An allowable expense is one incurred wholly and exclusively for the purposes of your trade. That single phrase decides almost every question below — and it is stricter than most people assume, but also broader than most people claim.
1. Working from home
Two options. HMRC's simplified flat rate pays £10 a month for 25–50 hours of home working, £18 for 51–100, and £26 for 101 or more. No records beyond your hours, no arguments.
Or you apportion the real costs — rent or mortgage interest, council tax, utilities, insurance — by rooms used and time used. It is usually worth more, especially if you have a dedicated room, but it needs a calculation you can defend. Keep the workings.
2. Vehicle and travel
Simplified mileage is 45p a mile for the first 10,000 business miles in the year and 25p after that. It covers fuel, insurance, servicing and depreciation — you cannot claim those separately on top.
The alternative is claiming the business proportion of actual running costs plus capital allowances on the vehicle. Once you choose a method for a particular vehicle you must stick with it for as long as you have that vehicle.
Commuting from home to a regular place of work is not allowable. Travel to clients, suppliers and temporary sites is.
3. Equipment and tools
Laptops, cameras, tools, machinery, office furniture. Most sole traders claim these in full in the year of purchase through the Annual Investment Allowance. If you use the item personally as well, claim only the business proportion — a laptop used 70% for work is a 70% claim.
4. Software and subscriptions
Accounting software, design tools, cloud storage, domain and hosting, professional journals. All allowable where they are for the business. With MTD arriving, your bookkeeping software subscription is now a compliance cost as much as a convenience.
5. Phone and internet
Claim the business proportion. A separate business line or mobile is cleanest — claim it in full. On a personal contract, work out a fair percentage from actual use and apply it consistently. Inventing a round number that never changes is what draws attention.
6. Professional fees and insurance
Accountancy fees, legal fees for trading matters, professional indemnity and public liability insurance, and subscriptions to approved professional bodies. Legal costs relating to buying property or other capital items are not allowable against income — they affect capital gains instead.
7. Marketing and website
Advertising, social media promotion, printing, branded materials, website build and maintenance, photography. Entertaining clients is not allowable, however much business it generates. That rule is absolute and often tested.
8. Training that maintains your skills
Courses that update or keep current the skills you already use in the business are allowable. Training that gives you a genuinely new skill or qualification, to move into a different trade, generally is not. A photographer's lighting workshop qualifies; a photographer's plumbing diploma does not.
9. Stock, materials and subcontractors
Goods for resale, raw materials, direct costs of delivering your work, and payments to subcontractors. If you are in construction, CIS rules apply on top — deductions have to be handled properly on both sides.
10. Bank charges, interest and bad debts
Business account fees, card processing charges, interest on business loans and overdrafts. Bad debts are allowable once genuinely irrecoverable, but only if the income was included in your accounts in the first place — which it is under the accruals basis, and is not under the cash basis.
Clothing, unless it is protective gear or a genuine uniform. A suit for client meetings is not allowable, whatever it cost. Also: client entertaining, fines and penalties of any kind, and anything with a large personal element claimed at 100%.
Records: the part that decides whether a claim survives
You must keep records for at least five years after the 31 January filing deadline for that tax year. That means records for 2025/26 need keeping until at least 31 January 2032.
What matters in practice:
- A digital copy of the receipt, not a faded thermal slip in a drawer. Dext or your phone camera is enough.
- A separate business bank account — the single highest-value habit for a sole trader.
- A note of the business purpose for anything a stranger would not find obvious.
- A consistent method for apportioned costs, applied the same way every month.
The most expensive expenses are the ones you were entitled to and never claimed because you had no record of them.
Claiming everything you're entitled to?
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Book a free 30-minute call →This article is general guidance based on the rules as we understand them at the date above, not advice for your situation. Tax rules change and thresholds are often updated at fiscal events — check the current position on GOV.UK or speak to us before acting on anything here.