What can I claim as a sole trader? Allowable expenses explained
30-second answer
If you're a sole trader, you can deduct the costs of running your business from your income before tax is worked out. HMRC calls these allowable expenses.
There's one rule underneath all of it: the cost has to be incurred wholly and exclusively for your business. If something is part business and part personal, you claim the business share and leave the rest.
The rules for working out what you can claim have not changed under Making Tax Digital. What has changed is how often you report the figures. If your business income is under £90,000, you can report your expenses as a single total in each quarterly update rather than splitting them into categories.
This guide is most relevant if you are:
- A sole trader working out what you can and can't put through the business
- Someone filling in a spreadsheet and unsure whether a cost belongs in the expenses total
- Wondering whether Making Tax Digital changes what counts as an expense
This guide covers
This guide is provided for general information only and is based on HMRC guidance available at the time of writing. It isn't tax advice, and it can't take account of your particular circumstances.
A cost is allowable if you incurred it wholly and exclusively for the purposes of your trade. That single sentence is doing all the work, and almost every tricky question comes back to it.
Two things follow from it.
- Purpose matters more than the item. The same laptop can be an allowable expense for one person and not for another, depending on why it was bought and how it's used
- Mixed use gets split. If a cost is partly business and partly personal, you claim the business proportion using a reasonable method, and you keep a note of how you worked it out
HMRC gives a plain example. If your phone bills for the year come to £200 and £70 of that is business calls, you claim £70.
Money you take out of the business for yourself is never an expense. That's drawings, not a cost of trading, and it doesn't reduce your profit.
In short
The test isn't "could I argue this is business?" It's "would I have paid this if I didn't run the business?" If the honest answer is yes, it probably isn't allowable, or at least not all of it.
HMRC groups allowable expenses into broad categories. Most sole traders will recognise several of these straight away:
- Office costs, such as stationery, postage, printing and phone bills
- Business premises costs, such as rent, heating, lighting, water and business rates
- Travel costs, such as fuel, parking, train and bus fares, and hire charges
- Clothing, but only uniforms, protective clothing and costumes for actors and entertainers
- Staff costs, such as wages, employer National Insurance and subcontractor payments
- Stock and raw materials, including things you buy to sell on and direct costs of producing goods
- Financial costs, such as bank charges, business insurance, interest on business loans and accountancy fees
- Advertising and marketing, such as newspaper and directory adverts, mailshots, free samples and website costs
- Training courses related to your business, including refresher courses
A few that people often miss but are perfectly ordinary claims: professional indemnity and public liability insurance, trade body or professional membership, trade journals, software subscriptions, and the fees your card or payment provider takes out of what customers pay you.
Costs you paid before you started trading can also count. If they would have been allowable once the business was running, and you paid them in the seven years before you started, they're generally treated as if you'd paid them on your first day of trading.
This is the shorter list, and it's worth knowing because these are the ones that come up in HMRC enquiries.
- Entertaining clients, suppliers or customers. Taking a customer for lunch is not allowable, however useful the meeting was. Event hospitality is treated the same way
- Most gifts to customers and contacts
- Everyday clothing, even if you only wear it for work and even if you bought it specially
- Gym membership, payments to political parties, and charitable donations
- Fines and penalties for breaking the law, including parking tickets picked up while working
- Your own wages or drawings. A sole trader can't employ themselves
- The private share of anything mixed. Your whole broadband bill, your whole car, your whole phone. Only the business part counts
One thing overrides that entire list. If you use the £1,000 tax-free trading allowance, you can't claim any expenses at all, and you can't claim capital allowances either. It's one or the other. So if your business costs come to more than £1,000, claiming actual expenses will usually leave you better off.
There are two ways to do this, and you can pick whichever gives the better result.
The flat rate. If you work at home for at least 25 hours a month, you can claim a fixed monthly amount instead of working anything out:
| Hours worked at home per month | Flat rate per month |
|---|---|
| 25 to 50 | £10 |
| 51 to 100 | £18 |
| 101 or more | £26 |
The flat rate covers things like heat, light and power. It does not cover your phone or internet, so you claim the business share of those separately by working out the actual cost.
A share of your actual bills. The alternative is to work out a reasonable proportion of your heating, electricity, Council Tax, rent or mortgage interest, and internet and phone use. HMRC's own example splits by rooms and then by days: a £1,120 electricity bill in a four-room house with one room used only as an office gives £280, and if you only worked from home one day a week, £40.
The flat rate is quicker. The actual-cost method is often worth more, particularly if you use a room a lot or your bills are high. HMRC has a simplified expenses checker that compares the two, and it's worth five minutes once a year.
Again there are two routes, and this is one of the bigger decisions you'll make about your expenses.
Flat rate mileage. You claim a set amount per business mile and forget about fuel, insurance, servicing, repairs and the cost of the vehicle itself. These rates changed at the start of the 2026/27 tax year, so older guidance you find online may still show the previous figures:
| Vehicle | 2026/27 rate | Before 6 April 2026 |
|---|---|---|
| Cars and goods vehicles, first 10,000 miles | 55p per mile | 45p per mile |
| Cars and goods vehicles, after 10,000 miles | 25p per mile | 25p per mile |
| Motorcycles | 24p per mile | 24p per mile |
Actual costs. The alternative is to claim the business proportion of everything the vehicle actually costs you, and claim capital allowances on the vehicle itself.
Three things to know before you choose:
- You can't use mileage rates for a vehicle you've already claimed capital allowances on, or already put through as an expense
- Once you use flat rates for a particular vehicle, you have to keep using them for as long as that vehicle is in the business
- Parking, and other travel like train fares, are claimed on top of your mileage. Parking fines are not
Either way, keep a mileage log. It's the single record HMRC is most likely to ask for, and it's the one people are most likely not to have.
Laptops, tools, machinery and vans are treated differently from day-to-day running costs, and how they're treated depends on which accounting method you use.
If you use the cash basis, which is now the default, you claim most equipment as an ordinary allowable expense in the period you paid for it. Cars are the exception: they get capital allowances instead.
If you use traditional accounting, equipment, machinery and business vehicles go through capital allowances rather than being claimed as running costs.
If an item has some private use, you reduce the claim to reflect the business share. A laptop used four days a week for work and evenings for everything else is not a full claim.
You can't claim capital allowances at all if you're using the £1,000 trading allowance.
These four come up more than anything else in support questions, and all four are more nuanced than the internet suggests.
Clothing
You can claim uniforms, protective clothing you need for the work, and costumes if you're an actor or entertainer. You cannot claim everyday clothing, even if you only wear it for work. A branded polo shirt or steel toe-capped boots, yes. A suit for client meetings, no.
Food and drink
Your ordinary lunch isn't allowable, because you'd have to eat whether you were working or not. The reasonable cost of food and drink can be claimed when you're travelling on business away from your normal pattern of work, for example an overnight stay or a trip somewhere you don't usually go. If you're buying a sandwich on the same round you do every week, that's not it.
Training
HMRC's position is more generous than many people assume. You can claim training that improves skills you already use in the business, keeps you up to date with technology in your industry, helps you respond to changes in your industry, or builds skills that support the business, including administrative ones like bookkeeping. You cannot claim training that helps you start a new business or move into an unrelated area.
Your phone and broadband
Claim the business share. If the contract is in your own name and you use it for both, work out a sensible split and keep a note of your reasoning. If you have a separate business line or handset used only for the business, that's a full claim.
This decides when a cost counts, which matters more than people expect when you're reporting four times a year.
Cash basis records money when it actually moves. You count income when you're paid and expenses when you pay them. It's now the default for sole traders, so if you've never made a choice, this is the one you're on.
Traditional accounting, also called the accruals basis, records income when you invoice it and costs when you incur them, regardless of when the money moves. You have to opt out of the cash basis to use it.
Two older restrictions on the cash basis have gone. There's no longer a turnover limit for using it, and the previous £500 cap on deducting interest and finance costs has been removed, so business loan interest can now be claimed in full where it's incurred wholly and exclusively for the trade.
For most sole traders keeping a spreadsheet, the cash basis is simpler and lines up neatly with a bank statement. If you invoice a lot and get paid slowly, or you carry stock, it's worth a conversation with an adviser before settling.
Worth knowing if you're choosing software: suiteSheets is built for the cash basis. If you've opted out and use traditional accounting, you'll need software that supports it.
Worth saying clearly, because it's the most common worry: Making Tax Digital hasn't changed a single rule about what counts as an allowable expense. Everything above applies exactly as it did before. What's changed is the reporting rhythm.
There are two ways expenses can be reported in a quarterly update.
- Consolidated expenses. One total figure for all your expenses. Available if the annual turnover (sales) for that business, or the rents received before expenses for a property business, is below £90,000
- Categorised expenses. A breakdown across HMRC's expense categories, which is what you use if that business is at or above £90,000
The £90,000 test is applied to each income source separately rather than to everything added together. So if you run a trade turning over £70,000 and also let a property bringing in £40,000, each one is looked at on its own and both can use a single total, even though the combined figure is well over the threshold.
Two more things that take the pressure off:
- Quarterly updates are cumulative. Each one carries your running totals from the start of the tax year, so a correction in one quarter is simply picked up by the next
- They aren't a tax calculation. Your final position, and any adjustments, are settled at the end of year tax return
That last point matters for expenses in particular. If you're unsure how to split a mixed cost, or you're waiting on a figure, you don't need to hold up a quarterly update over it.
Under Making Tax Digital you need to keep digital records of your income and expenses. A spreadsheet counts as a digital record, so if you already keep one, you're most of the way there.
A few habits that make the difference:
- Record costs as you go rather than in a scramble before each deadline
- Keep the underlying receipts and invoices. Photographs and scans are fine
- Write down how you worked out any split, such as the room count for your home office or the percentage for your phone. The number is easy to defend later, the reasoning is easy to forget
- Keep a running mileage log with dates, destinations and purpose
Self-employed records should generally be kept for at least five years after the 31 January submission deadline for the relevant tax year.
suiteSheets is HMRC-recognised bridging software. It takes the totals from the spreadsheet you already keep and sends them to HMRC as your quarterly update.
We don't tell you what to claim, and we won't pretend otherwise. What we do is make the reporting side straightforward once you've decided:
- Keep your income and expenses in our free template, or add our Overview sheet to the spreadsheet you already use
- Upload it to suiteSheets
- Check the figures and submit
Two things to check before you sign up, because we'd rather you knew now than at the deadline:
- suiteSheets uses consolidated expenses, so it suits businesses with gross income under £90,000. Above that, you'll need software that reports the full category breakdown for that income source
- suiteSheets supports the cash basis, which is the default for sole traders and what most people using a spreadsheet are already on. If you've opted out and use traditional accounting, we're not the right fit
It's £20 per tax year for your first income source, covering all of that year's quarterly updates, with unlimited resubmissions included.
You can claim the business proportion. HMRC's own example is a £200 annual bill split £130 personal and £70 business, giving a £70 claim. If a phone or line is used only for the business, you can claim it in full.
Yes. Either use the flat rate of £10, £18 or £26 a month depending on how many hours you work at home, available if you work at home for 25 hours a month or more, or work out a reasonable share of your actual bills. The flat rate doesn't cover phone or internet, which you claim separately.
Only if they're a uniform, protective clothing you need for the work, or a costume if you're an actor or entertainer. Everyday clothing isn't allowable even if you wear it only for work.
Not your ordinary daily lunch, because you'd need to eat regardless. The reasonable cost of food and drink can be claimed when you're travelling on business outside your normal pattern of work, such as an overnight trip.
For 2026/27 the simplified expenses rate is 55p a mile for the first 10,000 business miles in cars and goods vehicles, then 25p a mile, and 24p a mile for motorcycles. The first-10,000-miles rate was 45p before 6 April 2026, so check the year before using a figure you've found elsewhere.
Under the cash basis, which is the default for sole traders, most equipment is claimed as an ordinary allowable expense when you pay for it. Cars are the exception and go through capital allowances. Under traditional accounting, equipment and machinery go through capital allowances instead. Reduce the claim for any private use.
Not if the gross income for that business is below £90,000. You can report one consolidated expenses total instead. The £90,000 test is applied to each income source separately, not to your income sources added together.
No. The rules for working out allowable expenses are exactly as they were. Making Tax Digital changes how often you report your figures and requires records to be kept digitally, but it doesn't change what counts as a business cost.
This guide is provided for general information only. suiteSheets is software for spreadsheet users. We do not provide tax advice, accounting advice or legal advice. Expenses depend heavily on your own circumstances, and if you're unsure about a particular cost, contact HMRC or a qualified adviser.
The wholly and exclusively test comes from section 34 of the Income Tax (Trading and Other Income) Act 2005. HMRC's detailed working guidance sits in the Business Income Manual. The pages below are the everyday versions.
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