Can I claim expenses for business-related digital security software?

Can I claim expenses for business-related digital security software?

Most businesses now depend on digital tools for day-to-day operations: cloud storage, email, online banking, customer databases, accounting platforms, and remote collaboration. That convenience comes with risk. Malware, phishing, ransomware, data theft, and account takeovers are no longer rare events that happen only to large corporations. They are routine threats that target sole traders, freelancers, partnerships, and companies of every size. Because of that, it’s normal for businesses to invest in digital security software such as antivirus suites, endpoint protection, password managers, encrypted storage, VPN services, multi-factor authentication tools, email filtering, mobile device management, and secure backup solutions.

So the practical question becomes a tax question: if you buy digital security software primarily to protect your business, can you claim it as an expense? In many cases, yes. But the answer depends on how your local tax rules define allowable business expenses, what the software is used for, how it is billed, whether there is any personal use, and whether the purchase is treated as a normal running cost or a longer-term capital investment. This article walks through the key principles and the common scenarios so you can decide how to treat security software costs in a reasonable, defensible way.

What “claiming an expense” usually means

When people say “claim expenses,” they typically mean deducting a cost from business income so that the business pays tax on a smaller profit. If you are self-employed, the deduction is usually taken against your trading profits. If you operate through a company, the company normally deducts allowable expenses in calculating taxable profits. In either case, the general idea is the same: if the expense is genuinely for business purposes, it may reduce the tax you owe.

Digital security software often fits neatly into this framework because it is strongly connected to protecting business assets and enabling business activity. If the software is necessary to safely operate online, protect customer information, maintain access to systems, comply with contractual requirements, or reduce the risk of financial loss, the business rationale is clear. However, tax authorities also pay attention to whether something is partly personal. Security tools are easy to use across both personal and business life, especially if you work from home or use one device for everything. That mixed-use element is where careful record-keeping and reasonable allocation matter.

The basic “wholly and exclusively” principle

Although wording varies across jurisdictions, a common standard is that expenses must be incurred wholly and exclusively for the purposes of the business (or at least primarily and necessarily for business, depending on the tax system). In practice, this usually means:

1) The purchase must have a business purpose that makes sense for the kind of work you do.

2) The cost must not be mainly personal.

3) If there is mixed use, you should claim only the business-related proportion.

Digital security tools are often easier to justify than many other borderline costs because they directly protect business systems and data. But you still need to look at what you purchased and how you use it. A VPN subscription used exclusively to connect to a client’s secure network while travelling is a different scenario than a family antivirus plan covering multiple household devices with only one used for work.

Common types of security software you may be able to claim

“Digital security software” is a broad category. Many products fall into it, and the tax treatment can differ depending on whether it is a recurring subscription, a one-off purchase, or part of a larger hardware or IT package. Here are common examples that are often claimable when used for business:

Antivirus, endpoint protection, and anti-malware

These are the classic security products designed to prevent malicious software from compromising your devices. For many businesses, antivirus or endpoint protection is a standard operating cost. If you buy protection for the business laptop or office workstation, it is usually straightforward to classify as an allowable business expense. If it covers multiple devices, you may need to allocate the cost according to the business devices included or the percentage of use.

Firewall and network security tools

This includes software firewalls, network monitoring, intrusion prevention, and security management suites. Small businesses increasingly use software-based solutions to manage routers, segment networks, and detect unusual behaviour. If the purpose is to secure business systems, this is typically a business expense. The more your operations depend on reliable network security (for example, if you host services, handle payments, or store sensitive data), the easier the business justification becomes.

Password managers and authentication services

Password managers, single sign-on tools, and authentication apps (including paid multi-factor authentication services) are widely used to reduce the risk of account compromise. If you use them to secure business email, cloud storage, client portals, and financial services, the cost usually has a clear business purpose. Some password managers offer “family” tiers that include personal accounts for relatives; those plans can still be partly claimable if the business is paying primarily to secure business credentials, but you may need to apportion the cost.

Encryption and secure storage

Encryption software, secure vaults, encrypted email, and secure cloud storage features can be essential when you work with confidential information, intellectual property, or regulated data. If you pay extra for encryption features in your storage provider, you may be able to treat that incremental cost as a business expense. If the entire storage service is primarily for business files, the whole subscription is likely to be a business cost.

Virtual private networks (VPNs)

A VPN can be used to protect data in transit, especially when using public Wi-Fi, and to access internal business systems. Many remote workers rely on VPN services. If you subscribe to a VPN primarily for business, it may be deductible. If you also use it for personal streaming or general privacy on home devices, you may need to estimate the business portion in a sensible way (for example, based on which devices it is installed on, or the proportion of time you use it for work activities).

Email security, spam filtering, and phishing protection

Phishing is a major threat to small businesses. Tools that filter spam, scan attachments, detect impersonation, and add email security layers can be directly connected to preventing fraud and downtime. If these tools are purchased for business email accounts, they are typically ordinary business expenses. This includes add-ons purchased through your email provider or third-party gateways.

Backup and disaster recovery tools

Secure backup software, cloud backups, ransomware-resistant backups, and disaster recovery tools are often critical. The business argument is strong: backups protect business continuity, client deliverables, and your ability to operate. Subscription backup services are usually treated as ongoing expenses. If you buy a more complex disaster recovery solution as part of a broader IT investment, the treatment may shift toward capital in some cases.

Device management and security monitoring

Mobile device management (MDM), endpoint monitoring, and security information tools are more common as businesses scale. If you pay for these systems to protect company devices, enforce security policies, and monitor threats, they are generally business-related. They can also support compliance with client contracts and data security standards.

Compliance and privacy tools

Depending on your industry, you might use software for privacy compliance, consent management, vulnerability scanning, or security auditing. If these tools are required to meet legal obligations, contractual requirements, or professional standards, they are often strongly defensible as business expenses.

Subscription vs one-off purchase: why it matters

Many security tools are subscriptions billed monthly or annually. Subscriptions are usually treated as operating expenses because they relate to ongoing services. A one-off purchase, on the other hand, could be treated as an expense or as a capital cost depending on local rules and the nature of the asset you are acquiring.

For example, an annual subscription to an endpoint protection service is normally a straightforward deductible cost. A perpetual software licence purchased upfront might still be deductible as a normal expense in some systems, but other tax systems treat certain software purchases more like capital items that must be capitalized and written off over time. If the purchase is large, long-term, or part of building a durable business asset (like a custom security system or multi-year enterprise licence), it is more likely to be treated as a capital investment.

In everyday small business scenarios, many digital security purchases are relatively modest subscriptions. Those are typically easier to account for as ordinary costs, but you should still keep invoices and record the business rationale.

Mixed personal and business use: how to handle it

The biggest practical complication is mixed use. Many small business owners use a single laptop or smartphone for both work and personal life. Security software often protects the whole device, and it may also be licensed for multiple devices. Tax authorities generally expect you to claim only the part that relates to the business if there is significant personal benefit.

Here are common mixed-use patterns and reasonable ways to handle them:

One device used for both work and personal activities

If you use the same laptop for business work and personal browsing, and you pay for antivirus or a VPN on that laptop, you may need to estimate the business percentage. Some people apportion based on time (for example, if you use the device 70% for work, claim 70% of the cost). Others apportion based on usage patterns, such as the portion of storage dedicated to business, or the number of business accounts protected. The best method is one you can explain and apply consistently.

Family plans that cover multiple devices

A security suite might protect five or ten devices, including your work machine, personal phone, partner’s laptop, and a child’s tablet. If the business is paying, it’s hard to justify claiming the entire plan unless those devices are business assets. A more defensible approach is to allocate the cost based on the number of business devices covered (for example, 2 out of 10 devices) or to switch to a business plan that covers only business assets.

Personal security features that also protect business

Some tools blur the line. A password manager might store both personal and business credentials. A VPN might be used for both privacy and business travel. In these cases, the key is whether the business is the primary reason for the purchase and whether you can reasonably estimate the business component. If you cannot justify a business portion, it is safer to treat it as personal. If you can, document your reasoning.

Separate accounts can simplify everything

One of the easiest ways to support a business claim is to use separate business accounts and licences. For example, buy a password manager business account used only for business credentials, pay for endpoint protection for the business laptop only, and set up backups for business data separately. Separating personal and business usage not only reduces tax complexity but also improves security and reduces risk.

What makes a security expense “reasonable” for your business?

A frequent concern is whether the cost looks excessive. Security products range from inexpensive consumer subscriptions to expensive enterprise solutions. Tax rules typically focus on business purpose rather than “cheapness,” but an unusually high cost can invite scrutiny if it seems out of proportion to the business activity.

Reasonableness is easiest to show when you can connect the software to a specific need:

- You handle customer personal data, payment details, or confidential client documents.

- You access business systems remotely or travel frequently.

- You run online advertising, ecommerce, or process orders through a website.

- You rely on cloud services and email for core operations.

- Your industry has regulatory or contractual security requirements.

- You have experienced attempted phishing, fraud, or security incidents and responded by improving protections.

If you are a freelance designer, a basic endpoint suite, password manager, and secure backup may look proportionate. If you operate an online store, more advanced email filtering and vulnerability scanning might be justified. If you provide IT services or handle sensitive health or legal information, higher-tier security tools may be essential.

Security software bundled with other services

Many tools are bundled: a hosting provider includes malware scanning; a cloud storage subscription includes encryption; an internet provider includes security; a business phone plan includes device protection; an accounting platform includes fraud detection. The tax treatment usually follows the overall service if it is primarily business-related. However, bundles can hide the true nature of the cost.

Here are ways to approach bundled costs sensibly:

- If the entire subscription is clearly a business service (for example, business email hosting with security add-ons), treat the whole cost as a business expense.

- If the subscription is primarily personal (for example, a home broadband package with free security), don’t automatically claim it just because security is included.

- If you pay an explicit add-on for security features on a business service, record it clearly in your bookkeeping. If the invoice breaks it out, even better.

Capital vs revenue: when software might be treated differently

Most security software costs for small businesses are “revenue” expenses (ordinary running costs). But some situations might tilt toward capital treatment:

- You purchase a multi-year licence or a large upfront contract that creates a long-term intangible asset.

- You implement a significant security system as part of a broader IT infrastructure build.

- You pay for custom development of security tools, bespoke integrations, or an internally developed security platform.

In these cases, it may be appropriate (or required) to spread the cost over time rather than deducting it all at once. The exact rules vary widely by country, and the amounts involved often determine whether it’s worth seeking professional advice. For many small businesses, the purchases are small enough and subscription-based enough that normal expense treatment is typical.

How to record and support your claim

Even if you are confident an expense is allowable, it helps to keep your records clean. Good records reduce stress, make accounting easier, and help if your tax return is ever reviewed. For digital security software, aim to keep:

- Invoices or receipts showing the vendor name, date, amount, and what was purchased.

- Proof of payment (bank or card statement line items) that matches the invoice.

- A short note in your accounting system describing the business purpose (for example, “Endpoint protection for company laptop and client data”).

- If the cost is apportioned, a note explaining how you calculated the business percentage and why it’s reasonable.

When software renews automatically, keep the renewal invoices too. If you cancel or change plans, make sure your records reflect the change. Consistency matters: if you claim 80% business use one year and 20% the next without a clear reason, it may look arbitrary.

Examples of typical scenarios

Real-world examples can help clarify how the principles apply. These scenarios are general illustrations; always adapt them to your own circumstances and local rules.

Example 1: Sole trader using a dedicated business laptop

A self-employed consultant buys an antivirus subscription and a password manager for a laptop used exclusively for client work. The consultant keeps receipts and records the costs under “software subscriptions.” Because the laptop is a business asset and the tools protect business communications and documents, the costs are typically fully claimable.

Example 2: Freelancer using one laptop for work and personal life

A freelance writer uses a personal laptop for both writing work and home use. They buy a security suite for the laptop. The writer estimates that 60% of the laptop use is for work and claims 60% of the annual cost, noting the basis for the estimate. This approach is often more defensible than claiming 100% when personal use is substantial.

Example 3: Small business with multiple employees

A small agency pays for endpoint protection for each employee computer, a managed password manager for team credential sharing, and an email filtering service. These expenses are clearly tied to securing business operations and are typically claimed as business running costs. Clear invoices and user counts make the business link obvious.

Example 4: Family VPN plan used partly for business

A business owner buys a VPN family plan that covers five household devices, but only one is used for business. If the business pays the bill, claiming the entire cost may be hard to justify. A more reasonable approach is to claim only one-fifth of the cost (or whatever proportion reflects business devices), or to switch to a separate business-only plan and claim that fully.

Example 5: Security included in a cloud subscription

A photographer pays for cloud storage used mainly for client project files, with built-in encryption and ransomware protection features. Because the storage is primarily for business, the subscription is typically treated as a business expense. If the photographer also stores a large personal photo library there, an apportionment might be appropriate.

Does the type of business structure change the answer?

The principles are similar across business structures, but the mechanics can differ. A sole trader or partnership often focuses on whether an expense is incurred for business purposes and may need to apportion mixed-use costs carefully because personal and business finances can be closely linked.

Companies often have clearer separation between company and personal spending. If a company pays for security software used by employees on company devices, the business purpose is straightforward. However, if the company pays for software that is mainly personal for a director or employee, there could be additional considerations such as taxable benefits, payroll reporting, or other compliance obligations depending on local rules. If you operate through a company and the software covers personal devices, it’s worth being especially careful about whether it’s genuinely for business and how you document it.

When security software could be challenged

Security software is generally easier to justify than many other “grey area” expenses, but challenges can arise in a few situations:

- The software is clearly consumer-focused and used mostly for household devices.

- The subscription is bundled with entertainment features and the business use is minor.

- There is no clear connection between the software and business activity.

- The cost is unusually high relative to business turnover and there is little evidence of need.

- The business claims 100% despite obvious mixed personal use.

If you worry a cost may look questionable, the safest options are to apportion, separate licences, or pay personally for the personal portion. Often, a small change in how you buy the software can make the accounting and justification much cleaner.

Security as a compliance requirement

In some industries, security spending is not just sensible but required. Client contracts may mandate certain protections: encrypted storage, audited access controls, endpoint management, or incident response capabilities. Some professions have confidentiality obligations that are difficult to meet without strong security tools. If security software is necessary to meet contractual obligations or professional standards, that strengthens the business argument.

It can help to keep documentation such as client onboarding requirements, contract clauses, or internal policies that show why you purchased the tool. You don’t need pages of paperwork for every subscription, but having a clear narrative is useful if questions ever arise.

What about security training and services?

Although this article focuses on software, businesses often spend on security-related services too: phishing simulations, training courses, penetration tests, managed security services, or incident response retainers. These may also be claimable if they are business-related. Training that is directly linked to protecting business operations or meeting compliance obligations can be easier to defend than broad personal development. Managed services that monitor and protect your systems are often treated like other outsourced professional services.

If your spending includes both software and services from the same provider, make sure invoices clearly describe what you are paying for. If your bookkeeping categories separate “software subscriptions” and “professional services,” that can also make your accounts easier to understand.

Practical tips to make your claim stronger

You don’t need to overcomplicate this, but a few practical habits can make security expenses easier to claim and easier to justify:

- Use a dedicated business card or business bank account for business subscriptions where possible.

- Choose business plans for business needs, especially if you have a team.

- Keep personal and business devices separate if feasible, or at least separate user profiles and accounts.

- Document your apportionment method and apply it consistently.

- Review your subscriptions annually to ensure they still match business use and aren’t quietly drifting into mainly personal benefits.

These habits help not only with taxes but also with cybersecurity hygiene. Clear separation of business tools and credentials reduces the risk of accidental data leakage and simplifies offboarding if you ever add contractors or employees.

A simple decision checklist

If you want a quick way to evaluate a security software expense, run through these questions:

- Is the primary purpose to protect business systems, accounts, or data?

- Is the software used on business devices or for business accounts?

- Is there substantial personal use, and if so, can you reasonably apportion?

- Do you have invoices and proof of payment in the business records?

- Can you explain why the tool is relevant to your work?

If you can answer “yes” to the business-purpose questions and you have records, the expense is usually on solid ground. If personal use dominates, it’s safer to claim only the business portion or not claim it at all.

Final thoughts

In many cases, business-related digital security software is an ordinary and necessary cost of operating safely in a modern economy. Antivirus, password managers, VPNs, secure backups, email filtering, encryption tools, and similar products often have a clear business purpose and can be claimed as expenses when they are used for business. The main complications tend to come from mixed personal use, family plans, and bundled subscriptions that blur the line between personal and business benefits.

The best approach is straightforward: buy tools that match your business needs, keep your receipts, and if there is any meaningful personal use, claim only the business portion using a consistent, reasonable method. If you are making large or unusual security investments, or your business structure introduces additional considerations, getting advice tailored to your circumstances can be worthwhile. But for many small businesses, careful record-keeping and common-sense allocation are enough to handle security software costs confidently and responsibly.