Self-Employed Expenses You Can Actually Claim Against Tax

Every unclaimed business expense is tax you didn't need to pay. Yet many sole traders under-claim, either from uncertainty about what qualifies or simply not tracking costs properly through the year. Here's what HMRC actually allows.

The core rule

HMRC's test is that a cost must be incurred "wholly and exclusively" for business purposes. Where something has mixed personal and business use — a mobile phone, for instance — you can only claim the business proportion, and you need a reasonable method for splitting it.

What you can claim

Allowable categories include office costs such as stationery and phone bills, travel costs including fuel, parking, and train or bus fares, and — for those working from home — a proportion of household bills, or a flat rate of up to £312 a year if you don't want to calculate an exact proportion. Software subscriptions used for business, including cloud storage, domain names, and productivity tools, are fully deductible in the year you pay for them. If you employ staff, salaries, employer National Insurance, pension contributions and training costs are all allowable too.

The trading allowance trade-off

There's a decision point worth knowing: you can either claim your actual allowable expenses, or use the £1,000 tax-free trading allowance instead — but not both. If your genuine expenses are below £1,000 a year, the trading allowance is simpler and may save more tax; if they're above it, itemising properly usually wins.

Checklist: getting your expenses right

• Keep every receipt — HMRC can request evidence for any claim, and records must be retained for at least five years
• Decide upfront each tax year whether the £1,000 trading allowance or itemised expenses will save you more
• For home working, calculate whether the flat rate or a proportional bills method gives a bigger deduction
• Separate personal and business spending — a dedicated business bank account or card makes this far easier at year-end
• Apportion mixed-use costs (phone, vehicle, home internet) fairly and consistently, not just to whatever minimises tax that year
• Review your expense categories against HMRC's guidance at least annually, since allowable categories and flat rates are periodically updated

Why this matters more under Making Tax Digital

With Making Tax Digital for Income Tax now mandatory from April 2026 for sole traders and landlords with qualifying income over £50,000, expenses need to be logged digitally throughout the year via compatible software rather than reconstructed once a year for a Self Assessment return. Good habits now make quarterly digital updates far less painful.

International comparison

The UK's "wholly and exclusively" test has a close cousin in the US, where the IRS requires deductible business expenses to be "ordinary and necessary" — a similarly strict, if differently worded, standard. Australia's ATO applies a comparable requirement that expenses be incurred in earning assessable income, with equivalent record-keeping obligations.

Key Numbers

• £1,000 — tax-free trading allowance, an alternative to itemising expenses
• £312 — flat-rate annual home working allowance if not calculating exact proportions
• 5 years — minimum period to keep expense records
• £50,000 — qualifying income threshold requiring Making Tax Digital from April 2026

Sources

• GOV.UK: Expenses if you're self-employed
• MyIVA: Self-Employed Allowable Expenses UK — Full 2026 List
• GOV.UK: Sign up for Making Tax Digital for Income Tax

Educational content only — not financial advice.