As a sole trader, you can deduct business expenses before tax is worked out. That lowers your taxable profit and your tax bill. HMRC does set clear rules on what counts as a business expense and what does not.
Claim too much and you risk an enquiry. Claim too little and you pay more tax than you need to.
Disclaimer: This article is for general information only. Allowable expenses depend on your own circumstances and the nature of your business. Check the current HMRC rules or speak to a qualified accountant before you claim anything.
What business expenses can you claim on Self Assessment?
Sole traders can claim expenses that are wholly and exclusively for business use. Common examples include office costs, travel, staff, marketing, professional fees, and equipment. If you use something for both personal and business purposes, you can only claim the business share.
The “wholly and exclusively” rule matters. If an expense has any personal use, only the business part counts. So if you use a phone 70% for work and 30% personally, you can claim 70% of the cost.
These are the main categories.
Office and equipment costs
Office costs include stationery, printer ink, postage, phone and broadband bills, software subscriptions for work tools, and small items of equipment.
Larger items, such as computers, cameras, and tools, may qualify for the Annual Investment Allowance or capital allowances instead of a direct expense deduction.
Home office costs for sole traders who work from home are handled separately. See below.
Can sole traders claim home office expenses?
Yes. If you work from home regularly, you can claim a share of your home costs, such as rent, mortgage interest, utilities, and broadband, based on how much of your home you use for work and how long you use it. HMRC also offers a simplified flat rate if you do not want to work out the exact amount.
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 only cover working from home costs. If you use a room only as an office, you may be able to claim a larger amount, but it can affect Capital Gains Tax when you sell your home. Get advice before you use the exclusive use route.
What mileage rate applies to Self Assessment?
HMRC lets self-employed sole traders claim a flat mileage rate for business travel in their own vehicle. For cars, the approved rate is 45p per mile for the first 10,000 business miles in a tax year and 25p per mile after that. Motorcycles are 24p per mile. Cycles are 20p per mile.
Keep a mileage log with the date, route, business reason, and miles. Then multiply the miles by the approved rate. If you use the approved mileage rates, you cannot also claim fuel costs separately.
Travel to your normal workplace does not count as a business expense. Travel to temporary workplaces, client sites, or business meetings does.
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. Keep a record of what you paid and when.
Sole traders cannot claim a salary for themselves. Your drawings are not an expense. Money you take out of the business is profit, and it is taxed at your personal Income Tax rate.
Can you claim training as a business expense?
Training costs are allowable when the course directly supports your current business 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 line of work. The cost of an original qualification is not allowable.
For example, a freelance graphic designer can claim the cost of updating design software skills. The same designer cannot claim the cost of studying accountancy. That would be 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: membership fees for professional bodies relevant to your work, trade publications.
Clothing: only if it is 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 you cannot claim on Self Assessment?
Items you cannot deduct include:
- Your own salary or personal drawings
- Personal clothing, unless it is a uniform or protective gear
- Speeding fines or parking fines
- Entertainment for clients. HMRC does not allow business entertainment deductions for sole traders
- The personal use part of mixed use expenses
- Political donations
- Any expense that is not 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 you receive it and expenses when you pay them. This is simpler and HMRC accepts it for most small businesses.
Under traditional accruals accounting, you record income when it is earned and expenses when they are incurred, even if payment has not 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 are not sure which one 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.
Getting help with self assessment in the UK from an accountant means your expenses are categorised correctly, you do not miss anything you are entitled to, and you do not claim anything you should not.
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 will send you our current pricing. DASA’s self assessment service.