One of the most common questions we get from sole traders is a variation of the same thing: “Am I claiming everything I should be?” The answer, more often than not, is no. Knowing what expenses you can claim as a sole trader is one of the most direct ways to reduce your tax bill, and the rules are more straightforward than many people expect.

HMRC allows sole traders to deduct allowable business expenses from their turnover before calculating the tax they owe. That means every legitimate expense you record reduces your taxable profit, and with it, your Income Tax and National Insurance bill. The key word is “allowable” and understanding what that means in practice is where most of the confusion lies.

Below, we cover the main categories, the rules around costs that blur the personal and professional line, and the choice between simplified flat rates and claiming actual costs.

Before getting into categories, it helps to understand the principle HMRC uses to decide whether an expense is allowable. The cost must be incurred wholly and exclusively for the purposes of your business. That phrase does a lot of work.

It means the expense must have a clear business purpose, not just a tangential connection to your work. A laptop you use to run your business passes the test. A laptop you bought primarily for personal use, and occasionally use for invoicing, does not, at least not in full.

It also means the expense must actually have been incurred. You cannot estimate or round up. HMRC expects records: receipts, invoices, bank statements, and mileage logs where relevant. Good record-keeping is not bureaucracy for its own sake. It is what stands between a legitimate claim and one that gets queried.

One important distinction: allowable expenses cover day-to-day running costs. Larger purchases, such as equipment, machinery, or a business vehicle, are treated differently under capital allowances rules, which we touch on later. The two categories are not interchangeable.

HMRC groups allowable expenses into broad categories. Here is what typically falls into each:

• Office costs: stationery, printer ink, postage, and software subscriptions used for the business.
• Travel: fuel or public transport costs for business journeys (not the commute to a fixed place of work), parking, and accommodation on overnight business trips.
• Clothing: uniforms, protective workwear, or costumes required for the job. Everyday clothing does not qualify, even if you only wear it for work.
• Staff costs: wages, employer National Insurance contributions, and pension contributions for any employees you have.
• Cost of goods sold: stock, raw materials, and the direct costs of products you sell or use to deliver a service.
• Financial costs: bank charges, accountancy fees, business insurance premiums, and interest on business loans.
• Premises costs: rent, business rates, utilities, and maintenance for a dedicated business space. Home-working costs are handled separately.
• Marketing: website hosting, advertising spend, print costs, and subscriptions to directories or platforms used to find clients.
• Training: courses and professional development that maintain or improve skills directly relevant to your current trade. Training for a completely new trade does not qualify.

This list is not exhaustive, but it covers the categories most sole traders encounter. If a cost exists because of your business and passes the “wholly and exclusively” test, it is worth checking whether it belongs here.

Many expenses for sole traders are not purely one or the other. A phone contract used for client calls and personal calls. A car driven to client sites and used for the school run. A home office that doubles as a spare bedroom. HMRC’s position on mixed-use costs is clear: you can claim the business proportion, and only the business proportion.

In practice, that means working out a reasonable split and being consistent about it. For a phone, you might estimate that 60% of your usage is business-related and claim 60% of the monthly cost. For a car, you would track your business mileage as a proportion of total mileage over the year and apply that percentage to your actual running costs.

“Reasonable” is the operative word. HMRC does not expect perfection, but it does expect a genuine attempt to reflect the actual split. Claiming 90% business use on a car you drive primarily for personal journeys is the kind of thing that attracts scrutiny on a tax return.

The simplest way to handle vehicles and home-working costs is to use simplified expenses instead of calculating actual costs. We cover those in the next section. For other mixed-use items, keeping a brief log or note of how you arrived at your split is good practice, particularly if the amounts involved are significant.

HMRC offers an alternative to tracking actual costs for three specific areas: vehicles, working from home, and living on business premises. These are called simplified expenses, and they use flat rates instead of requiring you to calculate real costs.

Vehicle mileage rates

Rather than calculating fuel, insurance, and depreciation, you can claim a flat rate per business mile. As of the current tax year, the rates are 45p per mile for the first 10,000 business miles in a car, and 25p per mile after that. For motorcycles, the rate is 24p per mile. You keep a mileage log, multiply the miles by the rate, and that is your claim. Straightforward, and no need to separate out personal running costs.

One important point: once you choose simplified expenses for a vehicle, you must use it for the life of that vehicle. You cannot switch to actual costs later.

Working from home

If you work from home, you can claim a monthly flat rate based on the hours you work there each month: £10 for 25 to 50 hours, £18 for 51 to 100 hours, and £26 for 101 hours or more. For many part-time sole traders, this is simpler than calculating a proportion of actual household bills, though if your home-working costs are high, actual costs may give a larger deduction.

Living on business premises

If you run a business from a property you also live in, such as a bed and breakfast, flat rates apply based on the number of people living there who are not part of the business: £350 per month for one person, £500 for two, and £650 for three or more.

Beyond the obvious categories, there are a few areas where sole traders regularly leave money on the table.

Equipment and capital allowances

Larger purchases, such as a computer, camera, or tools, are not usually claimed as a straightforward expense in the year of purchase under traditional accounting. Instead, you claim capital allowances, and the Annual Investment Allowance allows most sole traders to deduct the full cost of qualifying equipment in the year they buy it. This is often more generous than people expect, and it is worth understanding before you write off a significant purchase incorrectly.

Professional subscriptions and memberships

If you belong to a professional body or trade association relevant to your work, the membership fee is usually allowable. Same goes for relevant trade publications or professional journals.

Accountancy and professional fees

The cost of an accountant preparing your Self Assessment tax return is itself an allowable expense. So are legal fees incurred for business purposes, such as reviewing a client contract.

Pre-trading expenses

Costs incurred before you formally started trading, up to seven years before, may be claimable if they would have qualified as allowable expenses had the business been running at the time. This catches out a lot of people who spent money on setting up and assumed it was just gone.

If you are unsure whether something qualifies, the question to ask is: would this cost exist if I did not have this business? If the honest answer is no, it is probably worth exploring further.