Complete 2026 Guide
As a self-employed individual or sole trader, one of the most important aspects of your tax return is claiming allowable expenses. These are the costs you incur to run your business that you can deduct from your turnover, reducing your taxable profit and ultimately your tax bill.
This comprehensive guide explains everything you need to know about allowable expenses, from the fundamental rules to a detailed breakdown of what you can claim.
The Golden Rule: ‘Wholly and Exclusively’
The cornerstone of claiming business expenses is HMRC’s ‘wholly and exclusively’ rule. To be tax-deductible, an expense must be incurred wholly and exclusively for the purpose of your trade, profession, or vocation.
- Wholly: The expense must be for the business and nothing else.
- Exclusively: The expense must be for the business alone.
If an expense has a dual purpose (business and personal), you can only claim the business portion. For example, if you use your mobile phone 70% for business and 30% for personal calls, you can only claim 70% of the bill as an allowable expense.
Important: HMRC has the power to disallow expenses that are not wholly and exclusively for the business. This is a common area of challenge, so it’s crucial to understand the rules and keep good records.
What Expenses Can You Claim?
Here is a comprehensive breakdown of the most common allowable expenses for self-employed individuals in the UK.
Office and Home Costs
If you work from home or have an office, you can claim a portion of your costs.
- Home Office: Flat rate method (£26-£40 per month) or actual cost method (proportion of rent, mortgage interest, council tax, utilities). Home Office Expenses for Self-Employed →
- Office Rent and Rates: Rent, business rates, and service charges are fully deductible.
Vehicle and Travel Costs
Business travel expenses are a significant deduction for many self-employed individuals.
- Mileage Claims: 45p per mile for first 10,000 miles, 25p per mile after. Mileage Claims for Self-Employed →
- Actual Car Costs: Fuel, insurance, repairs, servicing, and depreciation.
- Public Transport: Train, bus, and plane fares for business travel.
- Taxis and Ubers: Deductible if used for business purposes.
Technology and Software
In today’s digital world, these expenses are essential.
- Laptops, Computers, and Tablets: Capital assets claimed via Annual Investment Allowance. Equipment Purchases & Capital Allowances →
- Software Subscriptions: Accounting software, design tools, industry-specific software.
- Website and Hosting: Costs for building, hosting, and maintaining your business website.
- Phone and Internet: Proportion of bills used for business.
Marketing and Advertising
Any costs incurred to promote your business are tax-deductible.
- Advertising: Online ads, print ads, flyers, and business cards.
- Website Design and SEO: Professional design and search engine optimization services.
- Public Relations: Press releases, PR agencies, and networking events.
Professional Fees and Subscriptions
- Accountant Fees: Fees for preparing your accounts and tax return are fully deductible.
- Legal Fees: Fees for legal advice related to your business.
- Professional Subscriptions: Membership fees for professional bodies.
Insurance Costs
- Business Insurance: Professional indemnity, public liability, employer’s liability, and business interruption insurance. Insurance Costs for Self-Employed →
Finance and Banking
- Bank Charges: Charges on your business account.
- Interest on Business Loans: Interest portion of business loan repayments.
Training and Development
- Courses and Workshops: Costs for training that improve your skills in your current trade are deductible. Costs for courses teaching a completely new skill are not.
Staff Costs
- Salaries and Wages: Staff salaries, wages, and pension contributions.
- Training: Staff training costs are deductible.
What Cannot Be Claimed?
It’s equally important to know what you cannot claim:
- Business Start-up Costs: Unless you have started trading, these costs are not yet allowable.
- Drawings: Money taken from your business for personal use is not a deductible expense.
- Entertainment: Costs for entertaining clients are generally not deductible.
- Fines and Penalties: Fines and penalties, including parking fines or HMRC penalties, are not tax-deductible.
- Personal Costs: Any expense that is personal in nature, such as your gym membership or personal clothing.
Record Keeping and Evidence
To successfully claim expenses, you must keep good records. HMRC expects you to keep:
- Receipts: For every expense over £10.
- Invoices: For sales and purchases.
- Bank Statements: To support your records.
- Mileage Logs: If claiming mileage.
You must keep these records for at least 5 years from the 31 January deadline of the tax year they relate to. HMRC can ask to see them during a compliance check. For more on this, see our guide: Record Keeping for Self-Employed.
How We Can Help
Maximising your allowable expenses is one of the most effective ways to reduce your tax bill. But the rules can be complex, and many self-employed individuals miss out on legitimate claims. Our team of ACCA-qualified accountants can review your expenses, identify every possible deduction, and ensure your tax return is accurate and compliant. We also offer specialist advice on Tax Planning Tips for Self-Employed.
Maximise your tax deductions. Let us handle your Self Assessment.
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