Allowable expenses for sole traders

GOV.UK says that if you are self-employed you can only claim for costs related to business purchases. Its list of categories, each with an example, is a useful checklist when you are sorting a year of receipts:

• office costs, for example stationery or phone bills
• travel costs, for example fuel, parking, train or bus fares
• clothing expenses, for example uniforms
• staff costs, for example salaries or subcontractor costs
• things you buy to sell on, for example stock or raw materials
• financial costs, for example insurance or bank charges
• costs of your business premises, for example heating, lighting and business rates
• advertising or marketing, for example website costs
• subscriptions, for example to trade or professional journals
• training courses related to your business, for example refresher courses

The common thread is that the cost was incurred to run the business. Our page on accountants for sole traders explains how these costs fit into the wider tax return.

Many sole traders use the same phone, car or home for work and for everything else. In those cases you can only claim the business part of the cost, and GOV.UK says you need to find a reasonable method of dividing the cost, and gives the number of rooms you use for business as an example for a home you work from.

Whatever method you choose, apply it consistently and keep a note of how you reached the figure. If working out the exact business share of household bills or a car is too fiddly, simplified expenses let you use flat rates for vehicles, working from home and living at your business premises instead.

Some costs feel like business expenses but are excluded by HMRC's rules:

• Travel between home and work, and any other non-business driving or travel.
• Fines and penalty charges, such as a parking ticket picked up on a job.
• Everyday clothing, such as suits, shirts, dresses or ordinary shoes, even if you only wear them for work. Protective clothing, uniforms and costumes for performing are different and can be claimed.
• Entertaining clients, suppliers or customers, including tickets to events and the cost of lunch during a meeting about work. A staff event where employees are the main attendees can be claimed.
• Money you take out of the business for your own use, which is drawings rather than an expense.

On the other hand, hotel rooms and meals on overnight business trips are allowable, along with vehicle insurance, repairs, servicing, breakdown cover and vehicle tax for a business vehicle.

Larger purchases that you keep and use in the business, such as machinery, a laptop or a van, are treated differently depending on how you keep your accounts. If you use traditional accounting, you claim capital allowances on equipment, machinery and business vehicles rather than putting the cost through as an ordinary expense. If you use cash basis accounting, GOV.UK says a car you buy for the business goes through capital allowances, while other vehicles, and other items you buy and keep for the business, are claimed as allowable expenses in the normal way. If you plan to use simplified expenses for a vehicle, you cannot also claim capital allowances on it, so decide on your approach when you first start using it for the business.

If your costs are very low, the trading allowance can be simpler. It lets you deduct up to £1,000 from your trading income instead of working out your expenses, but GOV.UK is clear that you cannot claim expenses or capital allowances if you use it. If your real costs come to more than £1,000, claiming them gives a lower profit than the allowance would. A rise in the trading allowance to £3,000 from April 2027 was announced in the Budget on 28 October 2026 but is not yet law. Our trading allowance guide has more detail.

Every expense you claim needs a record behind it, such as a receipt, invoice or bank entry, and if you are within Making Tax Digital for Income Tax, HMRC says you need to create digital records and use compatible software. Our guide to what records to keep explains how long to hold on to them. If you would like an accountant to go through your costs, we read every enquiry and, where we can, we will put you in touch with a local accountant through our contact page.