As a self-employed individual or sole trader in the UK, you can deduct allowable business expenses from your income before calculating tax. This reduces both your income tax and your National Insurance contributions. However, HMRC applies a strict test: expenses must be incurred “wholly and exclusively” for business purposes.
This guide covers every category of allowable expense, what you can and cannot claim, and the simplified expenses alternative.
The “Wholly and Exclusively” Test
HMRC requires that expenses are incurred wholly and exclusively for business purposes. If an expense has both a personal and business element, you must apportion it — claiming only the business portion. For example, if you use your mobile phone 60% for business, you can claim 60% of the bill.
Allowable Expense Categories
Office, Premises, and Property Costs
Rent for business premises, business rates, utilities, repairs, and maintenance. If you work from home, you can claim a proportion of household bills or use the flat rate (up to £312/year).
Travel and Transport
Business travel by train, bus, taxi, or air. If using your own vehicle, claim mileage allowance (45p/mile for first 10,000 miles) or actual costs. Parking for business trips is allowable. Commuting to your regular workplace is not allowable.
Staff Costs
Employee salaries, employer NI contributions, pensions, bonuses, benefits, and subcontractor payments. Training for existing staff is also allowable.
Office Supplies and Equipment
Stationery, printer ink, postage, computer consumables, and small equipment. Larger items (computers, furniture, machinery) may qualify for capital allowances instead of being fully deductible in the year of purchase.
Software and Technology
Software subscriptions (Microsoft 365, Adobe, project management tools), cloud storage, domain names, web hosting, and app subscriptions used for business. These are fully deductible in the year purchased.
Professional Fees
Accountant fees, solicitor fees, architect fees, surveyor fees, and other professional services for your business. Tax return preparation fees are allowable.
Marketing and Advertising
Website costs, online advertising (Google Ads, social media ads), business cards, brochures, directory listings, and promotional materials.
Insurance
Business insurance, professional indemnity, public liability, employers’ liability (if you have staff), and contents insurance for business premises.
Financial Costs
Business bank account fees, credit card charges, loan interest for business purposes, hire purchase interest, and payment processing fees (Stripe, PayPal, SumUp).
Training and Professional Development
Courses, conferences, and seminars that update or maintain existing skills relevant to your business. Training to acquire entirely new skills is generally not allowable.
Subscriptions and Memberships
Professional body memberships, trade journals, industry subscriptions, and relevant publications.
What You Cannot Claim
- Client entertainment — meals, drinks, or events with clients are not deductible (unlike in the US and Canada)
- Everyday clothing — even if you only wear it for work (uniforms and protective clothing are allowable)
- Fines and penalties — parking fines, late payment penalties, speeding tickets
- Personal expenses — anything not wholly and exclusively for business
- Initial cost of business premises — purchase price is not deductible (capital allowances may apply to fit-out costs)
Simplified Expenses
HMRC offers simplified expenses (flat rates) for three categories: working from home, business mileage, and living at your business premises. These replace the need to calculate actual costs and may simplify your record keeping.
Keeping Records of Your Expenses
Every expense you claim needs a receipt. HMRC can request documentation for any claim, and without it your deduction will be denied. Records must be kept for at least 5 years. Under Making Tax Digital, your expense records must be digital from April 2026.
Scan every receipt as it arrives with SparkReceipt’s AI receipt scanner. Connect your email for automatic digital receipt capture. Generate expense reports any time you need them.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified accountant or tax adviser for your specific situation.
