What business expenses can you claim as a sole trader?

Whether you work from home or have premises equipped with expensive equipment, every business has ongoing expenses.

As a sole trader, you can deduct many of these costs from your income and pay less tax.

But what counts as a legitimate business expense when you are self-employed? And how do you claim?

What’s in this guide?

Please note that if you’re running a company, the rules are different. See our limited company expenses guide.

What is a business expense?

A business expense is anything you have paid for that is necessary for running your business. There are two main types:

• Revenue expenses
• Capital expenses

As a sole trader, you can claim both. But different rules apply to how you claim, depending on the type of expense.

Revenue expenses and the wholly and exclusively test

What counts as a revenue expense

Revenue expenses refer to the costs associated with the day-to-day operation of your business. These include software subscriptions, insurance, training that maintains or updates existing skills, and items like protective equipment.

The wholly and exclusively test

For a revenue expense to be allowable, it must usually satisfy HMRC’s wholly and exclusively test:

• Your business is the only reason you incurred the expense.

For example, you would not need accounting software if you did not have a business. So your annual subscription satisfies the wholly and exclusively test.

• The expense has both private and business uses, but you can specify exactly how much of it is wholly and exclusively for business purposes.

Mixed-use costs: claim the business proportion

If an expense is partly business and partly personal, you can only claim the business proportion. Which means you will need to work out what that is.

To claim business mileage, for instance, track your mileage and clearly distinguish between business and personal drives.

To claim part of your phone and broadband bill, work out what percentage of your usage was business-related.

When 100% can still be claimed

You can claim the full amount of an expense if you can show that personal use is incidental. Typically, this means that personal use is:

• Insignificant. For example, only one out of every twenty phone calls you make from your phone is a personal call.
• Subordinate. For example, you wear your protective clothing from home to save time, rather than changing on the job.

Costs you usually cannot claim

Some expenses are not allowable and cannot be claimed, even though you could argue you have made them wholly and exclusively for business. HMRC lists common disallowable expenses in Self Assessment helpsheet HS222. Typical examples include:

• The capital repayment on a loan or overdraft. Interest is allowable.
• The cost of buying and renovating premises.
• Entertaining clients.

At the other end of the spectrum, you cannot claim a business expense if it is impossible to separate business use from personal use. Food is a classic example.

While a lunch may have a business function, it also gives you sustenance. Subsistence may be allowable if you are away for business overnight.

Simplified expenses

As a sole trader, you can use HMRC’s simplified expenses instead of working out your actual business costs. These are flat rates set by the government for:

• Mileage costs
• Working from home
• Living at your business premises

When flat rates help

• Less admin and simpler record keeping.
• A consistent method that is easy to enter on the return.

When actual costs may be better

• Your real costs are higher than the flat rate.
• You want precision for mixed-use items.
• Note: if you use mileage flat rates, you cannot also claim capital allowances on the vehicle.

What to enter on your return

If you use flat rates, enter the flat-rate totals and do not also claim the same costs elsewhere. It is worth comparing actual costs versus flat rates first.

Read our simplified expenses guide to help you decide.

How to claim expenses on your Self Assessment return

Claiming expenses is straightforward once your bookkeeping matches the categories on the return.

• If your annual turnover is less than £85,000, jot down your total expenses in box 31 of your Self Assessment tax return.
• If your turnover is £85,000 or over, you will need to categorise your expenses and complete the detailed sections on the return.

Keep your totals consistent with your records. If you use mileage flat rates, enter the total mileage claim instead of fuel, repairs, or capital allowances for the car. For mixed-use items such as phone and broadband, claim only the business proportion and keep your workings.

Capital expenses and capital allowances

You make a capital expense when you buy equipment, machinery, or vehicles that you will use in your business.

HMRC does not define exactly what a capital asset is, but it is usually something that:

• You need for your business, such as a laptop or a delivery van.
• Is relatively expensive. There is no fixed threshold. A piece of equipment costing £100 might be a capital asset if you are a one-person operation in business for less than a year. It might be a revenue expense if you have dozens of employees and a £1 million turnover.
• Will benefit your business in the long term. You would expect to use a capital asset for at least a year.

As a sole trader, you do not deduct the full purchase price as a revenue cost. Instead, you usually claim relief through the capital allowances system.

In many cases, the Annual Investment Allowance (AIA) lets you deduct the full cost of qualifying items in the year of purchase, up to the annual limit.

Some assets, such as cars, may require a Writing Down Allowance (WDA) where a percentage is deducted each year.

The key distinction is that capital items provide value over time, rather than being consumed immediately.

For detailed rules, worked examples, and current limits, see our capital allowances guide.

Records and evidence

HMRC does not have a preferred format for your records. You can write out your transactions in a notebook and keep a shoebox of receipts, or you can record everything in accounting software. They do require your records to be complete, accurate, and readable.

• A record of your transactions.
• Documentary proof of your expenses. This includes receipts and invoices, as well as the workings used to determine the business proportion of a cost.
• For travel and mileage, a log of journeys and miles claimed.

Keep records for at least 5 years after the 31 January submission deadline for the relevant tax year. Keep longer if there are queries or if you file late.

Related guides

• What expenses can you claim as a sole trader
• Mileage allowance for sole traders
• Use of home as office
• Meals, subsistence and hotels
• Training expenses
• Phone and internet expenses
• Personal expense claims and your tax return
• Capital allowances explained

FAQs

Can I backdate expenses from before I registered as self-employed?
Some costs incurred just before you start can be treated as if incurred on day one, if they would have been allowable once trading began. Training taken before trading is not usually deductible. See our guide to backdating expenses.

Can I claim clothing?
Every day clothing is not allowable. Protective clothing and uniforms used only for work are usually fine. Read our clothing expenses guide.

How do simplified expenses affect my return?
If you use flat rates for mileage or working from home, enter the flat-rate totals and do not also claim the same costs elsewhere. See simplified expenses.

Do I need an accountant?
Not required, but helpful if you have mixed-use items, capital purchases, or you are unsure about allowances. An accountant can make sure you claim everything you are entitled to and avoid common errors.

Where do I enter expenses on the return?
In the Allowable expenses section of your Self Assessment return. If detailed categories are shown, split costs to match your bookkeeping. See our Self Assessment guide.

What about VAT on expenses?
If you are VAT-registered and the expense relates to taxable business activities, you can usually reclaim input VAT, subject to the normal rules and the provision of valid VAT invoices. See HMRC’s VAT guide (Notice 700).