What business expenses can a sole trader claim?

As a self-employed sole trader, claiming as much tax relief as possible should be among your biggest priorities. If you're self-employed you will be taxed on your hard-earned profits. Claiming all your business expenses to make sure you lower your taxable profit and, therfore your tax bill, will ensure you won't pay any more tax than is necessary.

In this guide, we ensure you're aware of what expenses you can claim against your income, so you pay the right amount of tax as a sole trader – and not a penny more!

It doesn’t matter whether you’ve been self-employed for 12 months or 12 years, all sole traders are entitled to claim for allowances and expenditure relating to their business. Knowing what you're allowed to claim can be complicated, and will depend on the type of work you're doing and the sector you work in.

This guide assumes you are using traditional accounting, also known as the accruals basis. For the cash basis see our guide here.

What counts as an allowable expense? 

An allowable expense is something that you can deduct from your profits to reduce your tax bill  when filing a self-assessment tax return or Making Tax Digital (MTD) for income tax end-of-year tax return with HMRC. 

The ‘wholly and exclusively’ rule 

Some types of business expense have specific rules about what can and can’t be claimed. But outside those categories of expenses, you should apply the ‘wholly and exclusively’ rule when working out whether you can claim an expense as tax deductible.  

The wholly and exclusively rule states that an expense is only allowable if it is: 

• revenue in nature – day to day expenses of the business and not an investment in buildings, plant and machinery or other big-ticket items 
• wholly and exclusively for the purposes of the trade – not also used for personal purposes 

Why record keeping matters 

It’s crucial to keep good records so that you don’t just understand which expenses are allowable, you can also prove that you’ve considered the rules each time should HMRC have a query in future.  

You need to keep records for at least five years after the 31st January tax return deadline for that tax year.  

Travel and vehicle expenses

You can either claim: 

• a mileage allowance to cover all vehicle fuel and maintenance costs or  
• the business portion of all your vehicle expenses.  

Mileage allowance  

You can claim for business mileage such as driving from home or your usual workplace to: 

• a temporary workplace, or  
• a customer or client’s premises.  

HMRC publishes approved mileage rates at any given time, and the rates are currently 55p per mile for the first 10,000 miles in a tax year and 25p for any subsequent miles (2026/27). This approved mileage rate covers the cost of fuel and the running costs of the vehicle so you cannot claim for repairs or other costs as well as this allowance.  

Actual travel and vehicle expenses 

Allowable business expenses are only permitted for the business element of: 

• fuel 
• parking 
• repairs 
• servicing 
• breakdown cover and 
• insurance.  

Public transport and accommodation 

You can claim business expenses for any other business-related travel costs, such as train, air or taxi fares for business purposes, as well as hotel rooms e.g. following an industry seminar or conference plus meals during overnight business trips. 

If you do not want to claim the cost running a vehicle for your business, you can use a simplified method which is to claim business mileage. You can claim for 45p per mile for the first 10,000 business miles. Anything over this figure will be claimed at a rate of 25p per mile. You can also claim business expenses for any other business-related travel costs, such as train, air or taxi fares for business purposes, hotel rooms e.g. following an industry seminar or conference and meals during overnight business trips.

What travel costs cannot be claimed 

If you buy a car or van, you cannot simply claim the cost of the vehicle and the cost of filling up your tank with petrol or diesel every time. The cost of a vehicle is not a revenue expense, and you must claim for your business mileage rather than the entire cost of a tank of fuel. 

In most cases, sole traders will not have a vehicle that’s designated exclusively for business use. You might use your vehicle to meet customers and suppliers but it’s highly likely that it will also be used for other purposes, such as doing your family grocery shopping, school runs and so on.  

Crucially, when calculating the business element, you can't include commuting costs – that's travel between home and work. Any speeding or parking fines incurred also can't be deducted. 

Buying or leasing vans and cars

If you buy a car or van through your business, it will be listed as a fixed asset in your accounts as a form of plant and machinery, it will therefore not be shown in your profit and loss account nor will it directly reduce your net profit. Tax relief is instead claimed through capital allowances, which can be claimed on the value of your purchase and reduce your taxable profit, but often spread out over more than one accounting period.

If you choose to lease a car rather than buy one for your self-employment, you can opt for one of three lease options:

• Hire Purchase
• Finance Lease
• Operating Lease

Each of these methods come with their own set of rules on how you treat them in your accounts, it's essential to seek professional guidance from your accountant so you can understand the best one for you and your business.

Working from home expenses

If you work from home as a sole trader, you should be able to claim a portion of your household bills as business expenses. Your claim can be based on your total household bills, the area of your home you’ve used and the duration of time you’ve used it for business purposes.  

Alternatively, you can calculate you claim using the simplified method which is a monthly rate based on the number of hours you work from home. 

Simplified expenses 

If you opt to trade as a sole trader, HMRC allows you to use its Simplified Expenses Calculator for some of your business costs. This calculator enables you to calculate your business expenses using flat rates rather than working out the specific costs to your business.  

This is often simpler and quicker and doesn't involve collating all your personal bills. Flat rates can be used to cover: 

• business costs for vehicles 
• costs of working from home 

The tool is not a detailed way of measuring business expenses. However, it can help you find out which way of calculating your business expenses will save you more money. The Simplified Expenses Calculator is not available to limited liability partnerships or limited companies. 

Calculating actual costs

There are many expenses you may be able to claim if you work from home, including:

• Mortgage interest/rent
• Council tax
• Electricity, gas and water
• Cleaning
• Insurance
• Some property repairs and maintenance

To work out the proportion of household expenses you can claim for each of the above costs, you will need to determine:

• how many rooms at home you use for work purposes and
• how long you spend using them for work.

Let’s say for example your property has five rooms and you use one of them Monday to Friday for business and it has private use at the weekends. You would start by calculating:

• a fifth of your household bills
• divide that total by seven days a week and
• multiply that by five working days.

This adjusts your expenses to only reflect the business use of this room. A real calculation is likely to be more complex than this so you should take professional advice. 

Premises, utilities and insurance 

If you use a business premises, you can include costs for: 

• energy costs 
• cleaning 
• water rates 
• rent and business rates as well as  
• repairs and maintenance  
• admin 
• phone, broadband and software 
• professional fees and subscriptions, and 
• advertising and marketing as business expenses in your accounts and tax return. 

Staff, subcontractor and training costs 

Wages, employer’s National Insurance Contributions (NICs), employer pension contributions and other staff costs are allowable expenses. 

Similarly, if you pay sub-contractors or freelancers, these fees are allowance expenses.  

Are training courses tax deductible?

If you are keen to improve your knowledge and skills in your area of expertise, you may wish to invest in training throughout the tax year.

Training courses that are relevant to your business and aim to further your career, not to gain new skills, are an allowable business expense by HMRC. For example, if you are an electrician that needs to enrol in a refresher course to understand the latest regulations, this expenditure will be tax deductible. 

If you are considering enrolling in a training course that will enable your business to enter an entirely new marketplace, this is not allowable. 

As ever, if you are unsure whether a training course will be tax deductible speak to an experienced accountant for advice. 

Equipment and assets 

Tools and other equipment 

If you are a builder, mechanic, or another trade that relies on tools and machinery to do your job, it’s possible to claim back tax on replacing and maintaining your essential equipment.  

You are entitled to claim tax relief when you first purchase the item either capital allowances or as an expense, depending on what kind of asset it is.

Common mistakes sole traders make 

• Leaving record keeping until the end of the tax year 
• Claiming actual costs incurred when only set amounts are allowed 
• Not separating personal and business expenses  
• Guessing what is allowed based on ‘common sense’ 

The best way to do bookkeeping

Don’t forget – if you are looking for an easier way to keep a record of your business expenses, saving hours of paperwork and administration week on week, check out QuickBooks, Xero or Dext bookkeeping software solutions. 

Need help claiming the right expenses?

If you wish to discuss any of our bookkeeping or accounting services or help with your self-assessment or MTD for income tax returns, please arrange a free initial consultation with our friendly and experienced team today on 01621 855822 or drop us a line using our online enquiry form.

Last updated 29 Jul 2026 | First published 15 Jul 2020

Share

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

---