Self Assessment Allowable Expenses for Sole Traders

The rule is short and the arguments are all about applying it. A cost is deductible if it was incurred wholly and exclusively for the purposes of the trade. Everything below is an application of that one test, with the flat rates HMRC publishes where working out the real figure is more trouble than it is worth.

Travel

Business travel is claimable. Fuel, parking, train and bus fares, taxis, tolls and congestion charges when the journey is for the business, together with hotel and reasonable subsistence on a business trip away from your normal base.

Ordinary commuting is not claimable. If you travel from home to the same workplace day in and day out, that is commuting however self employed you are. Parking fines are never deductible, wherever they were incurred.

For vehicles you choose between the actual costs and the flat rate, and you have to stay with whichever you pick for that vehicle until you replace it. Actual costs means the business proportion of fuel, insurance, repairs, servicing and road tax, plus capital allowances on the vehicle itself. The flat rate covers all of that in one figure.

For the 2025 to 2026 return the first band was 45p rather than 55p. Keep a mileage log with the date, the journey and the reason, because the claim is only as good as the record behind it.

Working from home

You can claim the business proportion of the running costs of your home, which means apportioning heat, light, metered water, broadband and rent or mortgage interest by the rooms used and the time they are used for the business. Done properly this often beats the flat rate, and it needs a calculation you can show.

You need to work at least 25 hours a month from home to use the flat rate, and it does not cover telephone or internet, so claim the business proportion of those separately. Be careful about claiming a room as exclusively business use, because exclusivity can raise questions on Capital Gains Tax when you sell the house.

Premises, office and admin

Rent, business rates, heat and light, water, insurance and security for business premises are deductible, as are the costs of running the office itself. Stationery, printing and postage, software subscriptions, website hosting and domain costs, telephone and mobile, and the business proportion of a mobile contract used privately as well.

Repairs to premises and equipment are deductible as they are incurred. Improvements are not, they are capital, and the line between repairing something and improving it is a question of degree that is worth getting right rather than guessing.

Equipment, tools and vehicles

Items that last, such as tools, machinery, computers, office furniture and vans, are normally claimed through capital allowances rather than as a running cost. The annual investment allowance usually means the full cost comes off your profit in the year you buy it, which is the same cash result as an expense but recorded differently.

Cars are the exception and are dealt with through writing down allowances at a rate that depends on the car's emissions, which is a large part of why the mileage flat rate is so often the better option for a sole trader.

If you use the cash basis, most equipment is simply deducted when you pay for it, with cars still treated separately. Which basis you are on changes the answer, so check before you claim.

Staff, subcontractors and professional fees

Wages, employer National Insurance, pension contributions for employees, agency fees, training for staff and subcontractor costs are all deductible. Your own salary is not, because a sole trader's profit is their income, and nor are your own National Insurance contributions or Income Tax.

Accountancy and bookkeeping fees are deductible, as are legal fees on day to day trading matters. Legal and professional fees on a capital transaction, such as buying a property, are not deductible against profit and instead form part of the cost of the asset. Fines and penalties, including HMRC penalties, are never deductible.

Subscriptions to a professional body or trade association relevant to your work are deductible, and so is work related training such as a course that updates skills you already use. Training that gives you an entirely new skill is capital in nature and is treated differently.

Finance, bank and insurance

Bank and credit card charges on the business account, interest on business loans and overdrafts, hire purchase interest, leasing payments and merchant or payment processing fees are deductible. Business insurance, including public liability and cover on business equipment or premises, is deductible. If you use the cash basis there is a cap on the interest and finance charges you can claim, so it is worth checking against your figures.

Advertising and marketing

Website design and hosting, online advertising, print advertising, signage, business cards, sample costs, mailshots and sponsorship with a genuine advertising return are all deductible. Client entertaining is not deductible, in any amount, whatever it achieves commercially. Staff entertaining is treated differently and has its own limited rules.

Stock, materials and direct costs

Goods bought for resale, raw materials, packaging, direct labour on the work and consumables used up in the job are deductible. Stock still unsold at the year end is carried forward rather than deducted, which is the point most often missed by a trader working from bank statements alone, because it moves profit between years.

What HMRC will not accept

• Ordinary commuting from home to a regular workplace.
• Everyday clothing, even if you only wear it for work. Protective clothing and branded uniform are fine.
• Client entertaining and gifts, other than small branded items within the specific rules.
• Fines, penalties and interest on late tax.
• Your own drawings, your own National Insurance and your own Income Tax.
• The private share of anything mixed. Apportion it, do not claim all of it.
• Costs with nothing behind them. A claim you cannot evidence is a claim you may lose.

The two allowances worth knowing

The trading allowance exempts the first £1,000 of gross trading income. If you claim it you cannot also deduct expenses, so it suits a small sideline with almost no costs and is the wrong choice for anything with real overheads. The property allowance works the same way for property income.

Finally, keep your records for five years after the 31 January filing deadline for the year concerned. The expenses above are only worth what you can show for them if HMRC asks.