Request a
call back
You pay Income Tax on your profit, not your turnover. Allowable expenses are the business costs HMRC lets you subtract from your income before that tax is worked out, so every legitimate expense you claim lowers the bill. The rule that decides what counts is short: the cost must be incurred wholly and exclusively for your trade.
This guide covers what sole traders and other self-employed people can claim, the two accounting methods you choose between, and the specific costs that do and do not qualify. Limited company directors follow different rules, which we cover separately in our guide to allowable business expenses for companies.
What Counts as an Allowable Expense?
An allowable expense is any cost you take on purely to run your business. HMRC’s test is that it must be spent wholly and exclusively for the trade. If a cost is part business and part personal, you cannot claim all of it. You claim the business proportion and leave the rest.
A home broadband bill is the everyday example. If you can show that part of the line is used for work, you claim that share, not the whole bill. The same logic applies to a mobile phone, a car, or a room you work from at home.
Claiming expenses correctly does two things. It reduces your taxable profit, and it keeps your return defensible if HMRC asks to see the records behind it. Keep receipts and a simple log of business use for anything with a mixed purpose.
Cash Basis or Traditional Accounting
Most sole traders now use the cash basis. From the 2024 to 2025 tax year it became the default method for self-employed people and partnerships, so you record income when money actually reaches you and expenses when you actually pay them. There is no longer a turnover limit to enter it. gov.uk cash basis guidance.
Traditional accounting, also called the accruals basis, records income and costs when they are invoiced or incurred rather than when cash moves. You can still choose it, and some businesses prefer it because it handles stock, invoicing in arrears, and capital allowances more cleanly.
The method changes how you treat some costs, particularly equipment and interest, so decide which one fits before you total your expenses. If you are unsure, that decision is worth a short conversation with an accountant rather than a guess.
When You May Not Need to Claim Expenses at All
If your total self-employment income for the year is £1,000 or less, the trading allowance means you usually do not need to report it or claim any expenses against it.
If you earn more than £1,000, you choose one of two options. You deduct the flat £1,000 allowance from your income, or you claim your actual allowable expenses. You cannot do both, so use whichever is larger. For anyone with real costs above £1,000, claiming actual expenses almost always wins.
Allowable Expenses You Can Claim
Office, stationery and admin costs
Day-to-day running costs are allowable. That covers stationery, printing, ink, postage, business phone and broadband, and the software you use to run the business. Small tools and equipment are usually deductible too, though how you claim larger purchases depends on your accounting method, which the capital allowances section below explains.
Working from home
If you run the business from home, you claim a share of your household costs. You have two routes.
The simplified method uses HMRC flat rates based on how many hours a month you work from home: £10 a month for 25 to 50 hours, £18 a month for 51 to 100 hours, and £26 a month for 101 hours or more. It is quick and needs no calculations.
The actual-cost method apportions your real bills, such as heating, electricity, council tax, and broadband, by the floor area you use for work and the time you spend on it. It takes more record keeping but often produces a larger claim if a full room is given over to the business.
Travel and mileage
Business travel is allowable, but not your ordinary commute from home to a permanent workplace. Again you choose a method, and you stick with one per vehicle.
The simplified mileage rate lets you claim a flat amount per business mile: 45p for the first 10,000 car or van miles in the year, 25p for each mile after that, and 24p for motorcycles. This single rate is meant to cover fuel, servicing, insurance, and wear, so you do not claim those costs on top.
The actual-cost method instead claims the business share of your real running costs, fuel, repairs, insurance, road tax, and breakdown cover, plus capital allowances on the vehicle. You cannot mix the two for the same vehicle, so once you claim simplified mileage on a car you stay on that method for it.
Other travel stands separately from the vehicle question. Train, bus, taxi and air fares for business trips are allowable, as are hotel stays and reasonable meals on overnight trips away from your normal base.
Staff and subcontractor costs
If you employ people, their wages, salaries, bonuses, pension contributions, and Employer’s National Insurance are allowable. Payments to subcontractors are allowable too. Note the limit for sole traders: you cannot put yourself on the payroll or claim your own wages or drawings as an expense, because as a sole trader your profit is your income.
Professional and financial costs
Fees you pay to run the business properly are allowable. That includes accountants, solicitors, surveyors and other professional advisers, professional indemnity insurance, and bank or payment-processor charges on your business account. Interest and finance costs can be claimed, though the cash basis applies its own treatment, so check which method you are on.
Stock, raw materials and direct costs
The cost of goods you buy to resell, and the raw materials that go into what you make or sell, are allowable. So are the direct costs of producing your goods or delivering your service.
Marketing and advertising
Promoting the business is allowable. Website costs, online and print advertising, mailshots, and directory listings all qualify. Sponsorship can qualify where it is genuinely for business promotion rather than personal interest.
Training that maintains your skills
Training is allowable where it keeps your existing professional skills up to date or refreshes knowledge your trade already relies on. Courses that teach you an entirely new trade are treated as capital and usually are not allowable.
Clothing in limited cases
You can claim for a uniform, branded workwear, protective clothing, or a costume that your work requires. You cannot claim for everyday clothes you could wear outside work, even if you only ever wear them on the job. The classic refusal is a smart suit, which HMRC treats as ordinary clothing.
CAPITAL ALLOWANCES
Claiming for Equipment and Assets
Larger, longer-lasting items, machinery, computers, tools, and business vehicles, are capital rather than running costs, and they are handled differently from the expenses above.
Under traditional accounting you claim these through capital allowances, most often the Annual Investment Allowance, which lets you deduct the full cost of qualifying equipment in the year you buy it.
Under the cash basis the treatment is simpler. You deduct most equipment as a normal expense when you pay for it, with cars being the main exception, which still go through capital allowances or the mileage method. This difference is one of the main reasons to settle your accounting method first.
What You Cannot Claim
Some costs are never allowable, however clearly they relate to the business.
You cannot claim client or customer entertaining, such as taking a client to lunch or to an event. You cannot claim personal expenses, fines and penalties, or the personal share of any mixed-use cost. You cannot claim everyday clothing, and you cannot claim your own wages or drawings as a sole trader. Money you put aside that has not actually been spent on the business does not qualify either.
How to Claim Your Expenses
You claim allowable expenses through your annual Self Assessment tax return. Most sole traders report them on the self-employment pages, the SA103 section, either as a single total if your turnover is below the HMRC threshold or broken down by category above it.
Keep the evidence. HMRC expects you to hold records that support every figure, normally for at least five years after the 31 January filing deadline for that tax year. For anything used partly for personal reasons, keep a note of how you worked out the business share, because that calculation is the first thing an enquiry will ask about.
If you also need to plan for the change to quarterly digital reporting, see our guide to Making Tax Digital for Income Tax.
Frequently Asked Questions
Can I claim expenses if I work from home as a sole trader?
Yes. You claim a share of your household running costs, either through HMRC’s flat monthly rates based on your working hours or by apportioning your actual bills by room use and time. You cannot claim the full cost of a bill that also covers personal use.
Can I claim for my car?
Yes, for business journeys, but not your normal commute. You either claim a flat 45p per mile for the first 10,000 business miles and 25p after that, or you claim the business share of your actual running costs plus capital allowances. You choose one method per vehicle and keep to it.
Can I claim clothing?
Only uniforms, branded workwear, protective gear, or costumes your work requires. Ordinary clothes are never allowable, even if you only wear them for work.
Do I have to claim the trading allowance?
No. If your self-employment income is over £1,000, you choose between deducting the flat £1,000 allowance or claiming your actual expenses, whichever leaves you better off. You cannot use both.
What records do I need to keep?
Keep receipts, invoices, bank statements, and a note of the business share of any mixed-use cost. HMRC normally expects you to hold these for at least five years after the relevant 31 January filing deadline.
Get your expenses right and your tax bill lower
Claiming the wrong way costs money twice, once in tax you did not need to pay and again if a mistake triggers an enquiry. We work with sole traders and self-employed people across London, with offices in Tooting, Barking and Wimbledon, to make sure every allowable expense is claimed and properly recorded.
Speak to our team about your Self Assessment and we will tell you exactly what you can claim for your trade.
Muhammad Sufyan Moavia
Muhammad Sufyan Moavia, Chartered Tax Adviser and Fellow Chartered Certified Accountant at IBISS & CO.
He has 15 years experience in accounting and tax, advising individuals and business owners on personal tax, HMRC matters, IHT, CGT and tax planning.
Last review: July 2026
