What Expenses Can You Claim as a Sole Trader? The Complete UK Guide for 2026/27

Every pound of allowable expense you claim reduces your taxable profit — which reduces both your income tax and your Class 4 National Insurance. Getting this right is one of the most direct ways to lower your tax bill within the rules. Getting it wrong in the other direction — not claiming things you're entitled to — costs you real money every January.

This guide covers what HMRC allows, what it doesn't, and where the grey areas sit for common sole trader situations.

The core rule: wholly and exclusively

HMRC's test for allowable expenses is that they must be incurred "wholly and exclusively for the purposes of the trade." This phrase does a lot of work. It means:

• Wholly: The expense is entirely business-related, not partly personal
• Exclusively: There is no non-business reason for the cost
• For the purposes of the trade: It relates to your actual business activity, not your general lifestyle or personal financial situation

If something has a dual purpose — business and personal — HMRC generally disallows the entire amount unless you can clearly separate the business and personal portions. The exception is where the duality is incidental: a business meal where you also happen to enjoy the food, for example, is still allowable (provided the primary purpose is business).

Travel and mileage

Travel costs for business journeys are deductible. The key distinction is that commuting — travel from your home to a permanent place of work — is not a business journey and cannot be claimed.

For most sole traders who travel to various client sites or work from home, the HMRC mileage rate is the simplest approach: 45p per mile for the first 10,000 business miles in a tax year, then 25p above that for cars and vans. This flat rate is meant to cover all vehicle costs — fuel, insurance, servicing, depreciation — so you cannot claim actual fuel costs separately if you use the AMAP rate.

You choose one method per vehicle for its lifetime in your business. If you bought the vehicle before using it for business, you may be better off tracking actual costs and applying a business-use proportion. For most sole traders, the mileage rate is simpler and competitive.

The mileage allowance applies to cars, vans, motorcycles (24p/mile), and bicycles (20p/mile). For each car journey where you carry a colleague or employee for business purposes, you can claim an additional 5p per passenger per mile on top.

Train, bus, and taxi fares for business journeys are deductible in full. Overnight accommodation and subsistence (meals) when working away from your base are also allowable, subject to HMRC's reasonableness expectations — a £250 dinner for one is unlikely to be accepted without pushback.

Working from home

If you use part of your home for business purposes, you can claim a deduction for the portion of home running costs that relates to business use. There are two methods:

Apportionment method: You calculate the business proportion of actual home costs — rent or mortgage interest (not the capital portion for mortgages), council tax, utilities, broadband, contents insurance. The apportionment is typically based on the number of rooms used for business divided by total rooms, and the hours spent working in those rooms versus total hours. This method usually gives a larger deduction and is particularly valuable if you have dedicated office space.

HMRC simplified expenses: A flat rate based on the number of hours you work from home per month. For 2026/27: 25–50 hours = £10/month, 51–100 hours = £18/month, 101+ hours = £26/month. This is much simpler but often produces a smaller deduction than the apportionment method.

The Use of Home Calculator calculates the apportionment figure. The Simplified Expenses Home Calculator shows the flat rate figure. Run both to see which is larger for your situation.

One important caveat: HMRC looks unfavourably on excessive home office claims. Claiming 80% of your home running costs as a business expense when you use one room for business and live in a five-bedroom house is the kind of thing that attracts scrutiny. Keep the proportion reasonable and be prepared to justify it with records.

Phone and broadband

Business calls on your personal phone are deductible in proportion to business use. If your phone is 60% business use, 60% of the monthly bill is allowable. Keep records to support the proportion claimed.

Broadband is allowable on the same proportional basis. If you have a dedicated business broadband line, it may be deductible in full. Most sole traders share their home broadband and should claim a reasonable proportion — often 50–70% depending on usage.

A dedicated business mobile used exclusively for work can be claimed in full. If it has any personal use, revert to the proportional approach.

Professional fees and subscriptions

Accountancy fees for preparing your Self Assessment return and business accounts are fully deductible. Legal fees related to your business (not personal legal matters) are also allowable.

Professional memberships, trade body subscriptions, and professional indemnity insurance relevant to your trade are deductible. Examples include solicitor practising fees, CIPD membership for HR consultants, RIBA membership for architects, or a journalism union membership for a freelance journalist.

General subscriptions to business publications, newspapers relevant to your industry, or trade journals that you read for professional purposes are allowable. A general newspaper that you would buy anyway is not.

Equipment and capital allowances

The Annual Investment Allowance (AIA) allows you to deduct the full cost of equipment in the year of purchase, up to a very generous threshold (currently £1 million per year — far above what most sole traders ever approach). This means a laptop, camera, desk, specialist tools, or other equipment purchased for your business can usually be deducted in full in the year you buy it, rather than depreciated over time.

The equipment must be used for business. If it has mixed personal and business use, only the business portion is deductible. A laptop used 70% for work and 30% for personal browsing qualifies for 70% of its cost as a deduction.

You cannot claim capital allowances on a car (there are separate capital allowance rules for vehicles — which is why the flat mileage rate is usually simpler). You also cannot claim the full purchase cost of a property.

Software and online services

Business software subscriptions — accounting software, project management tools, design applications, industry-specific software — are fully deductible. Annual or monthly subscriptions are allowable in the period they relate to.

Cloud storage, website hosting, domain registration, and professional email services used for your business are deductible. Stock image subscriptions, online research databases, and e-learning courses directly relevant to your trade are also allowable.

Marketing and advertising

Costs of promoting your business — website design and maintenance, advertising spend (Google Ads, LinkedIn, directories), printed marketing materials, branded merchandise, and PR costs — are deductible expenses.

Costs of a business website, including design, development, and hosting, are generally allowable. If the website has a capital element (a large one-off build cost that will provide lasting benefit for several years), it may need to be treated as a capital asset rather than a revenue expense — in practice, most sole trader websites are modest enough to be treated as fully revenue deductible.

What you cannot claim

Some common areas where sole traders mistakenly claim expenses include:

Personal expenses: Groceries, personal clothing (even if you wear it to work), home improvements that weren't specifically for business use, personal travel.

Commuting: Travel from your home to a regular fixed place of work. If you have a fixed office you rent, travel from home to that office is commuting, not a business journey.

Entertaining clients: Client entertainment — meals, hospitality, events — is specifically disallowed by HMRC as a business expense. Staff entertainment (including yourself) may be allowable for employed staff parties up to £150/person, but for sole traders entertaining clients, no deduction is permitted.

Fines and penalties: HMRC penalties, parking fines, and similar levies are not allowable.

Capital costs: The purchase price of property, land, or other capital assets (the ongoing running costs are a different matter).

Private use of vehicles: The personal-use element of car costs is always disallowed when tracking actual costs. This is one reason the flat mileage rate is simpler — it avoids the need to separate private and business use.

Record-keeping

HMRC requires you to keep records for five years from the 31 January Self Assessment deadline for the relevant year (or six years for VAT purposes). For expenses, this means:

• Invoices and receipts for all business purchases
• A mileage log recording the date, route, purpose, and distance of each business journey
• Bank statements showing business income and expenditure (a separate business bank account is not legally required but makes this much easier)
• Records of any home office calculations

Digital records are acceptable. Apps like Dext, AutoEntry, or simply photographing receipts with your phone are all fine. HMRC can request records during an enquiry — and if you cannot produce them, the deductions can be disallowed.

Putting it together

The practical approach: go through your bank statements line by line and categorise every transaction as business, personal, or split. Sum up the business totals by category, apply the right proportion to split items, and those are your allowable expenses. Subtract total allowable expenses from total business income to get your taxable profit.

Use the Self Assessment Estimator to see the tax impact of different profit levels. Reducing taxable profit by £1,000 saves a basic-rate taxpayer £260 (20% income tax + 6% Class 4 NI × £1,000 = £260). For a higher-rate taxpayer, that saving rises to £460 per £1,000 of deductible expense. The numbers justify the effort of keeping proper records.