Sole Trader Expenses Explained: What You Can and Can’t Claim

/Published:3rd December 2025/inExpenses, Self Employed
Accounting Wise - your quick guide to essential sole trader expenses

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One of the most effective ways to reduce your tax bill as a sole trader in the UK is by claiming allowable business expenses. These are the costs you incur “wholly and exclusively” for the purpose of running your business. By deducting them from your income, you reduce your taxable profit – which directly lowers the amount of Income Tax and National Insurance you pay.

Despite this, many sole traders still struggle to understand exactly what they can and cannot claim. Some underclaim and miss out on valuable tax savings, while others mistakenly include disallowable costs and risk penalties from HMRC.

This guide breaks down the rules on sole trader expenses in clear, practical terms, backed by HMRC guidance and years of experience supporting UK freelancers, contractors and small business owners. You’ll find a detailed list of common allowable expenses, examples of what HMRC will and won’t accept, and straightforward steps for staying compliant.

Expert Tip: HMRC’s legislation and guidance on self-employed expenses (including the Business Income Manual) is comprehensive but often difficult to interpret. This guide translates those rules into plain English so you can apply them with confidence.

For deeper guidance across key areas of self-employed tax, explore our related resources:

By the end of this article, you’ll understand exactly which expenses you can claim as a sole trader, which to avoid, and how to keep your records HMRC-compliant while maximising your tax efficiency.

Note: Information in this guide is based on current HMRC rules for 2025/26. Tax legislation can change, so always check the latest guidance or speak with a qualified accountant if you’re unsure.

What Are Sole Trader Expenses?

As a sole trader, business expenses are the costs you incur “wholly and exclusively” for the purpose of running your business. HMRC allows you to deduct these expenses from your total income before calculating your taxable profit. In practice, this means that every allowable expense you claim reduces the amount of profit that’s subject to Income Tax and National Insurance.

Example calculation:

  • Turnover (total sales): £40,000
  • Allowable expenses: £8,000
  • Taxable profit = £32,000

In this example, you only pay tax and National Insurance on £32,000, not the full £40,000. This simple principle is why good record-keeping and a proper understanding of allowable expenses can make a big difference to your tax bill.

Important: Only costs that genuinely relate to your business qualify. If an item is used for both business and personal purposes (such as your mobile phone, laptop, or home broadband), you can usually claim a proportion that reflects your business use. HMRC expects this split to be fair and reasonable.

HMRC’s Definition of Allowable Expenses

HMRC defines allowable expenses as costs that are “wholly and exclusively” incurred for business. In practical terms, this means:

  • The cost must be directly related to your business activities.
  • You cannot claim anything that has a purely personal element.
  • If an expense has mixed use (e.g., working from home), you must calculate a reasonable business proportion.

For full technical detail, you can refer to HMRC’s official guidance: Expenses if you’re self-employed.

Why This Matters

Understanding and correctly claiming your business expenses helps you:

  • Reduce your tax bill by ensuring you never pay more tax than necessary.
  • Maintain accurate, compliant records – which reduces the risk of an HMRC enquiry.
  • Free up more cash to reinvest into your business.

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Sole Trader Allowable Expenses List

Below is a detailed breakdown of the most common allowable expenses for sole traders. These are the categories HMRC usually accepts, as long as the costs are incurred wholly and exclusively for business purposes. Where expenses have mixed personal and business use, you must apply a fair and reasonable split.

Office Costs

Running an office – whether you rent a dedicated workspace or work from a home office – comes with a range of ongoing costs. Many of these are allowable expenses as long as they are used wholly and exclusively for your business.

Common office-related expenses you can claim include:

  • Rent for business premises such as an office, studio or workshop
  • Utility bills including electricity, gas, water and (where applicable) business rates
  • Office supplies such as stationery, postage, printer ink and other day-to-day consumables
  • Phone and internet costs – claim the business portion only if the service is also used personally

Important: If you work from home, some of these costs may need to be apportioned. You can either calculate an accurate percentage or use HMRC’s simplified flat-rate method: Simplified Expenses for Home Working.

Tip: Keep receipts, bills and digital records for all office-related purchases. HMRC may ask for evidence if your Self Assessment return is reviewed, and accurate documentation helps demonstrate that your claims are valid.

Travel Expenses

If you travel for business purposes (excluding your normal commute to and from a regular workplace), you can claim a range of travel-related costs as allowable expenses. HMRC accepts these expenses when the journey is undertaken wholly and exclusively for business.

Allowable travel expenses include:

  • Fuel, parking and public transport for business journeys
  • Hotel stays and meals when you are required to stay away overnight for work
  • Mileage allowance for using your personal vehicle for business travel:
    • 45p per mile for the first 10,000 business miles in a tax year
    • 25p per mile for every mile thereafter

Important: You cannot claim for ordinary commuting, travelling between your home and your usual place of work is never allowable.

HMRC’s full guidance on mileage and travel expenses is available here: HMRC Mileage & Travel Rules.

Tip: Keep a mileage log or use an app to record every business trip. HMRC may request evidence, and accurate logs make your claims easier to justify.

Clothing

Clothing is only an allowable business expense in very limited circumstances. HMRC is strict in this area, so it’s important to understand what qualifies and what doesn’t.

You can claim the cost of:

  • Protective clothing required for your work (e.g., hi-vis jackets, safety boots, helmets, gloves)
  • Uniforms or branded workwear that clearly identifies your business
  • Costumes required for your profession (actors, performers, entertainers)

Not allowable: Everyday clothing – even if you only wear it for work. HMRC views ordinary clothing as having a “dual purpose” (personal and professional), which means it cannot be claimed.

HMRC guidance on clothing expenses: Expenses If You’re Self-Employed.

Staff Costs

If you employ staff or outsource work to subcontractors, many of the associated costs are allowable expenses. These must relate directly to your business activities and be correctly recorded through payroll or contractor agreements.

You can claim for:

  • Salaries and wages paid to employees
  • Subcontractor costs – including those reported under the Construction Industry Scheme (CIS), where applicable
  • Employer’s National Insurance contributions on employee wages
  • Employer pension contributions made through an approved workplace pension scheme

Important: Payments to subcontractors must comply with HMRC rules on employment status. Misclassifying workers can lead to penalties, so ensure your records and contracts are accurate.

HMRC employment guidance: Employment Status and Worker Classification.

Marketing and Advertising

Marketing and advertising costs are generally fully allowable expenses, as they are directly linked to promoting your business and generating income. HMRC recognises these costs as essential for growth, visibility and client acquisition.

You can claim for:

  • Website design, development, hosting and domain names – including ongoing maintenance and updates
  • Online advertising such as Google Ads, Meta (Facebook/Instagram) ads and LinkedIn campaigns
  • Printed marketing materials such as leaflets, posters, brochures and banners
  • Business cards, trade fairs and networking events used to promote your services

Important: Costs must relate directly to business promotion. Personal brand building or hobby-related promotions cannot be claimed.

Note: Entertainment costs,  such as meals, gifts or hospitality for clients, are not allowable for sole traders. For more information, see our section on expenses you cannot claim.

HMRC marketing guidance is included within the self-employed expenses rules: Allowable Expenses for the Self-Employed.

Training and Professional Fees

Investing in your professional development and staying compliant with industry standards can qualify as allowable expenses, provided the costs relate directly to your existing business activities.

You can claim for:

  • Training courses that update or improve skills already used in your current trade or profession
  • Accountancy and legal fees relating to your business, including preparing your Self Assessment and financial statements
  • Professional memberships and subscriptions to approved bodies (e.g., ICAEW, ACCA, CIPD, FSB) that support your work

Not allowable: Training for new skills that would move you into a different line of business. HMRC classes this as capital in nature rather than a running cost.

HMRC training guidance: HMRC: Training Courses – Allowable or Not?.

Equipment and Tools

Equipment, machinery and tools that you use in your business are generally allowable expenses. These cover items essential to carrying out your work, whether you’re office-based, trade-based or working in a specialist profession.

You can claim for:

  • Computers, laptops, tablets and software licences used for your business
  • Machinery, tools and specialist equipment needed to perform your trade
  • Repairs, maintenance and replacements of equipment already in use

Pro Tip: Larger, longer-lasting purchases (such as computers, cameras, machinery or professional tools) may need to be claimed as capital allowances rather than everyday expenses. Most small businesses can use the Annual Investment Allowance (AIA) to deduct the full cost in the year of purchase.

For more detail, see our guide on Capital Allowances or refer to HMRC guidance: HMRC: Capital Allowances.

Business Vehicle Costs

If you use a vehicle for business purposes, you can claim either the HMRC mileage allowance (the simplified method) or the actual running costs of the vehicle. You must choose one method per vehicle and stick to it for the life of that vehicle.

If claiming the actual running costs, allowable expenses include:

  • Insurance, MOT, servicing and repairs
  • Fuel (only if you are not using the mileage method)
  • Lease or hire costs for a business vehicle
  • Breakdown cover such as AA, RAC or Green Flag memberships

Important: If the vehicle has both business and personal use, you must apportion the costs fairly – HMRC will not accept 100% business use unless you can prove it.

For mileage rates and travel rules, see: HMRC Simplified Expenses (Mileage).

Home Office Costs

If you run your business from home, you can claim a proportion of your household running costs as allowable expenses. HMRC allows two approved methods for calculating this: detailed apportionment or the simplified flat-rate system.

You can choose to:

  • Apportion actual household costs – including heating, electricity, council tax, mortgage interest or rent – based on:
    • The number of rooms used for business
    • The amount of time each room is used for work

    This method is more accurate but requires good record-keeping.

  • Use HMRC’s simplified flat-rate method based on the number of hours you work from home each month. This is easier, especially for new sole traders or those with fluctuating usage.

HMRC’s tool for calculating simplified expenses is available here: HMRC Simplified Expenses Checker.

Tip: If you use a room exclusively for business (e.g., a dedicated office), be cautious – claiming 100% business use may affect Capital Gains Tax when you sell your home. A mixed-use approach avoids this.

Financial Costs

Managing your business finances comes with a range of allowable expenses that HMRC accepts, provided they relate directly to running your business.

You can claim for:

  • Bank charges and business account fees – including monthly account charges and payment processing fees
  • Interest on business loans or overdrafts used for business purposes
  • Insurance premiums such as professional indemnity, public liability, employers’ liability or business interruption insurance

Important: Personal banking fees or interest on personal loans cannot be claimed unless the funds were wholly and exclusively used for the business.

Standout Tip

The golden rule is to maintain accurate, detailed financial records. Using digital accounting tools like Xero, QuickBooks, FreeAgent or our own Balance App makes it far easier to:

  • Track expenses in real time
  • Store receipts digitally
  • Stay compliant with Making Tax Digital (MTD)
  • Avoid missed deductions and HMRC penalties

Good bookkeeping isn’t just about compliance – it directly improves the accuracy of your tax return and ensures you never pay more tax than necessary.

Non-Allowable Sole Trader Expenses

Not every cost you pay out as a sole trader will qualify as an allowable business expense. HMRC takes a strict approach, and some costs that may feel business-related are specifically disallowed. Including these in your Self Assessment may increase the risk of an enquiry and could lead to penalties, so it’s essential to understand where HMRC draws the line.

Common Non-Allowable Expenses

  • Everyday clothing – Normal clothing such as suits, shoes and casual wear is not deductible, even if you only wear it for work. HMRC only permits:
    • Protective clothing (e.g., steel-toe boots, overalls, hard hats, hi-vis jackets)
    • Uniforms or branded workwear displaying a permanent and visible company logo

    HMRC clothing guidance: HMRC Allowable & Non-Allowable Expenses

  • Personal expenses – Anything that is not wholly and exclusively for business use cannot be claimed. Examples include:
    • Personal mobile phone use (unless proportioned correctly)
    • Gym memberships
    • Home groceries or household items

    Mixed-use items such as mobile phones and broadband must be apportioned. Personal use is never deductible.

  • Client entertainment – Meals, gifts and hospitality for clients, prospects or suppliers are not tax deductible, regardless of business purpose. This includes:
    • Taking a client out for lunch
    • Buying event or hospitality tickets
    • Sending wine, hampers or personal gifts

    You can still pay for these activities, but they cannot reduce your taxable profit.

  • Fines and penalties – HMRC does not allow deductions for:
    • Late filing penalties
    • Late payment interest
    • Parking fines and motoring penalties

    These are treated as personal responsibilities, even if incurred during business activities.

Why These Costs Are Excluded

These expenses are disallowed because they fall outside HMRC’s “wholly and exclusively” rule or provide a personal benefit. If there is any personal element at all, HMRC will not permit them as deductions against your taxable profit.

Pro Tip

If you’re ever unsure whether an expense is deductible, ask yourself:

  • “Would I have bought this item if I weren’t running my business?”

If the answer is yes, it’s usually a personal cost and therefore not allowable.

For more detail, see HMRC’s official guidance: Expenses You Cannot Claim for Self-Employment.

Why Getting Sole Trader Expenses Right Matters

Managing your expenses correctly is one of the most important parts of running your business as a sole trader. Done properly, it reduces your tax bill and keeps you compliant. Get it wrong, and the consequences can be costly.

  • Claim too little, and you overpay tax.
    Many sole traders underclaim because they’re unsure what qualifies. Missing common deductions – such as business mileage, equipment costs or home office expenses – can mean losing out on hundreds of pounds in legitimate tax relief every year.
  • Claim incorrectly, and you risk HMRC penalties.
    HMRC can review your Self Assessment return at any time. If they find you’ve claimed expenses you’re not entitled to – whether through error or misunderstanding – you may face backdated tax, interest and penalties. In more serious cases, HMRC may extend the review across several tax years.

The Role of an Accountant

Working with an accountant ensures your expense claims are accurate, compliant and complete. A qualified accountant will:

  • Identify all allowable deductions you can claim – even those many sole traders overlook
  • Ensure expenses are correctly categorised and recorded according to HMRC requirements
  • Help you stay compliant with Making Tax Digital and your ongoing reporting obligations
  • Reduce the risk of an HMRC enquiry by keeping your records accurate and audit-ready
  • Save you valuable time so you can focus on running your business

At Accounting Wise, we help sole traders and freelancers maximise their tax efficiency, maintain clean digital records and stay fully compliant with HMRC rules – all year round.

Conclusion

Understanding what you can claim as a sole trader has a direct impact on your profitability. When you know which allowable expenses reduce your taxable profit and you keep clear, accurate records – you’ll stay compliant with HMRC and avoid paying more tax than necessary.

Getting your expenses right isn’t just about saving money. It’s about running a financially healthy business, reducing stress at tax time and making confident decisions throughout the year.

If you’re unsure whether you’re claiming everything you’re entitled to or you want professional support managing your accounts – Accounting Wise can help. We support sole traders across the UK with clear guidance, compliant bookkeeping and tailored tax advice.

Speak to Accounting Wise today to make sure you’re not paying more tax than you should.

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Sole Trader Expenses Guide FAQ

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Allowable expenses are costs that are wholly and exclusively for business use – such as travel, equipment, office supplies, marketing, and professional fees. Anything with personal use must be apportioned.

Yes. You can claim a proportion of household bills such as heating, electricity, broadband and rent/mortgage interest, or use HMRC’s simplified flat-rate method.

You can claim the business-use portion of your mobile bill. If the phone is used for both personal and business reasons, you must calculate a reasonable split.

Only when travelling for business and staying overnight. Everyday lunches, coffees or food while working locally are not allowable.

Only specific types count: protective clothing (hi-vis, safety boots, PPE), branded uniforms, or costumes for performers. Normal clothing is disallowed.

You can claim either HMRC mileage rates or actual vehicle running costs (insurance, fuel, servicing, repairs, breakdown cover). You must choose one method per vehicle.

Yes. Website hosting, design, domain names, online ads, print marketing and networking events are all allowable.

Training that improves or maintains skills for your current business is allowable. Training for new skills or a new career is not.

Yes. HMRC can ask for evidence during a compliance check. Digital copies are fine, and bookkeeping software makes this easy.

HMRC may issue backdated tax bills, interest and penalties. In more serious cases, they may conduct a review covering several tax years.

Glossary of Key Sole Trader Expense Terms

Allowable Expenses – Costs you can deduct from your business income to reduce your taxable profit, such as travel, equipment and professional fees.

Non-Allowable Expenses – Costs that HMRC does not permit as deductions, including everyday clothing, client entertainment and personal spending.

Wholly and Exclusively Rule – HMRC’s requirement that an expense must be incurred purely for business purposes to be deductible.

Apportionment – Splitting a cost between business and personal use (e.g., 60% business, 40% personal) when an item is used for both.

Mileage Allowance – HMRC’s approved rates for claiming business travel in your personal vehicle: 45p per mile for the first 10,000 miles, then 25p per mile.

Capital Allowances – Tax relief for larger, long-lasting purchases (e.g., machinery, laptops, tools) that can’t be claimed as normal expenses.

Annual Investment Allowance (AIA) – A type of capital allowance allowing most businesses to deduct the full cost of qualifying equipment in the year of purchase.

Simplified Expenses – HMRC’s flat-rate method for claiming costs like working from home, business mileage or using your own vehicle.

Trading Allowance – A tax-free allowance of up to £1,000 for small or casual self-employment income. If you use it, you cannot also claim expenses.

Self Assessment – HMRC’s system for reporting your income and expenses each year. Sole traders use it to calculate and pay Income Tax and Class 4 NIC.

MTD (Making Tax Digital) – HMRC’s digital record-keeping initiative requiring businesses to maintain digital accounts and file returns using approved software.

Class 4 NIC – A form of National Insurance paid by self-employed individuals based on their taxable profits.

Balance Sheet Asset – An item your business owns that has long-term value (e.g., equipment, laptops). Often claimed through capital allowances.

Disallowable Entertainment – Client gifts, meals or hospitality that cannot be deducted for tax purposes, even if they relate to business.

Record Keeping – The practice of storing receipts, invoices, logs and digital evidence to support all claimed expenses in case of an HMRC enquiry.
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