Allowable expenses for sole traders (UK)

What counts as an allowable expense

An allowable expense is a cost you pay to run your business. You take allowable expenses off your takings to get your taxable profit, so every £100 of genuine costs you claim cuts the profit you pay Income Tax and National Insurance on by £100.

HMRC groups them into categories, and the self-employment pages of the tax return ask for them in the same groups:

• Office, property and equipment: stationery, phone and internet bills, postage, printing, software, rent and business rates for premises, and repairs.
• Travel: fuel, parking, train, bus and taxi fares for business trips, and hotels and meals on overnight business trips.
• Clothing: uniforms, protective clothing and costumes.
• Staff: wages and subcontractor fees.
• Things you buy to sell: stock and raw materials.
• Financial costs: business insurance and bank charges.
• Premises: heating, lighting and business rates.
• Marketing: adverts, a website and free samples.
• Training that keeps your current skills up to date, and subscriptions to trade or professional journals.

Allowed and not allowed: examples

If you are not sure whether something counts, HMRC's guide on expenses if you're self-employed goes through each category.

Things you use for business and personal

For anything you use both ways, claim only the business share. If your phone bill is £30 a month and a third of your use is for business, claim £10 a month. Work it out in a way you could explain, such as call records or the share of time, and keep a note of how you did it.

Simplified expenses: mileage, working from home and living at your premises

Simplified expenses are flat rates you can use instead of working out actual costs. They suit people who would rather not split every bill.

Mileage for cars, vans and motorcycles

The rate covers fuel, insurance, servicing, tax and wear and tear, so you cannot claim those as well, but parking and train fares for other trips can go on top. You cannot use the flat rate for a vehicle you have already claimed capital allowances on, and once you use it for a vehicle you keep using it for as long as that vehicle is in the business. For the 2025/26 return, due 31 January 2027, use 45p.

Working from home

The flat rate replaces working out a share of heating and electricity. It does not include phone or internet, so claim the business share of those separately. If you work at home for fewer than 25 hours a month, you cannot use it.

Living at your business premises

If you live at your business premises, such as a small guest house, add up the premises costs and take off a flat amount for private use: £350 a month for one person, £500 for two and £650 for three or more. What is left is your business expense.

The £1,000 trading allowance or actual expenses

Instead of claiming expenses, you can take £1,000 off your takings. If your takings are £1,000 or less, the allowance covers them all, and you may not need to tell HMRC about that income at all.

Above £1,000, pick whichever gives the lower profit:

• Takings £8,000, expenses £300: the allowance gives a profit of £7,000 against £7,700 with expenses, so the allowance wins.
• Takings £30,000, expenses £4,000: expenses give £26,000 against £29,000, so expenses win.

The allowance cannot create a loss, so if your costs are more than your takings, claim actual expenses. You cannot use it for income from a partnership, or from your employer or a company you or someone connected to you controls. The calculator above does the comparison for you.

Equipment and capital allowances

On cash basis accounting, equipment such as a laptop, printer or tools goes in as a normal expense in the year you pay for it; a car is the exception and is claimed through capital allowances. On traditional accounting, equipment is claimed through capital allowances instead. If you use the trading allowance, you cannot claim capital allowances either.

Records and Making Tax Digital

Keep receipts, invoices and bank statements for every cost, plus a mileage log if you use the flat rate, for at least 5 years after the 31 January deadline. From 6 April 2026, sole traders and landlords whose combined income from self-employment and property was over £50,000 in 2024/25 must use Making Tax Digital for Income Tax. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028, each based on an earlier year's income.

The Sole Trader Bookkeeping spreadsheet puts every cost against its HMRC category, works out mileage at the right rate and adds up your Making Tax Digital quarters.

Sources

Every rate and rule on this page was checked on GOV.UK on 8 November 2026.

• Expenses if you're self-employed
• Self-employed expenses: travel
• Self-employed expenses: clothing
• Self-employed expenses: marketing, entertainment and subscriptions
• Self-employed expenses: training courses
• Self-employed expenses: office, property and equipment
• Simplified expenses: vehicles
• Simplified expenses: working from home
• Simplified expenses: living at your business premises
• Tax-free allowances on property and trading income
• Check if you're eligible for Making Tax Digital for Income Tax
• How long to keep your records

Planning tool, not tax advice. This guide explains the general GOV.UK rules in plain English. Your own position can differ: check GOV.UK, ask HMRC, or speak to an accountant if you are unsure.