Contractor Expenses Guide 2026/27 — The Claims Most Contractors Miss

The one rule that governs every contractor expense claim

This means a £1,000 expense saves you £190 in corporation tax. Over a year, the difference between a contractor who claims £3,000 in expenses and one who claims £8,000 is £950 in tax — real money, legally saved, by simply knowing what you are entitled to.

The expenses below are split into two groups: the ones everyone knows about and the ones that most contractors leave on the table. If you are already claiming the first group, skip straight to the hidden savings.

The standard contractor expenses

These are the claims your accountant should already be handling. If any of these are missing from your accounts, that is a red flag.

For a complete HMRC-referenced checklist of every standard claim, see our ultimate allowable expense checklist for 2026/27.

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The expenses most contractors miss

This is where the real savings are. Every item below is a legitimate, HMRC-approved claim that the majority of contractors either do not know about or do not set up correctly.

1. Employer pension contributions saves £2,000–£12,000+/yr

This is the single most powerful tax-saving mechanism available to limited company directors, and most contractors vastly underuse it. Your company contributes directly to a registered pension (SIPP or workplace scheme). The contribution is deductible against corporation tax, is exempt from employer NI (saving 15%), is exempt from employee NI, and does not count as personal income — so it does not push you towards the personal allowance taper at £100,000.

A £10,000 employer pension contribution saves £1,900 in corporation tax plus £1,500 in employer NI that would have applied had you taken the same amount as salary — a total saving of £3,400 on £10,000. The annual allowance for 2026/27 is £60,000 (or 100% of earnings), with three years of unused allowance available to carry forward.

2. Home office — actual costs, not the flat rate saves £500–£2,000/yr

Most contractors take the easy option: £6 per week (£312/year) with no receipts required. But if you work from home regularly, calculating the actual proportion of your household costs is almost always worth more.

The calculation: take the total annual cost of your mortgage interest (not capital repayment), council tax, utilities (gas, electric, water), home insurance and broadband. Divide by the number of rooms in the house (excluding bathrooms, hallways and kitchen unless your office is in the kitchen). Multiply by the number of rooms used as your office. Then apply a time proportion if you only work from home part of the week.

3. Trivial benefits — £300/year tax-free saves £57/yr

Under the trivial benefits exemption, your company can give you (as director) gifts costing £50 or less each, up to £300 per tax year, completely tax-free and NI-free. The gift cannot be cash or a cash voucher, cannot be a reward for work, and cannot be part of a contractual arrangement.

In practice: your company buys you a £50 Amazon voucher for your birthday, a £50 restaurant voucher at Christmas, a £50 voucher for your work anniversary, and so on — up to six per year. Total: £300 of personal spending funded by the company, saving £57 in corporation tax (19% of £300). Small individually, but it adds up alongside everything else — and it is entirely free money that most contractors never use.

4. Annual events — £150 per head tax-free saves £29–£57/yr

Your company can spend up to £150 per head (including VAT) on annual parties or events, completely tax-free. This applies even to sole-director companies. The event must be open to all employees (which, in a sole-director company, is just you). You can split the £150 across multiple events — a summer meal and a Christmas dinner, for example.

If you have a spouse as an employee or fellow director, the allowance doubles to £300 total. Exceed £150 per head and the entire amount becomes taxable — not just the excess — so keep receipts and stay under the limit.

5. Company mobile phone — one phone, fully tax-free saves £100–£190/yr

If your company provides you with one mobile phone, the entire cost of the device and contract is tax-free — no benefit-in-kind, no NI, no income tax. You can use it for personal calls without restriction. The key conditions: the contract must be in the company’s name, and it must be one phone (a second company phone becomes a taxable benefit).

A £40/month contract (£480/year) plus a handset upgrade every two years saves the company £91–£190/year in corporation tax, and you pay no personal tax on the benefit. Compare this with paying for the phone personally — you would need to earn approximately £650 in dividends to fund the same £480 after tax.

6. Spouse salary for genuine work saves £1,000–£2,400/yr

If your spouse performs genuine administrative work for the company — bookkeeping, answering calls, managing invoices, handling correspondence — you can pay them a salary up to their personal allowance (£12,570) with zero income tax and zero employee NI. The salary is a deductible business expense, reducing your corporation tax.

Paying a spouse £12,570 saves the company £2,388 in corporation tax (19% of £12,570). The spouse pays zero tax and zero NI. The conditions are strict: the work must be genuine, the salary must be reasonable for the work performed, and you must be able to evidence the hours and tasks if HMRC enquires. Keep a simple log of tasks performed and hours worked.

7. Eye tests and one annual health check saves £20–£60/yr

If you use a computer for work (which as a contractor you almost certainly do), your company is legally required to fund eye tests and corrective glasses specifically for VDU use. This is a tax-free benefit. Additionally, your company can fund one annual health check-up per employee completely tax-free — no benefit-in-kind arises.

8. Pre-trading expenses — claim costs from before you started saves £100–£500+

Expenses incurred up to seven years before your company started trading are deductible if they would have been allowable had the company been trading at the time. This covers company formation fees, initial accountancy advice, equipment purchased in anticipation of your first contract, training courses taken before your first engagement, and even travel to interviews or meetings that led to your first contract.

Many contractors incorporate and begin trading in the same week, but if there was a gap — perhaps you spent weeks setting up, buying equipment, or completing certifications — those costs are claimable.

9. Professional subscriptions you forgot about saves £40–£200/yr

Most contractors claim BCS or IEEE membership. But HMRC’s approved list includes hundreds of professional bodies. If you hold membership of any body on the list, the subscription is deductible. Common ones contractors miss: the Chartered Institute for IT (BCS), the Institution of Engineering and Technology (IET), the Association for Project Management (APM), the Chartered Management Institute (CMI), and data protection registrations with the ICO (£40/year for most contractors).

10. Bicycle mileage at 20p per mile varies

If you cycle to a temporary workplace (your client’s office counts if it is a temporary assignment), you can claim 20p per mile. There is no 10,000-mile cap like there is for cars. For a 10-mile round trip, three days a week for 48 weeks, that is £288 in claimable expenses — saving £55 in corporation tax. Combined with the health benefits and zero commuting costs, cycling to client sites is genuinely the most tax-efficient commute available.

The expensive mistakes — expenses that are not deductible

Claiming costs that HMRC does not allow triggers enquiries, penalties and interest. Avoid these common traps:

• Commuting to a permanent workplace — if you work at the same client site for over 24 months (or expect to), it becomes a permanent workplace and travel is not deductible. The 24-month rule is one of the most frequently misunderstood areas of contractor tax
• Clothing that is not exclusively for work — a suit you could wear outside work is not deductible even if you only wear it to client meetings. Uniforms, branded workwear and specialist protective equipment are deductible
• Client entertaining — taking a client to lunch or dinner is never deductible against corporation tax (though it may be deductible against your personal tax in limited circumstances). Staff entertaining is different — that is where the £150 annual event allowance applies
• Gym memberships — personal fitness is not a business expense, regardless of how much you believe it improves your productivity
• Fines and penalties — parking fines, speeding tickets and HMRC penalties are never deductible
• Personal proportion of mixed-use assets — if you buy a laptop used 50% for work and 50% for personal use, only 50% is deductible. Be realistic with your split

Record-keeping that survives an HMRC enquiry

HMRC can enquire into any tax return within 12 months of filing (or longer if they suspect fraud). You must be able to evidence every expense claim. Under Making Tax Digital, digital record-keeping is now mandatory for qualifying income above £50,000.

• Receipts: photograph every receipt on the day of purchase and upload to Xero or a receipt-capture app. Paper receipts fade and get lost
• Mileage log: record date, start/end location, purpose, and miles for every business journey. HMRC will reject bulk estimates
• Home office calculation: keep a spreadsheet showing each household cost, the room calculation, and the time proportion. Recalculate annually as costs change
• Trivial benefits: keep the receipt showing the item cost £50 or less and note the occasion
• Spouse salary: maintain a simple task log with dates, hours and descriptions of work performed

At AccTek, we connect your bank feed to Xero, set up automated receipt capture, and review every expense category quarterly to ensure you are claiming everything you are entitled to. See our MTD knowledge hub for more on digital record-keeping requirements, or our MTD guide for freelancers if you also have sole-trade income.

How AccTek maximises your expense claims

Most contractors understate their expenses because they do not know what they can claim, or they cannot be bothered with the paperwork. Our job is to fix both problems.

• Expense audit at onboarding — we review your working arrangements, contracts, home setup and personal circumstances to identify every legitimate claim from day one
• Quarterly expense reviews — we check your Xero categories, flag missing claims, and prompt you for receipts before they expire or fade
• Pension contribution planning — we model the optimal employer pension contribution alongside your salary and dividend strategy to minimise your total tax bill
• Home office setup — we calculate your actual home office costs and prepare the supporting documentation for your records
• IR35-aware expense guidance — if your contract is inside IR35, the expense rules change significantly. We advise on what remains claimable

Whether you are an IT contractor, a freelancer, or a CIS subcontractor, maximising your expenses is one of the simplest ways to reduce your tax bill. It is included in every AccTek package from £19.99/month.

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Contractor expenses — frequently asked questions

How much can I claim in contractor expenses per year?

There is no cap on total expenses. You can claim any amount that meets HMRC’s “wholly and exclusively” test. In practice, most UK contractors claim between £3,000 and £10,000 per year in expenses (excluding pension contributions), saving £570–£1,900 in corporation tax. With employer pension contributions the saving can be dramatically higher.

Can I claim expenses if my contract is inside IR35?

Inside IR35, the fee-payer deducts income tax and NI before paying your company. The range of claimable expenses is severely restricted — broadly limited to pension contributions, the flat-rate £6/week home office allowance, and professional subscriptions. Travel, equipment and most other costs are not claimable against the deemed employment income. This is one of the biggest financial impacts of being inside IR35. See our IR35 guide for the full picture.

Do I need receipts for everything?

Yes. HMRC can ask for evidence of any expense claim. For mileage, a detailed log showing dates, destinations and business purpose is required. For purchases, keep receipts or bank statements showing the amount and supplier. Digital records (photos of receipts, Xero entries) are acceptable and preferred under Making Tax Digital.

Can I claim for training and courses?

Training that maintains, updates or refreshes existing skills required for your current trade is deductible. Training to acquire entirely new skills or qualifications is not. For example: a Java developer taking a Spring Boot course is deductible; the same developer taking a law degree is not. The line can be blurry — ask your accountant before booking expensive courses.

What is the 24-month rule for travel expenses?

If you work (or expect to work) at the same location for more than 24 months, that location becomes a permanent workplace and travel to it is not deductible. The rule applies to the expectation at the time of travel, not just the actual duration. If you sign a 12-month contract with a realistic expectation of renewal beyond 24 months, travel may not be claimable from the outset. Review this with your accountant at every contract renewal.

Can I claim for a home office if I also work at a client site?

Yes, provided you genuinely use a dedicated space at home for work. If you work from home two or three days per week and at a client site the rest, you claim the home office costs proportioned by the time you work from home. The £6/week flat rate does not require any time apportionment — but the actual-costs method (which is almost always worth more) does.