What Can You Actually Claim? A Plain English Guide to Business Expenses for Sole Traders.
Tax. Just the word is enough to make most of us reach for the cake tin or gin bottle and stare blankly at the wall. And when you’re self-employed or running a small business, the rules around what is and isn’t claimable as a business expense can feel overwhelming. But here is the good news: once you understand the basic logic of how HMRC thinks about expenses, the whole thing becomes a lot more straightforward. This blog is going to walk you through everything you need to know, in plain English, with no jargon and no fluff.
Before we get into the detail, a quick but important caveat: this blog is for general information only and is not financial or tax advice. Tax rules change, and your individual circumstances matter enormously. Always check the HMRC website for the most up-to-date guidance, and if you are in any doubt at all, speak to a qualified accountant. With that said, let’s get into it.
The Golden Rule: Wholly and Exclusively for Business
HMRC has one overarching rule that sits behind every single allowable expense: the cost must have been incurred wholly and exclusively for business purposes. That phrase, wholly and exclusively, is the key. If a cost has both a personal and a business element, you can generally only claim the business proportion. So, if you use your mobile phone for personal calls as well as business calls, you cannot claim the full bill. You can only claim the percentage that relates to business use.
If that sounds strict and unworkable it’s definitely time to put some clear water between your business and personal expenses. HMRC can, and regularly do, investigate (and fine) sole traders and microbusiness owners. But if you can make a clear and honest case that a cost was for the business, you are likely on the right track. The problems tend to arise when people try to claim things that are personal expenses dressed up as business ones. HMRC is a behemoth and appears slow to act, but it’s got teeth (at least when it comes to the little guys like us) and is happy to use them.
That said, claimable expenses can be generous, and definitely worth finding out about. Although I’m (mainly) happy to pay tax to ensure the country I live in is safe and the streetlights work, I’m also always happy to find out that an expense is tax deductible. So, lets take a closer look at the things you can claim.
The Everyday Running Costs You Can Claim
Most sole traders and small business owners are surprised by how many of their day-to-day costs are actually claimable. HMRC recognises a number of common categories of allowable running costs, and these are deducted from your income before your Income Tax is calculated. Here are the main ones to know about.
Office Costs and Stationery
Things like printer paper, pens, envelopes, postage, and phone bills all fall under office costs and are generally claimable. If you use a dedicated work phone purely for business, the whole bill is claimable (and in this day and age of cheap PAYG contracts and preloved phones why wouldn’t you have a dedicated business number?). If you use the same phone personally and professionally, you need to work out a reasonable business-use percentage and claim only that.
Working From Home
This is one that catches a lot of people out, usually because they do not realise they can claim anything at all. If you work from home, HMRC allows you to claim a reasonable proportion of household running costs including heating, electricity, council tax, mortgage interest or rent, and broadband, based on the amount of space and time you use for business.
If the idea of working out exact proportions makes your head hurt, there is a simpler option. HMRC offers a flat-rate simplified expenses scheme, which gives you a fixed monthly amount depending on how many hours a month you work from home. It is not always the most generous option, but it is straightforward and requires minimal record keeping. Check the HMRC website for the current flat rates, as these can change.
Travel Costs (But Not Your Commute)
Business travel is claimable. That includes fuel, parking, train fares, bus fares, taxis and any other travel costs directly related to business journeys. If you drive your own car for work, you can claim a mileage allowance rather than the actual fuel costs, and HMRC sets the approved mileage rates annually. As of 2026, it’s a relatively generous 45p/mile, going down to 25p/mile after 10,000 miles.
However, and this is a really important however: your regular commute between home and a permanent place of work is not claimable. HMRC treats that as a personal expense, regardless of how far you travel or how much it costs. If you are a sole trader who works from home, travel to visit clients or suppliers is a business journey and therefore claimable. The distinction is the purpose of the trip, not the distance.
Legal, Financial and Insurance Costs
If you are self-employed, the fees you pay to accountants, solicitors, surveyors or architects for genuine business reasons count as allowable expenses. Professional indemnity insurance premiums are also claimable, as are business bank charges, overdraft fees, interest on business loans, hire purchase interest, leasing payments and business insurance such as public liability insurance.
Worth noting: you can claim the interest on a business loan, but you cannot claim the capital repayment itself. And fines, whether parking tickets or anything else, are never allowable. HMRC takes a fairly dim view of subsidising rule-breaking, understandably.
Staff and Subcontractor Costs
If you employ anyone, the costs associated with that employment are generally claimable. That includes wages, salaries, bonuses, employer National Insurance contributions and pension contributions. If you use subcontractors or freelancers to help deliver your work, their costs are also deductible as long as they are genuinely incurred in running the business. Keep records and make sure your contracts and invoices are in order, because HMRC does look closely at employment status.
Stock, Raw Materials and Goods for Resale
If you buy goods to sell on, or materials and direct production costs to make what you sell, these are allowable expenses when calculating your self-employed profits. The key condition is that the items are used for business and are not taken for personal use. If you run a bakery and you eat a loaf yourself, the ingredients for that loaf are not a business expense. If you sell it to a customer, the ingredients are.
Training and Professional Development
Training that updates or improves skills you already use in your existing trade is claimable. So, if you are an electrician and you attend a course to keep up with new legislation, that is a legitimate business expense. However, training that gives you a brand-new skill set to start a completely different trade is generally not allowable as a revenue expense for your current self-employment. The distinction is between developing existing skills and acquiring entirely new ones.
Advertising and Marketing
Money you spend promoting your business is generally claimable. Website hosting, social media advertising, printed flyers, business cards, and fees for directories or listings all fall into this category. If you pay someone to manage your social media or run your marketing campaigns, those costs are claimable too.
Equipment and Larger Purchases: Capital Allowances
This is where things get a little more complex, so bear with me. Larger, longer-lasting items such as equipment, machinery and business vehicles are not usually treated as straightforward expenses in the year you buy them. Instead, if you use traditional accounting, you claim relief on these through something called capital allowances.
The Annual Investment Allowance (AIA) lets most small businesses claim 100 per cent of the cost of qualifying plant and machinery in the year of purchase, up to the current annual limit. This means that in practice, many sole traders can still get full tax relief in year one, just through a different mechanism than everyday expenses. The HMRC website has full details of what qualifies and what the current limits are, and this is definitely one to discuss with your accountant if you are making any significant purchases.
The Trading Allowance: A Different Option Altogether
If your self-employment income is relatively modest, you might be eligible to use the trading allowance instead of claiming actual expenses. This gives you a tax-free allowance of up to one thousand pounds on your self-employment income without you needing to track or document any expenses at all. Simple and low admin. However, and this is crucial, it is either/or. If you choose the trading allowance, you cannot also claim business expenses or capital allowances for the same income. You need to work out which approach leaves you better off, and for most people with more than one thousand pounds of expenses, claiming actual costs will be the better option.
Record Keeping: The Bit Nobody Enjoys But Everybody Needs
Whatever you claim, you need to be able to prove it. HMRC can ask you to produce receipts, invoices and bank statements to support your expenses, so keeping good records is not optional. The good news is that you do not need a filing cabinet full of paper. Most accounting apps and even the HMRC app itself allow you to photograph and store receipts digitally. Get into the habit of logging expenses as you go rather than trying to reconstruct six months of receipts at the end of the tax year. Future you will be very grateful. And with Making Tax Digital now a thing, it’s become essential to create and keep digital records. Keeping track of your expenses in a proper accounting system rather than a spreadsheet or a shoebox is going to become not just good practice but a legal requirement for many. Check the HMRC website for free compatible software, and have a look at my MTD blog for more details.
The Bottom Line
Claiming business expenses is one of the simplest and most legitimate ways to reduce your tax bill as a sole trader or small business owner. You are not trying to game the system; you are doing exactly what HMRC intends you to do. The key things to remember are: only claim costs that are wholly and exclusively for business, keep your receipts and records, know the difference between revenue expenses and capital items, and check the HMRC website for current rates and rules because they do change.
And if you are ever unsure, please do speak to a qualified accountant. A good accountant will save you more than they cost, and they will make sure you are claiming everything you are entitled to without putting yourself at risk of an unwanted HMRC enquiry.