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

‍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 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. Here’s how you do it.

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 which 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 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 2023/24 tax year.

If you use an online accounting system like our Crunch Limited Company accounting packages, we’ll take care of all of this for you.