Completing a Self Assessment tax return as a sole trader or small business owner in the UK can feel overwhelming, especially when it comes to identifying what expenses can legally be deducted. Allowable expenses are costs you incur exclusively in the course of running your business, and knowing what to claim can make a significant difference to your final tax bill.
Understanding which costs qualify and how to report them correctly is essential if you want to remain compliant while reducing your overall liability. We’ll explore travel, staff, and premises-related expenses in detail.
Why Business Expenses Matter
Allowable expenses reduce your taxable profit, not your total tax bill. For example, if you earned £40,000 but had £10,000 in qualifying expenses, you would only pay tax on the remaining £30,000. That is why it’s crucial to get these figures right and to make sure you are claiming everything you are legally entitled to. Failing to include eligible costs means you might end up paying more tax than necessary, while claiming ineligible expenses could lead to fines or penalties if challenged by HMRC.
Travel Expenses You Can Include
When your work requires you to travel, those costs may qualify as deductible expenses. The key condition is that the journey must be for business purposes. Travelling to a regular workplace or office from home is considered commuting and is not allowable. However, travel to meet clients, attend events, or visit temporary job locations can be included.
Using Your Own Vehicle for Work
Many self-employed individuals use their personal vehicle for business purposes. There are two main methods for claiming vehicle-related expenses.
The first method is to use simplified mileage rates published by HMRC. You track the number of business miles travelled and apply a set rate to work out your deduction. This method includes allowances for fuel, insurance, wear and tear, and other related costs. It’s simple and requires minimal record-keeping beyond a log of your journeys.
The second method is to calculate actual costs and claim the proportion used for business. To do this, you need to record total vehicle expenses such as:
- Fuel
- Repairs and servicing
- Road tax
- Vehicle insurance
- MOT testing
- Breakdown recovery
- Parking charges
Once you have the total annual cost, you calculate the percentage of usage that was for business purposes and claim that proportion. If 70 percent of your driving was for work, for instance, you can claim 70 percent of the total vehicle expenses.
Public Transport and Taxis
Public transport fares, including train, bus, tram, and taxi rides, can be claimed if they relate to business travel. For instance, if you take a train to meet a client or attend a business conference, the fare is an allowable expense. It’s important to keep all tickets or digital receipts. First-class travel is accepted if it is justified as a business requirement.
If you use a taxi or rideshare service like Uber to travel between business appointments or from a train station to a client’s office, that expense is also claimable.
Overnight Accommodation and Meals
When travel requires an overnight stay, you can claim the cost of accommodation and reasonable subsistence. Hotel bills, bed and breakfast stays, and modest meals are allowable. You cannot, however, claim extravagant dining or accommodation unless it can be clearly shown to be necessary and justifiable in the context of your business activities.
Parking, Tolls, and Congestion Charges
Parking fees paid during work-related travel can be claimed. Tolls for motorways or bridges and congestion charges incurred during business travel also qualify. Fines for parking violations or speeding tickets are not allowable and should never be included in your expenses.
Staff Costs and What’s Deductible
Employing staff or outsourcing work to others involves a range of costs. Most of these can be deducted when they are directly related to the operation of your business. This includes salaries, freelance payments, pensions, National Insurance contributions, and training.
Employee Wages and Salaries
Any amounts paid to full-time or part-time employees can be deducted as business expenses. This includes base salary, overtime, and statutory payments like holiday or sick pay. To claim this, the employee must be formally hired and registered through PAYE.
Payments to casual staff or individuals hired on a project basis can also be included, provided you can supply documentation such as contracts, payment records, and details of the work completed.
Employer National Insurance Contributions
As an employer, you are required to pay National Insurance on earnings above a certain threshold. These payments, along with any associated payroll costs, are tax-deductible. Even if your staff works part-time, if you contribute as an employer to their National Insurance, you can include these amounts in your expenses.
Pension Contributions
Employer contributions to staff pension schemes can be deducted from your taxable income. The scheme must be properly set up and registered. You cannot claim employee contributions made by individuals directly from their salary, but your own contributions as an employer can be included.
Bonuses, Commissions, and Benefits
Any additional payments made to staff such as annual bonuses, sales commissions, or other financial incentives are considered allowable expenses. You can also include non-cash benefits like health insurance or meal vouchers if these are part of a structured employment package.
The key rule is that all staff payments must be clearly related to their work duties and documented correctly.
Freelancers and Agency Staff
Freelancers and contractors hired to work on short-term projects can be included in your allowable expenses. Their fees should be based on a contract or service agreement, and payments should be tracked and recorded. You can also include fees paid to temporary staff agencies, including recruitment fees or finder’s charges.
Exclusions from Staff Expenses
Certain payments are not allowable. For example, domestic staff such as nannies, cleaners, or carers are not eligible unless they are hired strictly for business needs, such as cleaning a client-facing workspace or office. You also cannot include personal gifts, social entertainment, or other perks that do not directly relate to business performance.
Business Premises: Costs You Can Claim
Whether you work from a rented commercial property, a co-working space, or your home, there are multiple expenses related to your business premises that you may be able to deduct.
Rent and Business Rates
If you rent an office, shop, studio, or warehouse exclusively for business purposes, the rent is fully deductible. You can also claim business rates paid to your local council if they apply to your commercial property. These are often some of the largest costs a small business faces, so it’s essential to ensure they’re included in your tax return.
Utilities and Service Charges
Gas, electricity, water, internet, and phone services used at your business premises are allowable. Keep in mind that if these services are also used for personal purposes, only the business portion can be claimed. This applies particularly if you work from home or have a shared workspace.
You can also include service charges, security monitoring, and waste disposal costs if these relate to your business premises.
Office Supplies and Consumables
Everyday items like pens, paper, printer ink, postage, and envelopes fall under the category of consumables. These are straightforward business costs and can be claimed as long as they are used wholly and exclusively for work purposes.
You can also include the cost of cleaning materials and small furnishings if they are used in a business setting.
Repairs and General Maintenance
Routine repairs and maintenance costs for your business premises can be deducted. For example, if you repaint a customer-facing space or fix plumbing in your office, those expenses are considered necessary and allowable. However, costs for property improvements—like extending a building or upgrading electrical systems—may be treated as capital expenses rather than day-to-day costs.
Business Insurance
If you pay for insurance to protect your business premises or assets, this can be claimed. Common types include buildings insurance, contents insurance, public liability insurance, and professional indemnity cover. These policies ensure your business is protected and are therefore treated as legitimate expenses.
Home Office Costs
If you operate your business from home, HMRC allows you to claim part of your household expenses. You can use either a simplified method or calculate a proportion of your actual costs. The simplified method allows a flat monthly rate based on the number of hours you work at home. This is easier to manage but may result in a smaller claim.
Alternatively, you can work out the actual business portion of expenses like:
- Rent or mortgage interest
- Council tax
- Electricity and gas
- Water bills
- Broadband and telephone
To calculate this, you’ll need to consider how many rooms are used for business and for how many hours a week. For example, if you use one room out of five exclusively for work, and you use it 50 percent of the time, you can claim 10 percent of your eligible household bills.
Cleaning and Security
If you hire a cleaner for your business space or pay for regular cleaning services, the cost is deductible. Similarly, fees for installing and maintaining security systems or paying for a security guard at your premises are allowable.
When working from home, these expenses are only partially claimable and only if the services relate specifically to the business portion of your home.
Claiming Legal and Professional Fees
Every business will at some point rely on the expertise of legal, financial, or professional services. These costs can be deducted from your taxable income as long as they are directly related to your business operations.
Accountancy and Bookkeeping
Fees paid to accountants or bookkeepers are allowable if they relate to the running of your business. This includes services such as preparing your accounts, completing your tax return, or providing ongoing financial advice. If you also use your accountant for personal matters, such as inheritance planning or mortgage applications, you’ll need to apportion their fees appropriately and only claim the business portion.
Some people try to claim for personal finance costs through their business, but this can lead to issues during an HMRC review. If there is any overlap between business and personal advice, make sure to split the invoice and claim only what relates to your self-employed or company-related activity.
Legal Services
Fees paid to solicitors or legal professionals for business matters can also be included. These may relate to contract reviews, partnership agreements, employment law advice, or dispute resolution. If you are seeking help with business-related intellectual property rights, leases for premises, or compliance matters, those costs are usually fully deductible.
It’s important to note that legal expenses related to the purchase of assets such as property or vehicles are not treated as day-to-day costs. These are instead capital expenses, which must be handled differently for tax purposes.
Surveyors, Architects, and Other Consultants
If you hire a professional such as a surveyor or architect in connection with your business operations, those fees are allowable if they relate to planning a business move, assessing a commercial property, or designing a workspace. However, work on residential premises or speculative projects not yet launched may not qualify.
Management consultants, industry experts, and advisers brought in to assist with improving business processes or developing growth strategies are also considered deductible. Make sure to keep detailed contracts and invoices describing the nature of the work and how it relates to your business.
Professional Indemnity and Liability Insurance
Insurance policies that cover the risk of being sued or protect against claims made by clients or third parties are allowable expenses. This includes public liability insurance, employers’ liability insurance, and professional indemnity cover.
Other types of insurance can be more complex. Business interruption insurance, legal expense policies, or cyber liability cover can generally be claimed, while life insurance or income protection usually cannot be deducted unless arranged specifically through a business structure and with HMRC approval.
Clothing: What’s Allowed and What’s Not
Clothing is one of the more frequently misunderstood categories when it comes to self-assessment. It’s common for people to assume that anything they wear to work can be claimed as a business expense, but this is not the case.
Uniforms and Protective Clothing
If your work requires a uniform that is clearly distinctive or branded, the cost of purchasing, cleaning, and maintaining it is usually allowable. For example, a mechanic, nurse, or chef who must wear a specific outfit for work can claim the expense.
Similarly, protective clothing needed to do your job safely, such as steel-toed boots, safety goggles, high-visibility jackets, or gloves, is fully deductible. These items must be necessary for health and safety and not used for personal purposes.
Costumes for Performers
Those in creative professions, such as actors, musicians, or dancers, may need to purchase costumes or performance-specific attire. These are generally allowable if the clothing is not suitable for everyday use and is used only in the course of the performance or public appearance.
Everyday Clothing
Even if you wear certain clothes exclusively for work, they are not considered allowable if they are not unique or essential to your role. For example, suits, formal shoes, or standard office attire cannot be claimed, even if worn every day at work. HMRC’s reasoning is that there is a personal benefit to these clothes, and they are not exclusive to the job.
Marketing professionals, consultants, and freelancers working in client-facing roles are often disappointed to find that their work wardrobe does not qualify. The only exceptions are where the clothing is specialist, clearly branded, or protective.
Marketing, Advertising, and Promotion
One of the most commonly overlooked categories of business expenses is marketing. Yet, it’s one of the most important investments for growth and customer acquisition. Many different types of marketing activity qualify as deductible.
Advertising and Campaign Costs
You can claim for the costs of creating and running advertising campaigns, whether they are printed, digital, or broadcast. This includes payment for design, copywriting, media buying, and distribution. Common expenses that qualify include:
- Leaflets, flyers, or posters
- Magazine or newspaper ads
- Pay-per-click advertising
- Sponsored social media posts
- Local radio advertising
It’s important to keep records of campaign objectives, platforms used, and performance results where possible. This not only helps validate your claim but also supports better marketing decisions in the future.
Website and Online Marketing
Building and maintaining a website is a core part of most businesses today. You can claim costs associated with:
- Website design and development
- Hosting and domain registration
- Search engine optimisation (SEO)
- Email marketing tools
- E-commerce integrations
- Ongoing website maintenance
If you also use the website for personal reasons or host a personal blog on the same domain, you may need to apportion the expense accordingly.
Many businesses now invest in content marketing, video production, and webinars. These too are allowable if used exclusively for promoting your services, educating customers, or generating leads.
Free Samples and Promotional Merchandise
Offering product samples to potential customers is a recognised marketing tactic. If you give away products for free as part of a promotion, the cost of those goods can be included as a marketing expense.
Promotional materials such as branded pens, mugs, bags, or clothing used in giveaways are also allowable. Be careful with items that could be seen as gifts rather than marketing tools, as HMRC has strict rules about the value and purpose of gifts.
Business Cards and Signage
Printed business cards, signage for vehicles, or signs outside your business premises all count as marketing costs. They are directly related to representing your business and reaching potential clients.
Trade Shows and Networking Events
Exhibiting at trade fairs, business expos, or networking events can be claimed as a business expense. This includes fees for booth space, promotional banners, branded materials, and travel to the event.
Attendance at events purely for personal development or entertainment purposes may not qualify. However, if your presence is part of a structured business plan to connect with prospects, you can include the associated costs.
Subscriptions, Memberships, and Industry Publications
Many professionals subscribe to services or join membership organisations to stay updated and connected. These costs can often be claimed on your tax return.
Professional Memberships
If you are a member of a trade body or industry association relevant to your profession, the membership fee is an allowable expense. Examples include the Institute of Chartered Accountants, the Federation of Small Businesses, or the Royal Institute of British Architects.
Memberships that are social in nature or offer personal benefits not linked to your work are not claimable. Gym memberships, for example, do not qualify even if they help with your general wellbeing as a business owner.
Industry Publications
Subscriptions to professional journals, trade magazines, and online platforms can be deducted if they are relevant to your work. These resources help you stay informed, maintain compliance, or improve your skills.
Be cautious about claiming for general newspapers or political publications. These are not allowed under HMRC rules unless there is a direct business reason and the content is highly specific to your trade.
Online Tools and Platforms
If you use paid software tools or platforms to carry out your work or manage your business, the subscription fees are usually allowable. Examples include design software, marketing automation platforms, scheduling tools, or data storage services.
Music, film, or content streaming services are not deductible unless you are in a profession where such material is necessary for your work, such as in video editing or content creation. The same applies to stock image subscriptions and royalty-free music libraries.
Technology and Equipment Costs
Digital tools and electronic equipment have become a necessity in almost every type of business. From laptops and smartphones to project management platforms and cloud storage solutions, modern business relies on technology more than ever.
Office Equipment and Tools
Any item that you buy solely for the use of your business may be classed as an allowable expense. This includes computers, tablets, printers, routers, hard drives, and other hardware required to perform your work.
If the item is expected to last more than two years, it may need to be claimed under capital allowances rather than day-to-day expenses. However, you are still able to deduct the value through your tax return in a slightly different section. Items of shorter lifespan such as a computer mouse, USB cables, or paper shredders may be claimed as normal expenses.
When purchasing larger items, be sure to retain all receipts and records showing that the item is used specifically for business purposes. If a device is shared with others in your household or used for personal browsing or streaming, only the business portion should be claimed.
Software Subscriptions
Regular payments for software tools that are necessary for your business can be deducted as an allowable expense. This could include:
- Accounting software
- Project management tools
- Video conferencing platforms
- Design and editing software
- Client relationship management systems
- Cloud-based storage and file sharing tools
The key requirement is that the software must be used for the running of the business. Personal or entertainment-based subscriptions are not considered allowable unless they serve a direct commercial purpose. For example, a video editor may claim streaming platform subscriptions used to study editing styles or trends if it can be shown to directly inform their work.
Mobile Phones and Internet
If you use your phone or broadband connection for both personal and business reasons, you can still claim the proportion that relates to your business. This means keeping track of how much time or data is spent on client calls, emails, business research, or uploading content.
For those with separate devices or accounts strictly for work, you can usually claim the full cost. Shared contracts will need to be split appropriately, and detailed usage logs are useful in supporting your calculations. If you pay for apps or digital tools on your mobile device that relate to invoicing, time tracking, or communications, these can be claimed too, as long as they directly serve a business need.
Training and Professional Development
Investing in your knowledge, skills, and compliance through training or development is not only good for business—it may also be tax deductible. However, this area has specific rules and some distinctions that should be understood before making claims.
Courses and Certifications
You can claim for training that helps you maintain or improve skills directly related to your current business. This might include courses on updated regulations, industry best practices, advanced techniques in your field, or compliance with legal obligations.
For instance, a graphic designer attending a course on advanced design tools or a builder completing a new safety certification would be making a valid claim. These costs must relate to enhancing existing capabilities rather than starting a new trade or expanding into unrelated services.
If the course or training is to acquire a new qualification not related to your existing business activities, the cost is not allowable. This is because HMRC views it as capital investment in a new skill set, rather than a business expense incurred in the current line of work.
Conferences and Industry Events
Attendance at trade shows, networking events, and industry conferences may be claimed, provided there is a clear link to your business. This includes ticket prices, travel, and accommodation. Documentation such as agendas, session summaries, or marketing materials from the event can support your claim and show how it aligns with your business activity.
Remember that entertainment or leisure activities associated with the event are not allowable. If a ticket includes both business content and entertainment, you’ll need to apportion the cost and claim only the relevant part.
Books and Educational Materials
Books, manuals, or online resources that are essential to your trade and help you stay up to date with legislation, technique, or tools may also qualify as deductible expenses. These should be specific to your line of work. General education books or resources of personal interest are not considered allowable, even if they contribute indirectly to your development.
Bank Charges, Interest, and Financial Costs
Running a business involves managing money, and many of the associated costs are allowable, so long as they relate directly to your trade. If you operate a dedicated business bank account or pay fees for financial services used exclusively in your business, you may be entitled to claim those costs on your tax return.
Bank and Credit Card Charges
Charges levied by your bank on your business account are deductible. This includes:
- Monthly account fees
- Overdraft interest
- Transaction fees
- Credit card processing charges
If you use a personal account for business transactions, you’ll need to carefully separate business-related costs from personal spending. Only the fees and charges that relate to business transactions should be claimed. It is strongly advised to use a separate bank account for your business activities, not only to simplify bookkeeping but also to clearly support any expense claims.
Payment Processing and Merchant Fees
If your business accepts payments through card readers, online platforms, or payment gateways such as Stripe, PayPal, or Square, you can claim the percentage of each transaction charged by the provider as a fee.
These charges are considered necessary for collecting income and are fully allowable. You may also claim monthly service fees charged by such platforms, provided they are used solely for business transactions.
Loan Interest and Finance Costs
If you have taken out a business loan or finance agreement for commercial reasons, the interest paid is usually deductible. This includes business overdrafts, loans for purchasing equipment, or financing used for working capital.
However, the principal repayments themselves are not deductible—only the interest. Personal loans or credit used for mixed purposes cannot be claimed in full unless you can prove which part of the loan was spent on the business. Arrangement fees and early settlement charges for business-related finance are also generally allowable, assuming they are tied to your commercial activity.
Private Use Adjustments and Apportionment
One of the most common challenges for self-employed individuals is determining how much of an expense relates to business and how much is personal. This is especially true when using the same resource—such as a car, home, or phone—for both work and private life.
Shared Resources
If you use something both for your business and privately, you need to calculate the proportion that applies to your work and only claim that part. HMRC expects a reasonable and consistent method of apportionment.
For example, if you have a car and drive 10,000 miles a year, of which 4,000 are business-related, you can claim 40 percent of your allowable motoring costs. Similarly, if you use your home broadband for work about 60 percent of the time, that’s the share you can reasonably claim.
Being honest about private use is important. Overclaiming could attract attention during an HMRC compliance check and result in backdated tax, penalties, or interest.
Home Office Costs
As discussed in earlier parts, if you work from home, you can claim a portion of your utility bills, council tax, and rent or mortgage interest. The calculation typically considers:
- Number of rooms used for business
- Time spent working from home each week
- Purpose of the space (exclusive or occasional business use)
You cannot claim for the entire household bills unless the home is used exclusively as a business premises. Adjustments must be made to reflect personal use, even if you work full-time from a home office.
Internet and Mobile Phone
Apportioning phone and internet costs requires a logical and fair calculation based on usage. You could calculate business use by looking at your itemised phone bills or tracking how often the internet is used for emails, research, or uploading content.
Having a separate mobile contract for business use makes this simpler, but if you share a contract, only the work-related portion can be claimed.
Asset Depreciation and Capital Allowances
When you buy an expensive piece of equipment like a computer or camera, you may be required to claim it under capital allowances if it is expected to last several years. In these cases, private use must still be considered.
For instance, if you buy a laptop used 70 percent of the time for work and 30 percent for personal use, you can only claim for the 70 percent. You must also adjust the claim for depreciation over time if using capital allowance calculations.
Conclusion
Understanding what you can and can’t claim on your Self Assessment tax return is key to managing your finances effectively as a sole trader or small business owner. Every legitimate expense you include in your return reduces your taxable profit, which means you’ll only pay tax on your actual earnings rather than your gross income. This can lead to significant savings and ensures that you’re not overpaying HMRC.
Across this guide, we’ve looked at a wide range of allowable expenses that many self-employed individuals are entitled to claim. These include essential categories such as travel costs, staff wages, and business premises expenses, as well as more specific areas like legal fees, uniforms, marketing, technology, and professional development. In addition, we’ve explored the rules around financial charges and how to handle expenses that are shared between business and personal use.
The common thread throughout is that for an expense to qualify, it must be incurred wholly and exclusively for the purpose of running your business. Clear and accurate record-keeping is vital. This includes retaining receipts, invoices, mileage logs, and any documentation that supports how the expense relates to your trade. Apportioning mixed-use costs correctly and claiming only the business-related portion is equally important to stay compliant and avoid problems in the event of a tax investigation.
Whether you’re new to Self Assessment or looking to tighten your expense tracking, taking the time to understand what’s allowable will help you complete your tax return with confidence. It not only ensures you meet your legal obligations but also gives you peace of mind that you’re claiming everything you’re entitled to. By staying organised and informed, you can make Self Assessment less stressful and potentially more rewarding.