Sole trader allowable expenses: the 2026/27 round-up


One of the most common questions sole traders ask their accountant is "can I claim this?" The answer usually comes down to one phrase from HMRC: wholly and exclusively. An expense is allowable if it was incurred wholly and exclusively for the purposes of your trade. Get comfortable with that test and the categories below, and you will stop both missing legitimate claims and claiming things that would not survive an enquiry.

What "allowable" really means

The wholly-and-exclusively test is stricter than it sounds. If an expense has a dual purpose, part business and part personal, the whole thing is disallowed unless you can split it into a definite business part. Your mobile phone bill is a good example: the contract itself is personal, but the business calls are claimable if you can identify the business proportion. There is no room for guesswork here, which is why keeping evidence matters as much as knowing the categories.

The main categories you can claim

Office and communication costs

Stationery, printing, postage, and computer software used for the business all qualify. Phone, mobile and broadband costs are claimable for the business proportion, so work out a reasonable split and apply it consistently. If you use software subscriptions for design, accounting or project management, those are allowable too.

Travel costs

Travel for business counts: train fares, mileage in your own car, parking, tolls and hotels when you work away. The mileage rates are 45 pence per mile for the first 10,000 business miles in a year and 25 pence per mile after that. What does not count is ordinary commuting, the regular journey between home and your usual place of work. If you work from home and travel to clients, those client journeys are business travel and can be claimed.

Clothing and uniforms

You can claim protective clothing, uniforms and costumes that are specific to your work. A builder's safety boots, a chef's whites or a branded uniform all qualify. What you cannot claim is ordinary clothing, even if you only wear it for work. The famous test cases on this are strict: a suit worn only for client meetings is still everyday clothing in HMRC's eyes.

Staff and subcontractor costs

Wages, salaries and bonuses paid to employees are allowable, as are payments to subcontractors and freelancers. Employers' national insurance and pension contributions count too. If you pay family members, the amount must be a genuine commercial rate for work actually done, or HMRC will disallow it.

Premises costs

Rent, business rates, utilities, insurance and repairs for business premises are all claimable. If you work from home, you can claim a proportion of household costs such as heating, electricity and broadband based on the rooms used and the time spent working, or use the simplified flat rates instead: 10 pounds a month for 25 to 50 hours of home working, 18 pounds for 51 to 100 hours, and 26 pounds for 101 hours or more.

Advertising and marketing

Website costs, online advertising, printed materials, and networking event fees are allowable. One to watch: entertaining clients is not allowable, no matter how business-like the dinner felt. Staff entertaining has its own separate rules and a 150 pound per head annual limit for tax-free staff parties, but client entertaining is simply disallowed.

Financial and insurance costs

Accountancy fees, bank charges on the business account, interest on business loans, and business insurance premiums are all claimable. If you use an accountant for your self assessment, that fee is an allowable business expense. Many sole traders use accounting outsourcing services to keep their records clean through the year, and the fee itself reduces the taxable profit.

What you cannot claim

Some items trip people up every year. Fines and penalties, including parking fines incurred on business journeys, are not allowable. Personal living costs are not allowable. Depreciation of assets like vans or equipment is not claimed as an expense; instead you claim capital allowances, which is a separate mechanism. And anything with an unmistakable dual purpose that cannot be split, like a gym membership "for business energy", will not pass the test.

The 1,000 pound trading allowance

If your total business expenses are modest, you can skip all of the above and simply deduct the trading allowance of 1,000 pounds from your turnover instead of claiming actual expenses. You cannot use the allowance alongside actual expenses, and once your turnover passes 1,000 pounds you must register for self assessment. For side businesses with very low costs it is often the simpler and better option. For everyone else, actual expenses usually give a bigger deduction.

Keep records that back up every claim

Whatever you claim, keep the evidence: receipts, invoices, bank statements and a simple log of mileage and home-working hours. HMRC expects you to keep records for five years after the 31 January filing deadline. Digital copies are fine. The traders who sail through enquiries are not the ones with the cleverest claims, they are the ones with the tidiest records. If your trade is growing and the paperwork is growing with it, getting help with corporation tax and self assessment support keeps the expenses right and the return filed on time.


 

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