HMRC issued guidance on which business expenses UK companies can deduct before paying corporate tax.
The UK’s HM Revenue & Customs (HMRC) issued guidance on 11 November 2025, explaining which business expenses companies can deduct when calculating their corporate tax.
The guidance confirmed that businesses can deduct revenue expenses, also called business expenses, before paying Corporation Tax, as long as the costs are recorded in the company accounts. Revenue expenses are those that do not involve buying, selling, or changing capital assets. Costs related to capital assets must instead follow the rules on capital allowances.
To qualify for deduction, an expense must:
- Not be specifically disallowed, such as certain client entertainment costs.
- Serve only a business purpose, following the “wholly and exclusively” principle.
HMRC guidance also covers situations where an expense serves both business and non-business purposes. In such cases, only the portion clearly attributable to business activities may be deductible.
The guidance applies to individual companies as well as groups of companies, with additional instructions for specific corporate structures. Companies focused on investments are advised to consult HMRC guidance on management expenses for investment businesses.
