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Director reviewing business receipts and expense claims for tax-efficient reimbursements in the UK.

Reducing tax on director withdrawals in the UK for 2025/26 – Expense Reimbursement

Most Directors think this is a once-a-year effort. Reducing tax liability is a daily thought that involves thinking about the tax implications of all your actions, expenditure and plans for the business and personal.  

For example, HMRC allows the company to reimburse you for all allowable business expenses incurred personally by the director. The director will need to always commit to the exercise of doing personal budgets, assess the lines of interaction between personal and business expenses in those personal budgets then workout the proportions chargeable to the business in all those expenses. When a company reimburses its employees including Directors for expenses incurred on behalf of the business, the payments are not subject to personal tax or NICs and reduce company profits 

All expense claims must be supported by appropriate records such as receipts, invoices, mileage logs, and evidence of the business purpose. Expenses must not be for personal use, except where HMRC allows a specific personal benefit (such as one company phone). 

Consulting a qualified accountant ensures claims align with HMRC rules, maximizing tax efficiency without risk of penalties. 

Author

Fungayi Mukosera

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