Claiming all your allowable expenses is one of the simplest ways to reduce your tax bill as a sole trader. Every £1 of allowable expenses reduces your taxable profit by £1 — saving you 20p, 40p or 45p in income tax depending on your tax band, plus National Insurance on top. Here's what you can and can't claim.
The golden rule: wholly and exclusively
HMRC allows expenses that are incurred "wholly and exclusively" for the purposes of your business. If something has a dual personal and business purpose, you can sometimes claim the business proportion — but you must be able to justify the split. The rule is applied strictly: HMRC will not allow a deduction if even part of the purpose is personal.
Office and admin costs
You can claim stationery, postage, printing, business software subscriptions, and phone and broadband bills (the business proportion if shared with personal use). If you have a business bank account, fees are fully allowable.
Travel and mileage
Business travel costs are allowable — but commuting to a permanent workplace is never a business expense. The key distinction is between travelling to a temporary workplace (allowable) and a regular, permanent base (not allowable).
For your own car, van or motorcycle, you have two options. You can use the HMRC approved mileage rates — 45p per mile for the first 10,000 business miles per year in a car or van, and 25p per mile above that — and claim nothing else for the vehicle. Alternatively, you can claim the actual running costs (fuel, insurance, servicing, depreciation) in proportion to business use. Once you choose a method for a vehicle, you must stick with it.
Train, bus and taxi fares for business trips are fully allowable, as are parking fees, road tolls, and overnight accommodation and subsistence for genuine business trips away from home.
Equipment and tools
You can claim the full cost of equipment and tools used in your business through the Annual Investment Allowance (AIA), which is currently £1 million per year — far more than most sole traders will ever spend. This means you deduct the full cost in the year of purchase rather than spreading it over several years.
If equipment has both personal and business use (a laptop you also use at weekends, for example), you can only claim the business proportion.
Clothing
This is one of the most commonly misunderstood categories. You can claim for uniforms, protective clothing (safety boots, hard hats) and costumes for performers. You cannot claim for ordinary clothing, even if you only wear it for work — HMRC's position is that everyday clothing serves a dual purpose (warmth and decency) so it does not meet the "wholly and exclusively" test.
Professional and financial costs
Accountancy fees, legal fees directly related to your business (not personal legal matters), and business insurance premiums are all allowable. Bank charges on your business account are allowable. Interest on a business loan is allowable, but capital repayments are not — you can only claim the interest element.
Professional subscriptions relevant to your trade are allowable (a membership of a professional body, for example), as are trade and technical publications directly related to your work.
Marketing and advertising
Website costs, online advertising, business cards, and entries in trade directories are all fully allowable. Client entertainment, however, is not — HMRC explicitly disallows entertaining costs, regardless of how business-focused the meal or event is.
Training and professional development
You can claim training costs that relate to your current business activity — for example, an updated software course if you're an IT contractor, or a first aid course if you're a fitness trainer. You cannot claim for training to move into an entirely new area, as that would be acquiring a new qualification rather than maintaining an existing skill.
Working from home
If you work from home, you can claim a proportion of your home costs — council tax, heating, electricity, internet — in proportion to the business use of the relevant rooms and hours. This calculation can be complex. The simpler option is HMRC's flat rate: £10 per month if you work between 25 and 50 hours per month from home, £18 per month for 51–100 hours, and £26 per month for 101 hours or more.
The £1,000 trading income allowance
If your gross trading income is £1,000 or less in a tax year, you don't need to report it to HMRC at all. If your income is above £1,000, you can choose to deduct the £1,000 allowance instead of your actual expenses — but only if this gives a better result. You can't claim both the allowance and actual expenses.
Keep your records
HMRC can ask you to prove any expense claim, so keep receipts, invoices and bank statements for at least five years after the 31 January filing deadline. Digital records kept in accounting software are perfectly acceptable — and from April 2026, Making Tax Digital will require many self-employed people to use compatible software anyway.