Allowable Expenses UK: What Can Sole Traders Claim? (2026 Guide)

Understanding allowable expenses UK rules is essential if you are self-employed or running a side hustle. Claiming the right expenses reduces your taxable profit, meaning you only pay tax on what you actually earn after business costs.

What Expenses Can I Claim as a Sole Trader in the UK?

If you are self-employed or running a side hustle in the UK, understanding what expenses you can claim is one of the most important parts of managing your finances.

Allowable expenses reduce your taxable profit, meaning you only pay tax on what you actually earn after business costs. Done correctly, this can significantly lower your tax bill.

However, many people either:

• Miss out on legitimate claims

• Claim incorrectly

• Or don’t keep proper records

In this guide, we’ll explain exactly what expenses you can claim, how HMRC defines allowable expenses, and how to make sure you stay compliant.

What Are Allowable Expenses?

Allowable expenses are costs that are wholly and exclusively for business purposes.

This is the key rule used by HMRC.

To be claimable, an expense must:

• Be necessary for running your business

• Not be primarily for personal use

If something is used for both business and personal purposes, you can usually only claim the business portion.

Why Claiming Expenses Matters

When you’re self-employed, your tax is based on your profit, not your total income.

Example:

• Income: £20,000

• Expenses: £5,000

• Taxable profit: £15,000

You only pay tax on £15,000, not £20,000.

This is why understanding expenses is essential — it directly impacts how much tax you pay.

Common Allowable Expenses (Full Breakdown)

Below is a detailed list of the most common expenses you can claim as a sole trader in the UK.

Office, Equipment and Tools

You can claim for items that are necessary to run your business, including:

• Laptops and computers

• Printers and office equipment

• Tools required for your trade

• Business-related furniture

If an item is used partly for personal use, you must split the cost accordingly.

Software and Subscriptions

Digital tools are often essential for modern businesses.

You can claim:

• Accounting software

• Design or editing software

• Subscription services used for your business

• Website hosting and domain costs

These are usually straightforward to claim if used solely for business.

Phone, Internet and Utilities

If you use your phone or internet for business purposes, you can claim a portion of the cost.

For example:

• A percentage of your mobile phone bill

• A portion of your broadband cost

You must make a reasonable estimate of business usage.

Working From Home Expenses

If you work from home, you can claim part of your household costs.

You have two options:

Simplified method

HMRC provides a flat rate based on hours worked from home.

Actual cost method

You calculate the business portion of:

• Electricity

• Heating

• Rent or mortgage interest

• Council tax

This method can result in higher claims but requires more detailed records.

Travel and Vehicle Costs

Travel expenses are allowable if they are for business purposes only.

You can claim:

• Fuel costs

• Vehicle maintenance

• Insurance

• Parking fees

• Public transport

You cannot claim:

• Travel between home and a regular workplace

You can either:

• Use simplified mileage rates

• Or claim actual vehicle expenses

Food and Subsistence

You can claim food costs when:

• You are travelling for business

• You are working away from your usual location

You cannot claim everyday meals taken during normal working hours.

Stock and Materials

If your business involves selling goods or producing products, you can claim:

• Raw materials

• Stock purchases

• Packaging costs

These are essential costs and fully deductible.

Marketing and Advertising

Promoting your business is a valid expense.

You can claim:

• Online advertising (Google, Facebook, etc.)

• Website costs

• Branding and design work

• Business cards

These costs are fully allowable if they are for business use.

Professional Fees

You can claim fees paid to professionals who support your business.

This includes:

• Accountants

• Solicitors

• Business consultants

These services are considered necessary for running a business.

Financial Costs

Certain financial costs are allowable, such as:

• Bank charges on business accounts

• Interest on business loans

However, repayments of the loan itself are not deductible — only the interest.

Insurance

Business-related insurance policies are allowable expenses, including:

• Public liability insurance

• Professional indemnity insurance

• Business equipment cover

Clothing (Special Rules)

Clothing is only allowable if it is:

• A uniform

• Protective clothing required for your work

Everyday clothing, even if worn for work, is not allowable.

Expenses You Cannot Claim

Some costs are not allowed, even if they seem business-related.

These include:

• Personal expenses

• Fines and penalties

• Client entertainment

• Everyday clothing

• Personal travel

Understanding what you cannot claim is just as important as knowing what you can.

Simplified Expenses vs Actual Costs

HMRC allows you to choose between two methods:

Simplified expenses

• Flat-rate system

• Less admin

• Easier to manage

Actual costs

• Based on real expenses

• More accurate

• Requires detailed records

Choosing the right method depends on your situation and how detailed your record-keeping is.

How Expenses Reduce Your Tax Bill

Expenses reduce your taxable profit, which lowers your tax liability.

Example:

• Income: £30,000

• Expenses: £10,000

• Taxable profit: £20,000

This reduction can result in significant tax savings.

Record Keeping Requirements

You must keep accurate records of all expenses.

This includes:

• Receipts

• Invoices

• Bank statements

HMRC requires you to keep records for at least five years after the tax return deadline.

Using accounting software or spreadsheets can make this much easier.

Common Mistakes to Avoid

There are several common errors when claiming expenses:

Claiming personal costs
Only business-related expenses are allowed.

Not keeping receipts
Without evidence, your claims may be rejected.

Overclaiming
Inflated claims can lead to penalties.

Forgetting small expenses
Small costs add up and can significantly reduce your tax bill.

How This Fits Into Your Tax Position

Claiming expenses is only one part of your overall tax position.

You also need to consider:

• Your total income

• Your tax band

• National Insurance contributions

Understanding all of these together will give you a clearer picture of your finances.

Planning Ahead

As your business grows, your expenses may increase and become more complex.

At this stage, you may want to:

• Use accounting software

• Work with an accountant

• Plan your tax more strategically

Understanding what expenses you can claim as a sole trader is essential for managing your finances and reducing your tax bill.

The key principle is simple: expenses must be wholly and exclusively for business use.

By keeping accurate records and claiming correctly, you can ensure that you only pay tax on your true profit — and not more than necessary.