What Are Allowable Expenses for the Self-Employed?

If you are self-employed, you can deduct certain business costs from your income before calculating your taxable profit. These costs are known as allowable expenses.

An expense does not reduce your tax bill pound for pound. Instead, it reduces the profit on which Income Tax and National Insurance may be calculated. The expense must normally be incurred for a genuine business purpose and must meet HMRC’s rules.

For example, if your business turnover is £30,000 and you claim £5,000 of valid business expenses, your taxable profit before any other adjustments would be £25,000.

This guide covers the main allowable business expenses available to sole traders and individual members of partnerships under the 2026/27 rules. Limited companies follow different rules when calculating Corporation Tax. Expenses are just one part of the picture our ultimate guide to personal tax in the UK covers the rates, allowances and reliefs that determine your final Income Tax bill.

What Is an Allowable Expense?

An allowable expense is a cost incurred wholly and exclusively for the purpose of running your business. It can be deducted from business income when calculating taxable profit, provided it is not specifically disallowed by HMRC.

The cost must relate to the business rather than your personal lifestyle. Where something is used for both business and private purposes, you can normally claim only the identifiable business proportion.

Allowable expenses should not be confused with personal allowances or tax credits. They are costs deducted when working out business profit.

Common HMRC Allowable Expenses

The exact expenses you can claim depend on the nature of your work. A builder, consultant, online retailer and landlord will not necessarily have the same deductible costs.

HMRC confirms that self-employed people can claim qualifying office, premises and equipment costs, including stationery, business telephone use, rent, utilities, security and repairs. Private use must be excluded.

Office, Telephone and Software Costs

You can normally claim the business cost of stationery, printing, postage, printer cartridges, subscriptions and telephone or internet use.

Where a mobile phone or internet contract is used for both personal and business purposes, you should calculate a reasonable business proportion. If a £100 monthly phone bill includes £30 of identifiable business use, the allowable claim would generally be £30 rather than the full bill.

Regular software subscriptions used in the business can normally be claimed as expenses. The treatment of larger software purchases and equipment may depend on whether you use the cash basis or traditional accounting.

Business Travel and Vehicle Costs

Business travel may include journeys to temporary workplaces, client premises, suppliers, training locations or other places visited wholly for business purposes.

You may be able to claim train fares, bus fares, parking, accommodation and necessary travel costs. Ordinary commuting between home and a permanent place of business is generally not allowable. Parking fines, speeding penalties and other fines for breaking the law cannot be deducted.

For vehicles, sole traders and eligible partnerships can choose between claiming the appropriate business proportion of actual running costs or using HMRC’s simplified mileage rates.

Simplified Mileage Rates for 2026/27

The first 10,000-mile rate for cars and goods vehicles increased from 45p to 55p for the 2026/27 tax year. Once simplified mileage is chosen for a particular vehicle, it must normally continue to be used for that vehicle while it remains in the business. You cannot use the mileage method for a vehicle on which you have already claimed capital allowances.

Business parking, tolls and public transport costs can still be claimed separately where they meet the normal business-purpose rules.

Clothing and Staff Costs

Uniforms, protective boots, helmets and other clothing required for safety or clearly identifying a particular occupation may qualify as tax deductible expenses.

Ordinary clothing is not normally allowable, even if it is bought specifically for work. A suit worn for client meetings, for example, remains capable of private use.

Where you employ staff, allowable costs can include salaries, bonuses, employer National Insurance, pension contributions, subcontractor payments and relevant employee training.

A sole trader cannot claim their own drawings, salary, personal National Insurance, Income Tax or personal pension contributions as business expenses. The sole trader and the business are treated as the same person for Income Tax purposes. This differs from the position for employees, who claim relief for their own work-related costs through a separate employment expenses process rather than through business accounts.

Business Premises and Working From Home

Costs relating to dedicated business premises can include rent, business rates, electricity, heating, insurance, cleaning, maintenance and security.

If you run your business from home, you can claim a reasonable proportion of household costs such as heating, electricity, Council Tax, rent or mortgage interest. The calculation should reflect factors such as the number of rooms used, the amount of time they are used for business and the type of expense.

You should not simply claim a percentage based on floor space if that would not produce a fair result. For example, electricity use may need a different calculation from rent or Council Tax.

Simplified Working-from-Home Expenses

Sole traders and eligible partnerships can use HMRC’s simplified flat rates instead of calculating the business proportion of household costs. The flat rate is available where you work from home for at least 25 hours during a month.

The flat rate does not cover business telephone or internet use. The relevant business proportion of those bills can be claimed separately.

The former employee claim for unreimbursed homeworking costs, including the £6-per-week claim, was removed from 6 April 2026. This change applies to employees claiming directly from HMRC and should not be confused with the simplified homeworking expenses that remain available to qualifying self-employed people.

Living at Your Business Premises

Simplified expenses also remain available where a sole trader lives at premises used for a business, such as a guest house, bed and breakfast or small care home.

Instead of calculating every private household cost separately, you calculate the total premises costs and deduct a monthly flat-rate amount for private use.

Simplified expenses are optional and are available only to sole traders and partnerships with no company partners. Limited companies cannot use these flat-rate rules.

Legal, Financial and Marketing Expenses

Professional fees may qualify where they relate directly to the business. This can include fees paid to accountants, solicitors, surveyors and other advisers.

Business insurance, bank charges, overdraft charges, credit card charges, hire-purchase interest and interest on qualifying business loans may also be deductible. The repayment of the loan itself is not an allowable expense because it represents repayment of borrowed capital.

Advertising costs can include website expenses, paid search campaigns, social media advertising, printed materials, mailshots and directory listings. Business entertaining is generally disallowed, even where there is a genuine commercial purpose.

Training Courses

You can generally claim training costs that maintain or improve skills used in your existing trade. This could include refresher training, professional updates, software instruction or courses required to keep an existing qualification current.

Training intended to qualify you for a new profession, trade or unrelated business is normally treated differently and may not be deductible from the profits of the existing business.

Capital Allowances and Equipment Purchases

The treatment of equipment depends partly on the accounting method used.

Under the cash basis, many equipment purchases can be deducted as business expenses when paid, although cars follow separate rules. Under traditional accounting, assets retained for continuing use—such as machinery, computers, equipment and business vehicles—may qualify for capital allowances rather than being claimed as ordinary expenses.

Available capital allowances can include the Annual Investment Allowance and other first-year or writing-down allowances. Cars are subject to specific rules, while qualifying zero-emission cars may be eligible for a 100% first-year allowance during the relevant period.

The main writing-down allowance rate was reduced to 14% from April 2026, while the special-rate pool remains at 6%. A new 40% first-year allowance also applies to certain qualifying plant and machinery from 1 January 2026.

Because capital allowance claims depend on the asset, accounting method, purchase date and business structure, significant purchases should be reviewed before the tax return is completed.

Mixed Business and Personal Expenses

If an expense has both business and private use, only the business part can normally be claimed.

This rule may apply to mobile phones, broadband, vehicles, home expenses and equipment. Your calculation should use a fair and supportable method rather than an arbitrary percentage.

For capital assets used partly for private purposes by a sole trader or partnership, the capital allowance must also be reduced to reflect the private use.

Expenses You Cannot Normally Claim

Common non-allowable costs include personal living expenses, ordinary clothing, private travel, daily commuting, client entertaining and fines for breaking the law.

You also cannot claim your own Income Tax, personal drawings or the capital repayment element of a business loan. Accounting depreciation is not normally deductible for tax because qualifying assets are dealt with through the applicable expense or capital allowance rules.

Where a cost has both business and personal elements but the business element cannot be separated reliably, HMRC may refuse the whole claim.

Keep Evidence of HMRC Allowable Expenses

You should keep accurate records showing business income and expenditure, including receipts, invoices, mileage records, bank statements and calculations supporting mixed-use claims.

From 6 April 2026, qualifying sole traders and landlords with gross income above the relevant Making Tax Digital threshold must use compatible software to maintain digital records and send quarterly updates to HMRC. The records should show income and expenses for each relevant source.

Even where Making Tax Digital does not yet apply, proper records are essential. HMRC may request evidence supporting the figures included in a tax return.

Check Your Business Expenses Before Claiming

Allowable expenses reduce taxable business profit, but only where the costs meet HMRC’s conditions and are recorded correctly.

The most important distinction is whether an expense relates to the business, private use or a combination of both. You should also determine whether a larger purchase is an ordinary expense under your accounting method or should be claimed through capital allowances.

Reviewing expenses throughout the year is more reliable than trying to identify every deductible cost when the Self Assessment deadline is approaching. Clear records also make it easier to comply with Making Tax Digital and support a claim if HMRC asks for evidence. If you’d like a broader checklist covering the full range of costs you can claim back when self-employed, our companion guide brings the main categories together in one place.

Allowable Expenses Case Study

Karen, a self-employed marketing consultant, visited our Farringdon office because she was unsure which business costs she could claim on her Self Assessment tax return. Throughout the year, she had paid for software subscriptions, business travel, telephone bills and home office costs, but she was concerned about making an incorrect claim that might cause problems with HMRC.

After reviewing her bookkeeping records, we explained which costs qualified as allowable expenses because they were incurred wholly and exclusively for business purposes. We also showed her how mixed-use expenses, such as mobile phone and broadband bills, should be apportioned so that only the genuine business element was claimed. This gave Karen greater confidence that her business expense claims were both accurate and compliant with HMRC guidance.

During our discussion, Karen asked whether every equipment purchase could simply be treated as an allowable expense. We explained that while many purchases can be deducted immediately under the cash basis, some larger assets may instead qualify for capital allowances, depending on the accounting method used. Understanding the difference helps self-employed individuals maximise legitimate tax relief while avoiding incorrect claims.

By the end of the meeting, Karen understood that keeping accurate records throughout the year makes claiming HMRC allowable expenses far simpler than trying to identify deductible costs just before the Self Assessment deadline. Good bookkeeping, regular reviews and understanding HMRC’s rules help reduce taxable profit correctly while supporting a compliant tax return.