The complete sole trader expenses guide for 2025/26

What are allowable expenses?

HMRC allows sole traders to deduct expenses from their income before calculating tax. The key rule is that an expense must be wholly and exclusively for business purposes. If an expense has a personal element, you generally cannot claim it — unless you can clearly separate the business and personal portions.

Claiming allowable expenses reduces your taxable profit, which in turn reduces your Income Tax and Class 4 National Insurance bill. Getting this right can save you hundreds — or thousands — of pounds each year.

Office and admin expenses

These are some of the most commonly claimed expenses for sole traders:

• Stationery and postage — paper, envelopes, printer ink, stamps
• Phone and internet — business proportion only (e.g. if 60% of your phone use is for work, claim 60%)
• Software subscriptions — accounting software, design tools, project management apps used for business
• Business bank charges — monthly fees, transaction charges on your business account
• Printing and copying — including professional printing for marketing materials

Working from home

If you work from home, you can claim a proportion of your household costs. There are two methods:

• Flat rate: £6 per week (£312 per year) — no receipts required, simple to use
• Actual costs: Calculate the proportion of your home used for work (by rooms or hours) and apply that to your mortgage interest or rent, council tax, utilities, and broadband. This is more complex but can result in a larger claim.

Note: if you use the actual costs method and own your home, claiming a proportion of mortgage interest (not capital repayment) is allowed — but be aware this can affect private residence relief on any future sale.

Travel and transport

You can claim travel costs incurred for business purposes, but not for commuting between your home and a regular place of work.

Vehicles

The simplest method for vehicles is the HMRC mileage rate:

• Cars and vans: 45p per mile for the first 10,000 business miles, then 25p per mile
• Motorcycles: 24p per mile
• Bicycles: 20p per mile

Alternatively, you can claim actual vehicle costs (fuel, insurance, servicing, MOT, road tax, finance charges) apportioned by business use. You cannot use both methods — once you choose one for a vehicle, you must stick with it.

Public transport and other travel

• Train, bus, and taxi fares for business trips
• Parking charges (but not fines)
• Hotel accommodation when staying away from home for business
• Subsistence (meals) when staying away overnight — reasonable costs only

Equipment and tools

How you claim equipment costs depends on which accounting basis you use.

Cash basis (most sole traders): Equipment costs — computers, tools, office furniture, machinery — are deducted as an expense in the period you paid for them. No special process needed; they reduce your profit directly, just like any other business expense. This is the default for most sole traders and is how your expenses are recorded in your quarterly MTD updates.

Accruals basis: Capital items don't go directly into your profit and loss. Instead, you claim them through capital allowances, using the Annual Investment Allowance (AIA) to deduct 100% of the cost in year one (up to £1 million). This calculation happens at the End of Period Statement stage, not in your quarterly updates. If you later sell the asset, HMRC may reclaim some of that relief through a balancing charge.

Cars are the exception for everyone: Regardless of which basis you use, car costs always go through capital allowances (or the simplified mileage rate) — never as a direct expense.

Small items like stationery and consumables are straightforward revenue expenses under either basis and are claimed in full in the period you buy them.

Marketing and professional fees

• Website costs — design, hosting, domain registration
• Advertising — online ads, print advertising, social media promotion
• Accountancy and bookkeeping fees — including the cost of tax software like Bart
• Legal fees — for business contracts, debt recovery, or other business-related legal matters
• Professional memberships — industry bodies and trade associations relevant to your work

Note: legal fees for buying or selling a business asset are capital expenditure, not an allowable revenue expense.

Staff and subcontractor costs

If you pay other people to help you with your business, these costs are allowable:

• Subcontractor fees — payments to freelancers or contractors for work on your behalf
• Employee wages — if you have any employees, their gross wages, employer NI, and pension contributions are all deductible

Keep clear records of payments to subcontractors, including their name, address, and the amounts paid — HMRC may ask for this in an enquiry.

Training and development

You can claim training costs that update or improve skills you already have in your current trade. For example, a web developer attending an advanced coding course can claim the cost.

You cannot claim training to learn a brand new trade or skill you didn't already have — HMRC considers this a capital expense, not an ongoing business cost.

Clothing

Clothing is only claimable if it is:

• A uniform with your company name or logo
• Protective clothing required for your work (e.g. hard hats, hi-vis jackets, safety boots)
• Specialist costumes for performers

You cannot claim ordinary clothing even if you only wear it for work. HMRC's rule is that if you could wear it outside of work, it's not claimable.

Food and drink

Meals and subsistence are generally not allowable for sole traders — HMRC considers eating to be a personal need, not a business expense.

The exception is when you are staying away from home overnight for business. In that case, reasonable meal costs are claimable. "Reasonable" means normal restaurant prices — a five-course dinner would attract scrutiny.

Client entertainment (taking a client to lunch, for example) is also not allowable as a tax deduction.

Simplified expenses

HMRC offers simplified expense rates for some categories, which let you claim a flat amount without detailed calculations:

Frequently asked questions