Sole trader expenses reduce your taxable profit and lower your tax bill. You can claim any costs that are "wholly and exclusively" for business purposes. Common allowable expenses include office costs, travel, professional fees, equipment, and home office costs.
This guide lists all the expenses you can claim as a self-employed sole trader, with examples and limits.
The "Wholly and Exclusively" Rule
HMRC's rule for allowable expenses: costs must be incurred wholly and exclusively for business purposes.
| Allowable | Not Allowable | |-----------|---------------| | Business phone contract | Personal phone (unless claiming business %) | | Client meeting travel | Commuting to regular workplace | | Office desk for home office | Living room furniture | | Accountant fees | Personal tax advice | | Trade magazine subscription | General newspaper |
Mixed use: If something is used for both business and personal (like a phone), claim only the business proportion.
Office and Administrative Costs
Stationery and Supplies
| Expense | Allowable? | |---------|------------| | Paper, pens, notebooks | Yes | | Printer ink and toner | Yes | | Envelopes and postage | Yes | | Business cards | Yes | | Desk organizers | Yes |
Software and Subscriptions
| Expense | Allowable? | |---------|------------| | Accounting software (TaxFolio, QuickBooks) | Yes | | Microsoft 365 / Google Workspace | Yes (business %) | | Industry-specific software | Yes | | Adobe Creative Cloud (if for work) | Yes | | Antivirus software | Yes (business %) | | Cloud storage (Dropbox, iCloud) | Yes (business %) |
Communication
| Expense | Allowable? | |---------|------------| | Mobile phone contract | Yes (business % only) | | Landline (business calls) | Yes | | Broadband/internet | Yes (business % only) | | Business email hosting | Yes | | Video conferencing (Zoom Pro) | Yes |
Calculating business percentage: Estimate the proportion used for business. If you use your phone 60% for work, claim 60% of the contract cost.
Travel and Transport
Mileage (Using Personal Vehicle)
If you use your own car or van for business:
| Miles Per Year | Rate | |----------------|------| | First 10,000 | 45p per mile | | Over 10,000 | 25p per mile |
This rate covers fuel, insurance, repairs, and depreciation—you cannot claim these separately if using mileage rates.
What counts as business mileage:
- Travel to client sites
- Travel to temporary workplaces
- Travel between business locations
- Bank visits for business banking
- Supplier visits
NOT business mileage:
- Home to regular workplace (commuting)
- Personal errands during work day
Learn more: Mileage Allowance Guide
Other Travel Costs
| Expense | Allowable? | |---------|------------| | Train/bus fares (business travel) | Yes | | Taxi fares (business travel) | Yes | | Parking (at client sites, etc.) | Yes | | Congestion charge (business trips) | Yes | | Tolls (business trips) | Yes | | Flights (business travel) | Yes | | Hotel (business travel) | Yes |
Subsistence (Food and Drink)
| Situation | Allowable? | |-----------|------------| | Lunch at your desk | No | | Coffee while working at home | No | | Meal while travelling overnight | Yes | | Dinner on a business trip | Yes | | Snacks bought because away from home | Possibly (reasonable amount) |
Key rule: Subsistence is only allowable for meals you wouldn't have bought anyway—typically only when travelling away from your normal base.
Professional Services
Accountant and Bookkeeper
| Expense | Allowable? | |---------|------------| | Annual accounts preparation | Yes | | Tax return filing fees | Yes | | Bookkeeping services | Yes | | Tax advice (business-related) | Yes | | Personal tax planning | No |
Legal Fees
| Expense | Allowable? | |---------|------------| | Contract drafting | Yes | | Debt collection | Yes | | Employment disputes | Yes | | Property lease for business premises | Yes | | Personal legal matters | No | | Buying business premises | No (capital) |
Other Professional Services
| Expense | Allowable? | |---------|------------| | Consultant fees | Yes | | Freelancer/subcontractor payments | Yes | | Professional body membership (RICS, CIMA, etc.) | Yes | | Trade association membership | Yes | | Professional indemnity insurance | Yes |
Marketing and Advertising
| Expense | Allowable? | |---------|------------| | Website hosting and domain | Yes | | Website design and development | Yes | | Google Ads / Facebook Ads | Yes | | Print advertising | Yes | | Flyers and brochures | Yes | | Business cards | Yes | | Trade show costs | Yes | | PR and marketing agency fees | Yes | | Photography for business use | Yes | | Stock images | Yes |
Equipment and Tools
Small Items (Under ~£1,000)
Items with a short life or low value can be claimed as expenses:
| Expense | Allowable? | |---------|------------| | Hand tools | Yes | | Office supplies | Yes | | Small electronics | Yes | | Replacement parts | Yes |
Larger Items (Capital Allowances)
Expensive items are claimed via capital allowances, not direct expenses:
| Item | Treatment | |------|-----------| | Computer/laptop | Annual Investment Allowance (100% year 1) | | Machinery | Annual Investment Allowance | | Office furniture | Annual Investment Allowance | | Van/commercial vehicle | Annual Investment Allowance | | Car | Special rates based on CO2 emissions |
Annual Investment Allowance (AIA): Claim 100% of qualifying expenditure up to £1 million per year.
Example: You buy a £1,200 laptop. Claim the full £1,200 as AIA in year one.
Cars
Cars have different rules:
| CO2 Emissions | Allowance | |---------------|-----------| | 0g/km (electric) | 100% first year | | 1-50g/km | 18% per year | | Over 50g/km | 6% per year |
Only the business use proportion is allowable.
Home Office Expenses
If you work from home, claim either simplified expenses or actual costs.
Simplified Expenses (Easiest)
| Hours Worked at Home/Month | Flat Rate | |---------------------------|-----------| | 25-50 hours | £10/month | | 51-100 hours | £18/month | | 101+ hours | £26/month |
Maximum: £312/year
Actual Costs (Potentially Higher)
Calculate business proportion of:
| Expense | Calculation | |---------|-------------| | Rent or mortgage interest | Rooms used ÷ Total rooms × Annual cost | | Council tax | Same proportion | | Electricity | Same proportion | | Gas/heating | Same proportion | | Water | Same proportion | | Home insurance | Same proportion |
Example: 1 room of 5 used for business = 20% of costs
Learn more: Working From Home Tax Relief
Insurance
| Expense | Allowable? | |---------|------------| | Public liability insurance | Yes | | Professional indemnity insurance | Yes | | Employer's liability (if you have staff) | Yes | | Business equipment insurance | Yes | | Business premises insurance | Yes | | Vehicle insurance (business vehicle) | Yes (or included in mileage) | | Personal life insurance | No | | Home insurance (business portion) | Yes |
Financial Costs
| Expense | Allowable? | |---------|------------| | Business bank account fees | Yes | | Payment processing fees (Stripe, PayPal) | Yes | | Credit card fees | Yes | | Interest on business loans | Yes | | Overdraft interest (business account) | Yes | | Late payment fees (business) | Yes | | Personal bank charges | No |
Staff Costs (If You Have Employees)
| Expense | Allowable? | |---------|------------| | Wages and salaries | Yes | | Employer's National Insurance | Yes | | Employer's pension contributions | Yes | | Staff training | Yes | | Staff travel expenses (reimbursed) | Yes | | Recruitment costs | Yes | | Staff welfare (reasonable) | Yes |
Training and Education
| Expense | Allowable? | |---------|------------| | Training to update existing skills | Yes | | Courses to maintain professional status | Yes | | Industry conferences | Yes | | Webinars relevant to your trade | Yes | | Training for completely new skills | Usually no | | Degree courses | Usually no | | Professional qualifications (initial) | Usually no |
Key rule: Training must update existing skills, not provide new ones. A plumber can claim a course on new boiler technology, but not a course to become an electrician.
What You CANNOT Claim
Personal Expenses
| Expense | Why Not Allowable | |---------|-------------------| | Commuting costs | Personal choice where to live | | Everyday clothing | Could wear personally | | Gym membership | Personal health | | Childcare | Personal expense | | Fines and penalties | Not business expense | | Personal phone contract | Not business use |
Entertainment
| Expense | Allowable? | |---------|------------| | Taking clients to dinner | No | | Event tickets for clients | No | | Client gifts over £50 | No | | Client gifts under £50 (with business branding) | Yes | | Staff entertainment (reasonable) | Yes |
Note: Staff entertainment (like a Christmas party) is allowable. Client entertainment is not.
Capital Expenditure (Without Capital Allowances)
| Expense | Treatment | |---------|-----------| | Buying property | Not an expense (capital) | | Building improvements | Not an expense (capital) | | Initial professional qualifications | Not an expense | | Goodwill purchased | Not an expense |
These may reduce Capital Gains Tax when you sell, but aren't deductible from income.
Record Keeping for Expenses
What to Keep
For each expense, retain:
- Receipt or invoice
- Proof of payment (bank statement)
- Date of expense
- What it was for (business purpose)
How Long to Keep Records
Keep all expense records for 6 years after the tax year they relate to.
Digital vs Paper
Both acceptable. Digital is easier:
- Photograph receipts immediately
- Store in cloud (Dropbox, Google Drive)
- Use accounting software with receipt capture
- Original can fade; digital lasts
Expense Categories for Self Assessment
When filing SA103, expenses are grouped:
| Category | What to Include | |----------|-----------------| | Cost of goods sold | Materials, stock, subcontractors | | Car, van, travel | Mileage OR actual vehicle costs | | Wages, salaries | Staff costs | | Rent, rates, power | Business premises costs | | Repairs | Maintaining equipment/premises | | Telephone | Phone and broadband | | Accountancy | Professional fees | | Bank charges | Financial costs | | Interest | Loan interest | | Other expenses | Anything else allowable |
TaxFolio categorises your expenses automatically into these groups.
Common Expense Mistakes
1. Not Claiming Legitimate Expenses
Many sole traders under-claim. Review this list—are you missing anything?
2. Claiming Personal Expenses
HMRC can investigate. Only claim genuine business costs.
3. No Receipts
Without evidence, HMRC can disallow claims. Keep everything.
4. Wrong Proportions
If claiming business % of mixed-use items, be able to justify the split.
5. Claiming Mileage AND Car Costs
Choose one method: mileage rates OR actual costs. Not both.
Track Expenses with TaxFolio
TaxFolio automates expense tracking for sole traders:
- Bank connection — transactions import automatically
- AI categorisation — expenses sorted into correct categories
- Receipt capture — photograph and store digitally
- Mileage tracking — log business journeys easily
- Real-time tax — see how expenses reduce your bill
- HMRC categories — matches SA103 requirements
- From £69.99/year — saves more than it costs
Start your free 30-day trial and never miss an expense claim.