Here’s something that surprises a lot of sole traders: you don’t pay tax on everything you earn. You pay tax on your profit — and profit is what’s left after you’ve deducted your legitimate business costs.

That means every allowable expense you claim reduces your tax bill. Not by a little — potentially by a lot, depending on what you spend running your business.

This guide covers every category of allowable expenses UK sole traders can claim, with plain-English examples for each one. Scan the full list and make sure you’re not leaving money on the table.

Quick disclaimer: I’m a Chartered Accountant, but I’m not your accountant. This guide is for information and guidance only — everyone’s situation is different. If you’re unsure about a specific expense, check with a qualified professional.

What Are Allowable Expenses?

Allowable expenses are the business costs HMRC lets you deduct from your income when working out your taxable profit.

The rule is simple: an expense must be wholly and exclusively for business purposes to be allowable. If it’s part personal, part business — a phone contract, for example — you can usually claim the business proportion.

How it works in practice:

Profit = Income − Allowable expenses

If your income is £50,000 and you have £10,000 of allowable expenses, you’re taxed on £40,000 — not £50,000. At the basic rate of 20% Income Tax plus 6% Class 4 NI, that’s roughly £2,600 less tax on £10,000 of expenses. It adds up fast.

What You Can’t Claim (Disallowable Expenses)

Before the full list, it’s worth being clear on what HMRC won’t allow:

• Personal spending (anything not related to the business)
• Everyday clothing — even if you wear it for work
• Client entertaining — taking a client for lunch is not claimable
• HMRC fines and penalties
• Travel from home to your normal workplace (commuting)
• Your own wages or drawings as a sole trader

The Full List of Allowable Expenses for Sole Traders

Stock and Materials

If your business involves selling products or delivering a service that requires materials, those costs are allowable:

• Stock for resale
• Raw materials used in production
• Packaging and shipping supplies

Subcontractors and Freelancers

Paying someone else to help deliver your work? That’s a legitimate business cost:

• Freelancers (designers, writers, VAs, developers)
• Specialist contractors brought in for specific projects
• Bookkeepers

Office and Workspace Costs

If you rent workspace outside your home:

• Office rent and business rates
• Coworking memberships
• Storage costs

If you work from home, see the home office section below.

Website and Digital Costs

Almost everything involved in having an online presence:

• Domain registration and renewal
• Website hosting
• Website themes and plugins
• Platform fees (e.g. Shopify, Squarespace)

Marketing and Advertising

Any cost involved in promoting your business:

• Online advertising (Google Ads, social media ads)
• Print materials (business cards, flyers, brochures)
• Photography and video for business use
• PR costs

Software and Subscriptions

The tools you use to run your business day to day:

• Accounting software
• Project management tools
• Design tools (e.g. Canva Pro, Adobe)
• Email marketing platforms
• CRM systems
• Cloud storage

Worth knowing: Members of The Self Employed Club get exclusive discounts on many of the software tools sole traders use most — including accounting software. Grab the deals before you renew anything at full price. See current deals →

Phone and Internet

If you use your phone or broadband for both personal and business use, you can claim the business proportion. Keep a note of how you worked out the split in case HMRC ever asks.

If you have a phone or contract used exclusively for business, the full cost is allowable.

Insurance

Business insurance premiums are allowable:

• Professional indemnity insurance
• Public liability insurance
• Business contents insurance
• Employers’ liability (if you have staff)

Personal insurance (life insurance, income protection) is not a business expense.

Professional Fees

Costs of professional advice and services related to your business:

• Accountant or bookkeeper fees
• Solicitor fees (for business matters)
• Business consultancy

Bank Charges and Interest

• Monthly business bank account fees
• Transaction and payment processing fees (Stripe, PayPal, SumUp)
• Interest on a business loan or overdraft (cash basis accounting)

Business Travel

You can claim travel costs when travelling for business — visiting clients, attending supplier meetings, going to training events. The key is that the travel must have a genuine business purpose.

Allowable travel expenses include:

• Train, bus, and taxi fares
• Parking charges (but not parking fines)
• Tolls
• Hotel accommodation on business trips
• Meals when travelling overnight for business

You cannot claim travel from your home to a regular, fixed workplace — that’s commuting, and HMRC doesn’t allow it.

Mileage (Using Your Personal Vehicle)

If you use your own car, van, or motorcycle for business travel, you can claim mileage using HMRC’s simplified rates:

Keep a mileage log showing the date, start and end point, business purpose, and miles driven. Your accounting software can usually do this for you.

Note: if you use simplified mileage rates for a vehicle, you can’t also claim capital allowances for the same vehicle. Choose one method and stick with it.

Vehicle Costs (Business Vehicle)

If you buy or lease a vehicle primarily for business use, you may be able to claim a proportion of:

• Purchase cost (via capital allowances)
• Lease or hire purchase payments
• Insurance, servicing, and fuel (business proportion)

This gets complicated quickly if there’s any personal use. Simplified mileage is often easier for most sole traders.

Home Office Expenses

If you work from home, you can claim either:

Option 1: Simplified flat rate (easiest)

Option 2: Actual cost method Calculate the business proportion of your household bills — mortgage interest or rent, utilities, broadband — based on the number of rooms used for work and the hours worked. This requires more record-keeping but may produce a higher deduction.

Most sole traders go with the flat rate because it’s simpler and HMRC won’t question it. If you work long hours from a dedicated home office, the actual cost method might be worth calculating.

Clothing

A common area of confusion. The rule is strict:

• ✅ Branded uniforms with your business logo
• ✅ Protective or safety clothing required for your work
• ❌ Everyday clothing worn for work — including business suits, smart outfits, or anything you could wear outside work

If the clothing could reasonably be worn outside work, HMRC won’t allow it.

Staff Costs

If you employ people (even part-time):

• Salaries and wages
• Employer National Insurance contributions
• Pension contributions (employer portion)
• Staff training

Your own wages as a sole trader are not a business expense. You’re taxed on profit — what you pay yourself out of that profit isn’t deductible.

Training and Development

Courses and professional development are allowable — but only when they improve existing skills relevant to your current business. A digital marketer upskilling in a new platform: allowable. A bookkeeper retraining as a plumber: not allowable.

Trade Publications and Memberships

• Industry-specific magazines and journals
• Professional body memberships relevant to your business
• Trade association fees

Pension Contributions

Sole traders can’t claim pension contributions as a business expense in the same way a limited company can — but contributions to a personal pension do reduce your overall tax bill through personal pension tax relief. Worth speaking to a financial adviser about the best approach for your situation.

How to Claim Expenses on Your Tax Return

You claim allowable expenses in the self-employment section of your Self Assessment tax return (or via your MTD final declaration if you’re within the MTD threshold).

If your turnover is under £90,000: You can use the simplified short pages (SA103S) and enter one total figure for all allowable expenses.

If your turnover is £90,000 or over: You must use the full pages (SA103F) and break expenses down into HMRC’s specific categories.

Either way, you must keep records of what you claimed and how you calculated it. Receipts, invoices, mileage logs — HMRC requires you to keep these for at least 5 years after the relevant tax return deadline.

The easiest way to stay on top of this: Good accounting software tracks expenses automatically as you go, categorises them correctly, and means your figures are ready when it’s time to file. Members of The Self Employed Club get exclusive discounts on Xero — one of the most popular tools for sole traders. Grab the deal here →

Mixed-Use Expenses

Some expenses are partly business, partly personal. You can claim the business proportion — but you need to be able to justify how you calculated the split. Common examples:

• Phone: e.g. 60% business use, claim 60% of the bill
• Internet: similar split based on actual usage
• Car: business miles as a proportion of total miles driven

If you genuinely can’t separate personal and business use, HMRC may disallow the expense entirely under the “duality of purpose” rule. When in doubt, be conservative and keep a note of your method.

The Biggest Mistakes Sole Traders Make with Expenses

These are the ones that cost people the most:

Not tracking small costs — a £10 subscription here, a £15 parking charge there. They feel insignificant individually but easily add up to hundreds of pounds of unclaimed expenses over a year.

Mixing personal and business spending — the cleanest solution is a separate business bank account. It makes bookkeeping significantly easier and means you’re never uncertain which costs are business and which aren’t.

Leaving it all to January — trying to reconstruct 12 months of expenses from memory (or a pile of receipts) is miserable and almost guarantees you’ll miss things. A simple monthly routine takes 20 minutes and saves hours of January stress.

Not keeping receipts — HMRC can ask for evidence of any expense you’ve claimed, and “I forgot to keep the receipt” isn’t a valid defence. Most accounting apps let you photograph receipts on your phone and attach them to the transaction.

A separate business bank account helps with all of this — and there are some excellent free options for sole traders. Check the current banking deals in The Self Employed Club →

Quick Reference: Allowable Expenses Checklist

FAQs