Sole Trader Expenses: What You Can and Can't Claim (2026/27)

The golden rule

An expense is allowable if it is incurred wholly and exclusively for your business. If a cost is partly personal, you can usually claim just the business share - as long as that share can be sensibly worked out.

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HMRC's own example: your mobile phone bill for the year is £200. You spend £130 on personal calls and £70 on business calls. You can claim £70.

Official guidance: Expenses if you're self-employed (GOV.UK)

What you CAN claim

·      Office costs - stationery, phone and internet bills (business share), software, printing

·      Travel - fuel, parking, train or bus fares, hotel rooms and meals on overnight business trips

·      Clothing - uniforms and protective clothing needed for the job (not everyday clothes)

·      Staff - salaries and subcontractor costs

·      Things you buy to sell on - stock and raw materials

·      Financial costs - insurance, bank charges

·      Business premises - heating, lighting, business rates

·      Advertising and marketing - including your website costs

·      Training - courses related to your existing business, for example refresher courses

Official guidance: Expenses if you're self-employed (GOV.UK)

What you CANNOT claim

• Entertaining clients, suppliers or customers - no, not even that coffee meeting

• Everyday clothing - even if you only wear it for work

• Ordinary commuting - travel between home and your regular place of work

• Fines and penalty charges - parking fines included

• Gym memberships, political donations, most charitable donations and most gifts

• Anything for personal (non-business) use

Official guidance: Travel costs (GOV.UK) · Clothing (GOV.UK) · Entertainment and subscriptions (GOV.UK)

The easy option: HMRC's flat rates ("simplified expenses")

Instead of tracking every receipt for certain costs, sole traders can use HMRC's flat rates:

Business mileage (2026/27):

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Cars and goods vehicles - first 10,000 business miles 55p

Cars and goods vehicles - over 10,000 business miles 25p

Motorcycles 24p

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Note: the 55p rate is new for 2026/27 - it was 45p for many years, so plenty of older guides are out of date. Once you use the flat rate for a vehicle, you must keep using it for that vehicle, and you can't combine it with claiming the vehicle's actual running costs or capital allowances.

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Working from home (if you work 25+ hours a month from home):

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Hours of business use per month - Flat rate per month

25 to 50 - £10

51 to 100 - £18

101 and more - £26

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The home flat rate doesn't cover phone or internet - claim the business share of those separately.

Official guidance: Simplified expenses (GOV.UK)

The £1,000 trading allowance

If your total self-employment income is small, you can instead use the tax-free £1,000 trading allowance - but you can't claim any expenses on top of it. If your actual expenses are more than £1,000, claiming real expenses is usually better.

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(Heads-up: the government has announced plans to raise the Self Assessment reporting threshold for trading income to £3,000. That change is not yet in force - and it's about paperwork, not tax: tax is still due on income above the £1,000 allowance.)

Official guidance: Tax-free allowances on property and trading income (GOV.UK)

Equipment and tools

Since April 2024, "cash basis" accounting is the standard method for sole traders. Under it, equipment you buy to keep and use in the business (laptops, tools, machinery) is normally claimed as a straightforward business expense in the year you buy it. Cars are the main exception - they're claimed either through the mileage flat rate or through capital allowances (a way of spreading the cost over time for tax - we handle this for you).

Official guidance: Cash basis (GOV.UK) · Capital allowances (GOV.UK)

Costs from before you started trading

Business costs you paid up to 7 years before your first day of trading (for example, equipment, insurance or advertising bought while setting up) can usually be treated as if you spent them on day one - so don't throw those receipts away.

Official guidance: HMRC Business Income Manual - pre-trading expenditure

Keep your records (and know about Making Tax Digital)

Keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year.

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And if your combined self-employment and property income is over £50,000, you're now within Making Tax Digital for Income Tax (from April 2026): digital records and quarterly updates to HMRC through compatible software. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028 - so most sole traders will be in it soon. We can set you up on the right software and handle the quarterly updates for you.

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Official guidance: How long to keep your records (GOV.UK) · Check if Making Tax Digital applies to you (GOV.UK)