What Expenses Can I Claim as a Sole Trader? UK Tax Guide 2026

One of the most significant advantages of self-employment is the ability to deduct legitimate business expenses from your income before calculating the tax you owe. Every pound of allowable expense reduces your taxable profit by a pound — saving you tax at your marginal rate (20%, 40%, or 45%).

Yet many sole traders consistently under-claim, either because they are unsure what qualifies or because they have not kept adequate records. This guide covers every main expense category, the HMRC rules that apply, and how to stay compliant.

The Golden Rule: "Wholly and Exclusively"

HMRC allows expenses that are incurred wholly and exclusively for the purpose of your business. This is the test that determines whether any cost is deductible. If an expense has a dual purpose — partly personal, partly business — you can usually only claim the business portion, provided that portion is clearly identifiable.

Allowable Expense Categories

Office and Admin Costs

Any cost directly related to running your business from an office counts: stationery, postage, printer ink, subscriptions to business software (including Filabl), internet bills (business portion), and telephone costs (business portion). If you work entirely from a dedicated office premises, the full rent, rates, and utilities are deductible.

Travel and Vehicles

Business travel — journeys made for work purposes, not commuting to a fixed place of work — is fully deductible. You have two options for vehicle costs:

• Actual costs method: Claim the actual expenses of running the vehicle (fuel, insurance, servicing, repairs, road tax) in proportion to business use, plus capital allowances on the purchase price.
• Simplified mileage rate: Claim 45p per mile for the first 10,000 business miles in the tax year, and 25p per mile thereafter (for cars). This rate covers all running costs including depreciation — you cannot also claim actual fuel and insurance on top.

Public transport, train fares, taxis, and flights for business trips are fully deductible. Overnight accommodation and subsistence on genuine business trips is also allowable, provided the amounts are reasonable.

Equipment and Capital Allowances

When you buy an item that lasts more than one year — a laptop, camera, tools, machinery — it is treated as a capital asset rather than a day-to-day expense. You claim relief through Capital Allowances rather than as a direct expense.

The Annual Investment Allowance (AIA) allows you to deduct the full cost of most business equipment in the year of purchase, up to £1 million per year. In practice this means almost all sole trader equipment purchases qualify for 100% deduction in year one.

Clothing

Clothing is one of the most commonly misunderstood categories. HMRC will only allow clothing that is either a uniform (branded workwear that identifies your business) or protective clothing (PPE, safety boots, hard hats). Ordinary business attire — a suit you wear to client meetings — is not deductible because it can also be worn outside work.

Marketing and Advertising

Website design and hosting, domain registration, online advertising (Google Ads, Meta), trade directory listings, business cards, brochures, and promotional items given to customers are all allowable. Business entertaining — taking clients to lunch or events — is specifically disallowed by HMRC and cannot be claimed.

Professional Fees

Accountancy fees, legal fees relating to business matters (not personal legal disputes), trade and professional association memberships directly relevant to your work, and business insurance premiums are all allowable. Professional indemnity insurance, public liability insurance, and employer's liability insurance are typical examples.

Stock and Materials

If you sell physical goods, the cost of purchasing stock or raw materials is a direct business expense and is fully deductible. Only the cost of goods actually sold in the tax year is deductible — the value of unsold stock at year end is carried forward to the next year.

Home Office: Simplified Expenses vs Actual Costs

Working from home is extremely common among sole traders, and HMRC offers two methods for claiming the associated costs.

Simplified flat-rate method

HMRC's simplified expenses scheme allows you to claim a fixed monthly amount based on the number of hours you work from home per month:

• 25–50 hours per month: £10/month
• 51–100 hours per month: £18/month
• 101+ hours per month: £26/month

This method is straightforward and requires no detailed calculations, but it often under-represents the true costs for those working full-time from home.

Actual costs method

You can instead calculate the business proportion of your home running costs — mortgage interest or rent, council tax, utilities, broadband — based on the number of rooms used for business or the proportion of floor space. This often yields a larger deduction but requires more record-keeping.

Expenses You Cannot Claim

• Client entertaining and hospitality
• Fines and penalties (including HMRC penalties)
• Clothing suitable for everyday wear
• Personal travel (commuting from home to a fixed place of work)
• Payments to yourself (drawings are not a business expense)
• Capital repayments on business loans (only the interest is allowable)

Record-Keeping: What You Must Keep

HMRC requires you to keep records that support your Self Assessment return for at least five years after the relevant filing deadline. This means:

• Receipts or invoices for every business expense you claim
• Bank statements showing business income and outgoings
• Mileage logs if you claim the mileage rate (date, destination, purpose, miles)
• Evidence of the business proportion for any split-use expenses

Digital records are fully acceptable — photograph your paper receipts and store them in a dedicated folder. If you are subject to MTD for Income Tax Self Assessment (ITSA), digital record-keeping becomes mandatory; the rules are being phased in from April 2026 for those earning over £50,000.

Simplified Expenses: Who Should Use Them?

HMRC's simplified expenses scheme (covering vehicles, home office, and live-in business premises) is designed to reduce the administrative burden for sole traders. It is most beneficial for those who:

• Drive a modest amount for business and want to avoid keeping detailed fuel logs
• Work from home for a limited number of hours per week
• Want a straightforward, audit-proof basis for their return

If you use your vehicle heavily for business or work full-time from home, calculating actual costs will almost always produce a larger deduction.