One of the biggest advantages of being self-employed is the ability to deduct legitimate business expenses from your income before tax is calculated. Every pound you claim in allowable expenses reduces your taxable profit — and therefore the amount of income tax and National Insurance you pay.
This guide lists everything you can (and can’t) claim as a sole trader or freelancer, so you can minimise your tax bill legally and confidently.
The Golden Rule
For an expense to be allowable, it must be incurred “wholly and exclusively” for the purposes of your business. If something has a mixed personal and business use (such as a mobile phone), you can claim the business proportion only.
You don’t need to send receipts to HMRC with your tax return, but you must keep records for at least five years in case of an enquiry.
Allowable Expenses by Category
Office, Property & Equipment
| Expense | Notes |
|---|---|
| Office or workshop rent | Business premises only |
| Business rates | On your business premises |
| Utilities (gas, electric, water) | Business premises, or business proportion of home costs |
| Repairs and maintenance | To business premises or equipment |
| Stationery and office supplies | Paper, ink, postage, etc. |
| Computer equipment and software | Laptops, monitors, accounting software |
| Telephone and broadband | Business proportion if shared with personal use |
| Cleaning costs | For business premises |
For items costing over a few hundred pounds — such as computers, machinery, or vehicles — you may need to use capital allowances rather than deducting the full cost in one year (see below).
Travel
| Expense | Allowable? |
|---|---|
| Business mileage (own vehicle) | ✓ 45p per mile for first 10,000 miles, 25p thereafter (simplified) |
| Actual vehicle costs | ✓ Fuel, insurance, repairs, road tax — business proportion only |
| Parking for business trips | ✓ |
| Public transport for business | ✓ Train, bus, taxi fares |
| Hotels and meals on business trips | ✓ Reasonable overnight costs |
| Home-to-regular-workplace commuting | ✗ Not allowable |
| Congestion charges for business trips | ✓ |
Important: You must choose either the simplified mileage rate or actual vehicle costs for each vehicle — you cannot mix and match. Once you’ve claimed actual costs for a vehicle, you must continue using that method for as long as you use the vehicle for business.
Staff Costs
| Expense | Notes |
|---|---|
| Employee salaries and wages | Including your own staff |
| Subcontractor payments | Net of any CIS deductions |
| Employer’s National Insurance | Your share of NI for employees |
| Staff pension contributions | Employer contributions |
| Staff training | For existing employees |
| Recruitment costs | Advertising roles, agency fees |
Financial Costs
| Expense | Notes |
|---|---|
| Bank charges and fees | Business accounts |
| Interest on business loans | Business borrowing only |
| Hire purchase interest | Business assets |
| Accountancy fees | Tax returns, bookkeeping |
| Legal and professional fees | Business-related only (not personal disputes) |
| Business insurance | Public liability, professional indemnity, etc. |
| Bad debts | Invoices you’ve written off as unrecoverable |
Marketing
| Expense | Notes |
|---|---|
| Advertising | Online, print, social media |
| Website costs | Hosting, domain, design, maintenance |
| Business cards and brochures | Printed marketing materials |
| Trade directory listings | Including online directories |
| Sponsorship | If it promotes your business |
Training and Development
| Expense | Allowable? |
|---|---|
| Courses related to your current trade | ✓ Updating skills you already use |
| Professional subscriptions | ✓ Trade bodies, journals |
| Books and reference materials | ✓ Related to your business |
| Training to enter a new profession | ✗ Not allowable |
Working from Home
If you use part of your home for business, you can claim a proportion of your household costs. There are two methods:
Simplified flat rate (no evidence required):
| Hours Worked from Home per Month | Monthly Flat Rate |
|---|---|
| 25–50 hours | £10 |
| 51–100 hours | £18 |
| 101+ hours | £26 |
Actual costs method: Calculate the business proportion of your rent or mortgage interest, council tax, utilities, broadband, and insurance. For example, if you use one room of a four-room house for business, you might claim 25% of those costs — adjusted for the hours you work.
Alternatively, you can claim the £6 per week simplified working-from-home allowance without needing to track hours.
Capital Allowances
For larger items that last more than a year — such as vehicles, machinery, computers, and tools — you claim the cost through capital allowances rather than as a simple expense.
- Annual Investment Allowance (AIA): Deduct the full cost of qualifying items up to £1,000,000 per year. This covers most sole traders — you’d need to spend over a million pounds on equipment to hit the limit.
- Writing Down Allowances: For amounts above the AIA or items not qualifying, you deduct a percentage of the remaining value each year (typically 18% or 6% depending on the type of asset).
Most sole traders will use the AIA to claim the full cost of equipment purchases in the year they buy them.
Simplified Expenses
HMRC offers simplified expenses — preset flat rates that remove the need for complex calculations. These are available for:
| Category | Flat Rate |
|---|---|
| Vehicles | 45p/mile (first 10,000), 25p/mile thereafter |
| Working from home | £10–£26/month depending on hours (see above) |
| Living in business premises | £350–£650/month depending on household size |
Simplified expenses are optional. If your actual costs are higher, it’s worth calculating and claiming the real figures instead.
What You CAN’T Claim
These expenses are not allowable, no matter how business-related they may feel:
| Expense | Why Not Allowable |
|---|---|
| Personal expenses | Not exclusively for business |
| Entertaining clients or suppliers | Specifically disallowed by HMRC |
| Fines and penalties | Including parking tickets, HMRC penalties |
| Your own salary (as a sole trader) | Your profit IS your income — you can’t pay yourself a salary |
| Everyday clothing | Even if only worn for work — unless a uniform or protective |
| Home-to-work commuting | Considered personal travel |
| Political donations | Not business-related |
| Charitable donations | Claim through Gift Aid on your personal return instead |
Maximise Your Claims
- Keep every receipt — Digital photos or scanned copies are fine. Use an app to capture them immediately.
- Separate your bank accounts — A dedicated business account makes it far easier to identify and prove expenses.
- Review this list before filing — Many sole traders leave money on the table by forgetting smaller claims like professional subscriptions, mileage, or working-from-home costs.
- Use accounting software — Tools like FreeAgent, Xero, or QuickBooks categorise expenses automatically and flag common deductions.
Related Tools and Guides
- Self-Employment Tax Calculator — See how expenses directly reduce your tax bill
- Self-Employment Tax Guide — Complete walkthrough of registering, filing, and paying