What Expenses Can Contractors Claim in 2025/26?

One of the biggest advantages of running through a limited company is the ability to claim legitimate business expenses. However, many contractors are unsure what HMRC actually allows. Can you claim mileage? Can you claim a laptop? Can you claim broadband? Can you claim training courses?

For limited company contractors the answer almost always comes back to one principle: the expense must be wholly and exclusively for business purposes. Where you are claiming employee-style expenses, or working inside IR35, additional rules may apply and some costs that would otherwise be allowable can be restricted. This guide explains the most common contractor expenses, the difference between working inside and outside IR35, what HMRC allows, what it does not allow and how expenses affect your tax bill.

The short answer

Most common contractor expenses at a glance

Before getting into the detail, here is a quick reference to the expenses contractors ask about most often, and how HMRC generally treats them.

Most contractor expense questions can be answered by applying HMRC's core test: was the expense incurred wholly and exclusively for business purposes? If the answer is yes, there is a good chance it may be allowable.

HMRC's golden rule

A useful test: if a cost has a clear personal benefit (a "duality of purpose"), HMRC may disallow it entirely unless the business element can be cleanly separated and measured.

How contractor expenses reduce tax

The core mechanism is simple:

Worked example

What could this save a typical contractor?

Travel expenses

Contractors operating outside IR35 may often claim genuine business travel that is not ordinary commuting, including:

• business travel between sites or to client meetings
• train tickets and rail fares
• taxis for business journeys
• parking (but not fines)
• hotels and overnight accommodation for business trips
• business mileage in your own vehicle

Mileage claims

If you use your own personal vehicle for business journeys, you can usually claim tax-free mileage using HMRC's approved mileage allowance payment (AMAP) rates rather than claiming actual running costs.

Worked example — 5,000 business miles

A contractor drives 5,000 business miles in their own car during the year. All miles fall within the first 10,000, so the rate is 45p:

• 5,000 miles × 45p = £2,250
• The company pays this £2,250 to the director tax-free.
• It is also an allowable business cost that reduces taxable profit.

These rates are intended to cover fuel, insurance, servicing and wear and tear, so you cannot also claim those running costs separately for the same vehicle. Keep a mileage log showing the date, journey, reason and miles.

Home office expenses

Many contractors work from home for at least part of the week. There are two broad ways a limited company director can claim home working costs:

• HMRC flat rate: a simple fixed amount of £6 per week (£26 per month) with no need to keep detailed bills — the easiest and lowest-risk method for most directors.
• Apportioned actual costs: a reasonable proportion of household running costs (heat, light, broadband, etc.) based on the number of rooms used for work and the time they are used for business.

Mobile phone and broadband

• Mobile phone: if the contract is in the company's name, the full cost can usually be claimed even if there is some incidental private use. A personal contract you partly use for business is far harder to claim.
• Broadband: if you already pay for home broadband personally, HMRC usually sees no additional cost from business use, so it is often not claimable. A dedicated business line in the company name is more clearly allowable.
• Mixed use: where a cost is genuinely shared, only the identifiable business proportion is allowable.

Computers and equipment

Equipment bought by the company for business use is generally allowable, including:

• laptops and desktop computers
• monitors
• printers
• office furniture (desk, chair)
• webcams and headsets
• business phones

Larger items of equipment are usually treated as capital expenditure. In practice most contractors can claim the full cost in the year of purchase via the Annual Investment Allowance (AIA), which gives 100% tax relief on qualifying plant and machinery up to a generous annual limit. Where there is some private use, the claim is restricted to the business proportion.

Software subscriptions

Software and online tools used to run the business are normally allowable, for example:

• Microsoft 365
• Google Workspace
• Adobe Creative Cloud (where used for work)
• accounting software (e.g. for bookkeeping and VAT)
• cloud storage and backups
• project management and collaboration tools

Training and professional development

Training that maintains or updates existing skills relevant to your current trade is generally allowable. The position is more difficult where training provides an entirely new skill or qualification — HMRC may treat that as capital or personal in nature rather than an allowable revenue cost.

Professional memberships

Fees and subscriptions to professional bodies and industry organisations can be allowable where the membership is relevant to your work and, in many cases, where the body appears on HMRC's approved list (List 3). Examples include:

• professional institutes and chartered bodies
• industry membership organisations
• relevant trade or technical journals and subscriptions

Accountancy fees

The cost of running the company's finances is a clear business expense, including:

• accountancy and bookkeeping fees
• payroll software and processing
• business tax advice
• company secretarial services and confirmation statement filing

Note that fees relating purely to your personal tax affairs may not always be allowable to the company, so a good accountant will split company and personal work appropriately.

Pension contributions

Employer pension contributions made by the limited company directly into a director's pension are one of the most tax-efficient ways to extract value from a contractor company. When made wholly and exclusively for the business, employer contributions are normally an allowable expense that reduces Corporation Tax, and they are not subject to Income Tax or National Insurance at the point of contribution.

Contributions count towards your annual allowance, so larger payments need planning. Pensions sit naturally alongside your salary and dividend strategy — model the impact in the Contractor Tax Calculator before deciding.

Insurance costs

Business insurance taken out for the company is generally allowable, such as:

• professional indemnity insurance
• public liability insurance
• cyber insurance
• other business insurance relevant to your work

Some agencies and clients require professional indemnity cover as a condition of contracting, making it both a practical necessity and an allowable cost.

Expenses inside IR35 vs outside IR35

IR35 status has a big impact on what you can realistically claim. Outside IR35 contractors operate as a genuine business with broad expense flexibility; inside IR35 engagements are treated much more like employment, so most expenses give no extra tax relief.

What contractors cannot usually claim

Record keeping requirements

Every claim should be backed by evidence. Good records protect you if HMRC ever asks questions:

• keep receipts and VAT invoices for purchases
• retain sales invoices and bank statements
• use bookkeeping or accounting software to record transactions
• keep a mileage log for vehicle claims

Limited companies must generally keep their accounting records for at least six years from the end of the relevant accounting period (longer in some circumstances). Digital records are fine and are increasingly expected.

What if you have lost a receipt?

While HMRC recommends keeping receipts and invoices wherever possible, a missing receipt does not automatically mean an expense cannot be claimed. Business bank statements, credit card statements, supplier invoices and accounting records may help demonstrate that a genuine business expense was incurred. However, keeping the original receipt or invoice remains the strongest form of evidence and makes it much easier to support a claim if HMRC ever asks questions.

Common HMRC red flags

Common mistakes

• claiming personal costs as business expenses
• missing or lost receipts
• poor or out-of-date bookkeeping
• mixing personal and business spending in one account
• misunderstanding IR35 rules and over-claiming inside IR35

Contractor expenses checklist

Sources & references

This guide reflects official UK government and HMRC guidance on allowable business expenses for the 2025/26 tax year.

• GOV.UK — Expenses if you're self-employed and limited company expenses
• GOV.UK — Claim tax relief for your job expenses
• GOV.UK — Travel and subsistence (expenses and benefits)
• GOV.UK — Business mileage and approved mileage rates
• GOV.UK — Capital allowances and Annual Investment Allowance
• GOV.UK — Understanding off-payroll working (IR35)
• GOV.UK — Running a limited company
• HMRC — Employment Income Manual (EIM)
• HMRC — Business Income Manual (BIM)
• MoneyHelper — Pensions and tax