tax

Limited company freelancers: How to claim business expenses you paid for personally

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    If you have your own limited company, the lines between your personal and business lives can easily get blurred. While they’re obviously connected, they’re also legally separated too. This means financial matters can get a bit confusing from time to time – especially so when it comes to business expenses.

    The question is, if you’re out and about and buy some new company equipment with your own money, can you claim that cash as a business expense? Obviously, you haven’t used the business bank account, so does this mean you’ll find yourself saddled with the bill?

    Fortunately, that isn’t the case. While slightly more complicated to sort out, it’s hardly a difficult process at all. Read on to find out how you do it, or if you’d rather download a guide to read later, check out the jargon-free PDF Limited Company Expenses Guide below.

    How to claim business expenses you paid for personally

    Once you’ve paid for whatever it is you’re purchasing, you enter it into your accounts as a regular business expense, except that you note the money came from you personally. The payment is then added to your director’s loan account and means you are putting your own money into the business.

    You can have the amount you paid personally reimbursed at any time, usually by way of a director withdrawal, which reduces the amount the company owes you through your director’s loan account. Overall, a pretty straightforward affair.

    To be an allowable business expense, the purchase must meet HMRC’s “wholly and exclusively” rule and it cannot be used in any personal capacity. If the purchase is used by you personally, then it’s not an allowable expense and you and your business will need to pay tax. You’ll need to complete out a P11D expenses form for HMRC to ensure the correct amount of personal tax is paid. Your business will pay Employer’s National Insurance on the amount as well. The rate is 13.8% for the 2021/22 tax year (and has been this way since April 2011).

    If you use an online accounting system like our Crunch limited company accountancy packages, we’ll take care of all of this for you. Otherwise, you can find the information on the Gov.uk website. We’ve got all the information you need about allowable expenses in our article “What business expenses can I claim for as a limited company.

    Or, if you don’t have time to read the article now, you can download the info in a jargon-free PDF guide to read whenever you like.

    Business Expenses - Get your free guide