A short guide to business credit card expenses

If you’re mixing personal and business spending, or wondering whether a business credit card is right for your company, you’re not alone.

Over 50% of UK businesses are using personal credit cards for business expenses. But this can be a costly mistake that results in complicated accounting and even penalties from HMRC.

In this article, we’ll look at how business credit cards work, what expenses you can legitimately claim and the common mistakes that could prove costly.

Key points:

• Business credit cards can be used for legitimate business expenses like office supplies, travel, equipment, and professional services

• They shouldn’t be used for personal expenses like household shopping or entertainment, as this could complicate your accounting and cause issues with HMRC

• Funding Options by Tide can help when optimisation working capital isn’t enough, offering access to business finance up to £20 million

How are business credit cards different from normal credit cards?

The most obvious difference is in the name – business credit cards are designed exclusively for company expenses. But there are a few other important differences to be aware of…

A business card will usually offer a higher credit limit than personal cards since they’re based on your company’s revenue rather than your personal income. So you can generally make larger purchases with a business card. That said, some employee cards have customisable individual spending limits. This allows businesses to manage employee expenses more easily but also reduces an employee’s autonomy.

One important difference is that business credit cards don’t come with Section 75 protection like personal cards. So if something goes wrong with a purchase (eg new equipment arrives damaged) you’ll have less legal recourse through your card provider. But some business cards do offer other protections, like fraud insurance and purchase protection.

If you use it responsibly and pay off balances monthly, you can use a business credit card to help build your company’s credit score. This can help open doors to better financing terms in the future if you apply for business loans or asset finance or expand your credit facilities.

Who’s eligible for a business credit card

Getting a business credit card may not be as complicated as you might think. But there are some basic boxes you'll need to tick…

Basic eligibility requirements:

• Age 18+ and UK resident

• UK registered business (eg sole trader, limited company or partnership)

• Valid business registration details

• Business bank account (usually)

• Good credit history (exact requirements vary by provider)

You won’t usually need to generate a certain amount of revenue. But some providers may ask you to provide annual turnover figures during the application process. If you’re a new business, you might have to meet slightly tougher criteria – or provide a personal guarantee, where you’ll become personally liable for any debt that your business can’t pay.

Your credit history also matters. But it’s not necessarily a deal-breaker if your score isn’t perfect. Some providers focus more on your business’s trading history and cash flow than your personal credit rating, especially if you’ve been operating for a while and have a record of consistently generating revenue.

What you can (and can’t) put on your business credit card

When it comes to what you can use a business credit card for, the general rule is: if it’s a legitimate business expense, it’s probably fine to use it.

Where it gets trickier is with grey-area expenses. For example, you can put home office costs on your business credit card if you work from home, but you’ll need to calculate the percentage of time it’s used solely for business. And while business meals are generally fine, a lavish 5-star 7-course setting might raise eyebrows with HMRC.

What you CAN put on your business credit card:

• Office supplies and equipment

• Software subscriptions and licensing

• Business travel and accommodation

• Fuel and vehicle expenses

• Utility bills and rent

• Marketing and advertising costs

• Professional services (eg accounting and legal)

• Client entertainment and business meals

• Training and professional development

What you CAN’T put on your business credit card:

• Personal shopping and household items

• Family meals and personal entertainment

• Personal travel and holidays

• Household utility bills

• Personal insurance payments

• Personal loan repayments

• Personal subscriptions and memberships

Basically, you shouldn’t use your business credit card for personal expenses – regardless of whether you’re the business owner or an employee. Although it’s not illegal to use a business card for personal expenses, it’s not a great idea as it will complicate your accounting and can cause issues with HMRC.

HMRC can challenge expenses that don’t look business-related. So it’s best to keep business and personal costs separate. If you’re unsure whether something is a business cost or not, err on the side of caution or speak to your accountant.

The pros and cons of using business credit cards for expenses

Business credit cards offer some valuable advantages, particularly when it comes to managing cash flow.

Like all credit cards, you’ll be able to make purchases immediately and pay them off later on (potentially after your customers pay you). That could equate to 30 days interest-free credit if you clear the balance monthly.

The expense tracking benefits can be valuable too. Instead of collecting receipts and manual expense claims, you may be able to review detailed monthly statements that automatically categorise your spending. Many business credit cards also integrate directly with accounting software like Xero or QuickBooks, which can save hours of bookkeeping time.

But there are also some important downsides to be aware of…

Interest rates on business credit cards are often very high (around 18-36%) which is way more than business loans or overdrafts. If you can’t clear your balance each month, costs could quickly grow into major problems. There’s also the temptation to overspend, especially when cash flow is tight and the credit limit is sitting there unused.

Compared to alternatives like invoice finance (which can provide cash in 24-48 hours) or business loans (which offer larger amounts at lower rates), business credit cards sit somewhere in the middle. They’re more expensive than traditional lending but more flexible than fixed-term loans.

How to get the most out of your business credit card

Getting the most out of your business credit card comes down to smart and strategic thinking. Here’s how to make your card work harder for your business:

1. Pay off your balance in full every month: This keeps you in the interest-free period and stops you from paying expensive (and potentially growing) debt.

2. Calculate if any rewards schemes are worth it: Some cards offer attractive rewards. But a card with 1% cashback and a £200 annual fee means you’d have to spend £20,000 just to break even. For many small businesses, a fee-free card can make more financial sense.

3. Match rewards to your spending patterns: If you do choose a reward card, consider cashback for general expenses or air miles if you often fly for business. Don’t be swayed by flashy rewards or bonuses that don’t align with how you actually spend.

4. Set up employee cards with clear policies: Most providers let you set individual limits for each cardholder, and they can provide detailed spending reports, too. This can give you control while eliminating the need for expense claims and reimbursements.

Common mistakes and how to avoid them

One of the biggest and most common mistakes is when business owners use personal credit cards for company expenses. When it comes to filling in your tax return, this can create a bookkeeping nightmare. And it also prevents you from building your business credit score. If you’re currently doing this, you might want to prioritise getting a business credit card ASAP!

Poor record-keeping is another common mistake. Despite having detailed card statements, you still need to keep receipts and make sure expenses are properly categorised. HMRC can challenge any expense without the right supporting documentation, so treat your card statements as a starting point rather than the complete record.

Many businesses also fall into the trap of using credit cards when other types of finance might suit them better. For example, expensive equipment might be better financed through asset finance, while large one-off costs could be cheaper with a business loan. Credit cards are best used for regular operational expenses (eg monthly software subscriptions) and short-term cash flow management.

Finally, it’s important to keep an eye on employee spending. Business credit cards can become a source of unauthorised personal spending without clear policies and regular monitoring. So communicate expectations to employees early and review card statements each month to spot any issues quickly.

Find business finance with Funding Options by Tide

Whether you’re looking for a standard business loan, a short-term business loan, or something a little more specialist, like auction finance for property developers, we’re one of the leading names in business finance in the UK, having helped facilitate over £800 million in finance to more than 18,000 customers. 

Checking if you’re eligible is free, only takes a few minutes, and while a full application would impact your personal or business credit score, checking eligibility won’t. Just submit your details via the link below to find out if you could be eligible to borrow up to £20 million.

Find business finance.

FAQs

Can I use my business credit card for personal expenses?

No. This applies whether you’re the business owner or an employee. It’s best to keep personal and business expenses completely separate to avoid accounting headaches and potential HMRC issues later on.

What happens if I can’t pay off my balance each month?

You'll be charged interest at rates averaging 26%, which can quickly add up. Consistently late payments can also impact your business credit score. If you’re struggling, you can contact your card provider to discuss payment options or consider switching to alternative funding like invoice finance or a business loan with lower interest rates.

Do I need separate cards for employees?

While you don’t legally need separate cards for employees, it’s a good idea. Most providers offer employee cards with individual spending limits, which gives you more control and clearer expense tracking than sharing a single card.

What records do I need to keep for HMRC?

Keep all your receipts and make sure expenses are properly categorised in your accounting system. Card statements alone aren’t sufficient evidence for HMRC.

What are spending limits on business credit cards?

Spending limits vary but typically range from £1,000 to over £25,000 depending on your company’s credit history and revenue. As your business grows, you should be able to request higher spending limits.

What are the best business credit cards in the UK?

This will depend on your spending patterns and needs. Compare interest rates, annual fees, rewards programmes, and additional features before choosing.

What are some alternatives to business credit cards?

A business credit card isn’t suitable for every purchase. Consider business loans for larger amounts, invoice finance for immediate cash flow, overdrafts for flexibility, or asset finance for equipment purchases.

How do I apply for a business credit card?

Most providers will let you apply online or in-branch. You’ll need your business registration details, financial information, and identification. The process usually takes around 7-14 days to complete.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.