As a sole trader, you can deduct allowable business expenses from your income before tax is calculated. That lowers your taxable profit and your tax bill. But HMRC has clear rules about what counts as a business expense and what doesn’t. HMRC’s guide to expenses if you’re self-employed has the full list of allowable categories.
Overclaiming puts you at risk of an enquiry. Underclaiming means paying more tax than you should. If you’re new to self-employment or have recently taken on rental income, our guide covers whether you need to complete self assessment.
Disclaimer: This article is for general information only. Allowable expenses depend on your specific circumstances and the nature of your business. Check the current HMRC rules or speak to a qualified accountant before claiming expenses.
What business expenses can you claim on Self Assessment?
Sole traders can deduct expenses that are wholly and exclusively for business use. Common categories include office costs, travel, staff, marketing, professional fees, and equipment. Mixed-use expenses, where you use something for both personal and business purposes, can only be claimed for the business proportion.
The “wholly and exclusively” rule matters. If an expense has any personal element, you can only claim the business portion. A phone used 70% for work and 30% personally means you can claim 70% of the cost.
The main categories are:
Office and equipment costs
Office costs include: stationery, printer ink, postage, phone and broadband bills (business proportion), software subscriptions for work tools, and small items of equipment.
Larger items of equipment, computers, cameras, tools, may qualify for the Annual Investment Allowance or capital allowances rather than a direct expense deduction.
Home office costs for sole traders who work from home are covered below.
Can sole traders claim home office expenses?
Yes. If you work from home regularly, you can claim a proportion of your home costs, rent, mortgage interest, utilities, broadband, based on how much of your home you use for work and for how many hours. HMRC also offers simplified expenses as a flat-rate alternative if you don’t want to calculate the exact proportion.
Simplified expenses (flat rate):
- 25 to 50 hours worked at home per month: £10/month
- 51 to 100 hours: £18/month
- More than 100 hours: £26/month
These flat rates are for working-from-home costs only. If you use a room exclusively as an office, you may be able to claim a larger amount, but it can complicate Capital Gains Tax if you sell your home. Get advice before claiming the exclusive-use route.
What mileage rate applies to Self Assessment?
HMRC allows self-employed sole traders to claim a flat mileage rate for business travel using their own vehicle. The approved rate for cars is 45p per mile for the first 10,000 business miles in a tax year, and 25p per mile above that. Motorcycles are 24p per mile. Cycles are 20p per mile.
You keep a mileage log, date, route, business reason, and miles and multiply by the approved rate. You can’t also claim actual fuel costs separately if you use the approved mileage rates.
Travel for ordinary commuting, going to a permanent workplace, is not a business expense. Travel to temporary workplaces, client sites, or for business meetings is.
What staff costs can you claim?
If you employ staff or use subcontractors, you can claim: employee wages, employer National Insurance contributions, employer pension contributions, and payments to subcontractors (keeping a record of what you paid and when).
Sole traders cannot claim a salary for themselves. Your drawings aren’t an expense. The money you take out of the business is profit, it’s taxed at your personal Income Tax rate.
Can you claim training as a business expense?
Training costs are allowable if the training is directly relevant to your current business activities and updates existing skills or knowledge. You cannot claim for training that helps you start a new trade, qualify for a new profession, or move into a different area of work. The cost of original qualifications is not allowable.
For example, a freelance graphic designer updating their skills in design software can claim the cost. The same designer studying accountancy cannot, that’s a new trade.
What other expenses can sole traders claim?
Common additional categories:
Marketing and advertising: website costs, online advertising, business cards, exhibition stands, trade directories.
Professional fees: accountancy fees, solicitor fees for business matters, professional indemnity insurance, business insurance.
Banking costs: bank charges on a business account, interest on a business loan or overdraft. Personal bank charges are not allowable.
Stock and materials: anything you buy to sell on, or materials used in your trade.
Subscriptions: professional body memberships relevant to your work, trade publications.
Clothing: only if it’s a uniform or protective clothing specific to your job. Ordinary clothing, even if you only wear it for work, is not allowable. A site worker’s hard hat is claimable. A consultant’s business suit is not.
What can’t you claim on Self Assessment?
Items you can’t deduct include:
- Your own salary or personal drawings
- Personal clothing (unless a uniform or protective gear)
- Speeding fines or parking fines
- Entertainment for clients, HMRC doesn’t allow business entertainment deductions for sole traders
- Personal use proportion of mixed-use expenses
- Political donations
- Any expense that isn’t wholly and exclusively for business
Cash basis vs traditional accounting, does it matter?
Most sole traders use cash basis accounting, which means you record income when it’s received and expenses when they’re paid. This is simpler and HMRC accepts it for most small businesses.
Under traditional accruals accounting, you record income when it’s earned and expenses when they’re incurred, even if payment hasn’t happened yet. For complex businesses with significant stock, accruals may be more appropriate.
The method you use affects which expenses you can claim and when. If you’re not sure which applies to you, ask an accountant.
How do you claim expenses on Self Assessment?
You enter your total income and total allowable expenses on your Self Assessment return. The difference is your taxable profit. For most sole traders with simple affairs, HMRC’s online SA return has straightforward boxes for each expense category.
Keep receipts, invoices, and records for everything you claim. HMRC can ask for evidence going back 6 years from the date you filed the return. For the exact filing dates and what happens if you miss them, read our guide on late filing penalties for self assessment.
Getting help with self assessment in the UK from an accountant means your expenses are categorised correctly, you don’t miss anything you’re entitled to, and you don’t claim anything you shouldn’t.
DASA reviews your expenses as part of your return
We prepare sole trader Self Assessment returns from scratch, categorise expenses properly, and identify deductions you may have missed.
Get a quote and we’ll send you our current pricing, DASA’s self assessment service.