Part of our complete guide to IR35 & contractor tax.
IR35 status changes what you can claim
The single biggest factor in what a contractor can claim isn't the type of expense, it's whether the engagement is inside or outside IR35. Outside IR35, your limited company is treated as genuinely running an independent business, and the normal, fairly generous rules for business expenses apply. Inside IR35, you're taxed broadly as if you were an employee of the end client for that engagement, which closes off several expense categories employees can't claim either.
What's generally claimable either way
- Accountancy and professional fees, including the cost of running the company itself
- Business insurance, professional indemnity and public liability cover relevant to contracting work
- Equipment and software genuinely used for the work, laptops, monitors, relevant subscriptions
- Training directly related to your current role, though training for a completely new skillset is treated differently
- A reasonable proportion of home working costs, if you genuinely work from home some or all of the time
What disappears inside IR35
Travel between home and the client site, generally the single biggest expense category contractors lose when caught inside IR35, is treated the same way ordinary commuting is treated for employees, not claimable. The 5% allowance that used to let contractors deduct a flat amount for running costs on inside-IR35 income was removed some years ago, so there's no automatic buffer any more for engagements caught by the rules.
Key point: Outside IR35, travel to a genuinely temporary workplace is usually claimable in the normal way business travel is. The moment the engagement is caught inside IR35, that same journey is treated like an employee's commute, not claimable, regardless of the actual distance or cost involved.
Keeping it defensible
- Keep the business purpose clear for every claim, a note on why it was for the business, not just a receipt
- Separate personal and business spending properly, a dedicated business account makes this straightforward
- Check anything borderline before claiming it, not after, the cost of asking is far lower than the cost of an HMRC challenge later
Not sure what's claimable on your current contract? Book a free consultation and we'll go through your specific engagement and expenses, as part of our Self Assessment service.
Frequently asked questions
Can contractors claim travel expenses?
Outside IR35, reasonable travel to client sites is usually claimable. Inside IR35, home-to-work travel is generally disallowed in the same way it would be for an employee, since you're taxed broadly as an employee for that engagement.
What expenses can a limited company contractor claim regardless of IR35 status?
Costs the company genuinely needs to operate, accountancy fees, business insurance, a reasonable proportion of home office costs, training directly relevant to your work, and equipment used for the business are generally claimable regardless of IR35 status.
Can I claim for a laptop or equipment?
Yes, equipment genuinely used for your contracting work, a laptop, a second monitor, software subscriptions, is a normal allowable business expense whether you're inside or outside IR35.
What happens if I claim something that isn't actually allowable?
If HMRC challenges an expense and disallows it, you may face additional tax, interest, and in some cases a penalty, which is why it's worth checking anything borderline before claiming it rather than after.