Bank charges & account fees

Can I claim it?

Sole traderYesGenerally allowable

Limited companyYesGenerally allowable

EmployeeNoNot normally claimable

Last checked 15 October 2026 · HMRC source

Bank, overdraft and account charges on a business account are allowable for a sole trader, and overdraft interest is allowable where the borrowing is used for the business. Repaying an overdraft or loan is not an expense. A limited company deducts its running costs before Corporation Tax, with interest under separate rules for loan relationships.

Conditions

GOV.UK lists bank, overdraft and credit card charges, and interest on bank and business loans, among the financial costs a sole trader can claim. You cannot claim for repayments of loans, overdrafts or finance arrangements.
If you use cash basis, GOV.UK's examples of allowable expenses include interest and bank charges, for example, interest on bank overdrafts.
For tax years up to 5 April 2024, HMRC's cash basis guidance is different (BIM70000). Under that guidance, a deduction of up to £500 was allowed for interest and incidental costs of obtaining finance in total for any trade period (BIM70040). If you are working out one of those earlier years on the cash basis, ask your accountant.
Overdraft interest is allowable for a sole trader where the borrowing is used for business expenditure or acquisition of assets used in the business (BIM45700). HMRC's own example is an overdraft used mostly to buy stock and partly to help buy a private car: the interest relating to the stock is allowable and the interest relating to the car is not (BIM45700).
If one personal account is used for both business and personal transactions, its fees are a separate question from interest. The law allows a deduction for any identifiable part or identifiable proportion of an expense which is incurred wholly and exclusively for the purposes of the trade (section 34 ITTOIA 2005), but HMRC distinguishes that from an expense incurred for a dual purpose, which should be disallowed (BIM37007, BIM37600). Which applies depends on the facts. A dedicated business account avoids the question.
For a limited company, the costs of running the business are deducted in working out its taxable profit before Corporation Tax (GOV.UK), subject to the wholly and exclusively rule (section 54 CTA 2009). HMRC's Income Tax guidance on interest does not apply to companies, which have separate rules in the loan relationships legislation (BIM45650); where a company is a party to a loan relationship for the purposes of a trade it carries on, the debits are treated as expenses of the trade (section 297 CTA 2009). Keep the company's banking in the company's own account.
An employee can deduct an expense only where they are obliged to incur and pay it as holder of the employment and it is incurred wholly, exclusively and necessarily in the performance of the duties of the employment (section 336 ITEPA 2003). The Income Tax Act 2007 relief for interest on a loan used to buy plant or machinery for use in an employment (EIM32860) is not to be given for interest on a debt incurred by overdrawing an account.

Common mistakes

Claiming all the fees on a personal account used for mixed spending. Whether any business share can be claimed depends on whether it is an identifiable part of the expense or a dual-purpose cost (BIM37600).
Claiming the repayment of a loan or overdraft as a bank charge. GOV.UK says you cannot claim for repayments of loans, overdrafts or finance arrangements.
Overlooking smaller recurring bank charges, such as monthly account fees and transfer fees — they add up over a year.

What to keep

Bank statements showing charges and overdraft interest.
If an overdraft was used partly for private spending, a record of how much of the borrowing went on the business.

Real-world example

A sole trader has a dedicated business current account. During the year she pays £180 in monthly account fees, £35 in CHAPS transfer fees, and £90 in overdraft interest during a short cash-flow gap in which the overdraft paid business bills. All £305 is allowable: GOV.UK lists bank and overdraft charges among the financial costs a sole trader can claim, and the interest is on borrowing used for business expenditure (BIM45700).

Frequently asked

Can I claim the fees on my personal account if I use it for business?

Possibly a share, but it is not automatic. A deduction is allowed for an identifiable part or identifiable proportion of an expense incurred wholly and exclusively for the trade (section 34 ITTOIA 2005), while HMRC says an expense incurred for a dual purpose should be disallowed (BIM37007). Which describes your account fees depends on the facts, so ask your accountant. A dedicated business account makes the claim straightforward.

Can I claim overdraft interest if I also took money out of the business for myself?

It depends on what the borrowing paid for. HMRC says a proprietor may withdraw the profits of the business and the capital they have introduced to the business, even though subsequent funding may then have to be provided by interest bearing loans (BIM45700). However, simply exchanging existing capital for loan finance does not on its own satisfy the wholly and exclusively test (BIM45700), and HMRC looks at whether private drawings have caused the capital account to become overdrawn and whether the overdrawn capital account has been funded by bank borrowings (BIM45705). Interest on the part of the borrowing that funded private spending is not allowable. This turns on your own accounts, so ask your accountant.

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Monthly price by annual turnover, excluding VAT
Turnover	Sole trader	Ltd / LLP
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Above £500,000, add £15.00 a month per further £100,000. Charged separately, also monthly:

VAT returns £35.00
MTD Income Tax quarterly updates from £35.00
Bookkeeping £20.00 to 40 transactions, then 50p each
Payroll from £24.00 for up to four payslips
Self Assessment — included for a sole trader; £10.00 covers two directors (limited company or LLP) or one partner, then £10.00 each

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* The Accountancy Partnership’s own offer, taken off the standard monthly fee above, for readers arriving through this link. It is not on their public pricing pages. Checked 24 October 2026.

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Where this answer comes from

Every figure, rule and status on this page traces to these GOV.UK and legislation.gov.uk pages, all read on 15 October 2026.

HMRC internal manuals

Legislation

GOV.UK guidance

This page is general information based on HMRC published guidance, not tax advice. Status shown is a plain-English summary — your own position can differ. Always check the HMRC source above and speak to a qualified accountant before making a claim.

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