HMRC allows you to claim startup costs incurred up to seven years before your business officially starts — treating them as if they were spent on the first day of trading. Most new business owners do not know this rule exists, which means they miss out on valuable tax relief. Here is what qualifies and how to claim in 2026/27.
The Pre-Trading Expenses Rule
Under section 57 ITTOIA 2005 (for individuals) and section 61 CTA 2009 (for companies), costs incurred before trading begins are deductible if:
- They were incurred within the seven years before the trade starts
- They would have qualified as deductible revenue expenses had they been incurred after trading started
- They were incurred wholly and exclusively for the purposes of the trade
The costs are treated as if they were spent on the first day of trading — so they form part of the opening year’s expenses.
What Qualifies as a Pre-Trading Expense
| Expense | Qualifies? | Notes |
|---|---|---|
| Market research and feasibility studies | Yes | Directly related to the new business |
| Professional advice (solicitor, accountant) | Yes | For business setup, not personal matters |
| Website design and domain registration | Yes | For the business website |
| Advertising and marketing before launch | Yes | Promoting the new business |
| Business insurance (before first client) | Yes | Taken out before trading begins |
| Equipment testing and trials | Yes | To assess business viability |
| Training to refresh existing skills | Yes | E.g. refresher CPD for a skill you already hold |
| Buying equipment, vehicles | No | Capital — claim via Annual Investment Allowance |
| Training to acquire a new qualification | Generally No | Viewed as capital expenditure on skills |
| Personal living expenses | No | Not exclusively for the trade |
| Rent for home office before trading | Possibly | Only the business proportion |
| Travel to research suppliers or locations | Yes | If wholly for the new business |
Worked Example: Rachel’s Consultancy Launch
Rachel decides to launch a management consultancy in October 2026. In the two years before launch she incurs the following costs:
| Date | Expense | Amount | Qualifies? |
|---|---|---|---|
| Jan 2025 | Accountant — business planning advice | £600 | Yes |
| Mar 2025 | Market research reports | £450 | Yes |
| Jun 2025 | Website design | £1,200 | Yes |
| Aug 2025 | Professional indemnity insurance | £800 | Yes |
| Sep 2026 | Business cards and launch marketing | £350 | Yes |
| Aug 2025 | New laptop (£1,100) | £1,100 | No — capital (claim via AIA) |
Total qualifying pre-trading expenses: £3,400
Rachel includes £3,400 in her first year’s Self Assessment return as business expenses. If her first-year profit before these is £18,000, her taxable profit becomes £14,600 — saving approximately £680 in Income Tax at 20%.
The laptop (£1,100) is claimed separately as capital expenditure under the Annual Investment Allowance — full deduction in year one.
Capital Expenditure: Not Pre-Trading Expenses but Still Deductible
Equipment, vehicles, and other capital assets are not pre-trading expenses — but they are not lost either. They qualify for capital allowances from the date you start trading.
| Asset | Treatment |
|---|---|
| Computer / equipment | Annual Investment Allowance — 100% in first year |
| Van or lorry | Annual Investment Allowance — 100% in first year |
| Car | Writing Down Allowance — 18% or 6% depending on emissions |
| Fixtures and fittings | Annual Investment Allowance — 100% |
Key Rules to Remember
| Rule | Detail |
|---|---|
| Lookback period | 7 years before trading starts |
| Treatment | Deemed incurred on day 1 of trading |
| Legislation | s57 ITTOIA 2005 (individuals); s61 CTA 2009 (companies) |
| Record-keeping | Keep all receipts and invoices from the pre-trading period |
| Registration deadline | Register for Self Assessment by 5 October after your first trading year |
When Your Business “Starts Trading”
HMRC uses the point at which you first enter into contracts for the supply of services or goods as the start of trading — not when you register as self-employed or create a company. If you take on your first client informally before registering, the trading start date could be earlier than you think. Getting this date right matters for the seven-year lookback and for the basis period of your first tax return.
Record Keeping
Keep all receipts, invoices, and bank statements for pre-trading expenses. HMRC can ask to see evidence of any expense claimed on your return for up to four years after you file (longer in cases of carelessness or fraud). A simple spreadsheet listing each pre-trading cost, the date, supplier, and amount is sufficient supporting evidence.
See our Self Assessment guide, cash basis accounting guide, and self-employed expenses guide.