line
None of these are loopholes or grey areas — they are established reliefs and exemptions that simply go unused because they are not front of mind. Individually they are small; together, across a year, they add up to a meaningful reduction in your tax bill. If you are not sure you are claiming everything you are entitled to, that is exactly the sort of thing a good accountant should be picking up for you.
