Most sole traders either under-claim, out of caution, or claim something they shouldn’t, out of not knowing the rule. Both are avoidable once you understand the one principle everything else is built on. And there’s a genuinely recent change here (the mileage rate) that a lot of guides written even a year ago still haven’t caught up with.
The rule behind every allowable expense
HMRC’s test is that a cost must be incurred “wholly and exclusively” for your trade. In practice: if there’s any personal benefit mixed into the purpose of the spending, the whole expense technically fails the test, unless you can identify a specific, genuine business proportion of it, in which case that proportion is claimable. A phone bill is the classic example: if £70 of a £200 monthly bill is business use, you claim £70, not the full amount and not nothing.
Some costs don’t get this apportionment treatment at all, because HMRC treats them as having an unavoidable personal element no matter how you use them. Ordinary clothing and everyday food are the two that catch people out most often (more on both below).
What counts as an allowable expense
HMRC’s main categories run wide: office costs (stationery, the business proportion of phone and broadband bills, software with a working life under two years, postage, printing); travel costs (fuel, parking, train and bus fares, and vehicle costs generally); staff costs (salaries, subcontractor payments, employer pension contributions); and stock and materials, meaning anything bought to make or resell.
A few more worth knowing individually. Financial costs cover insurance, bank charges, interest on business loans and hire purchase, and most professional fees (accountants, solicitors, surveyors) where they relate to the business. Business premises costs cover rent, business rates, heating, lighting and security. Advertising and marketing covers website costs, print advertising, mailshots, and relevant trade or professional subscriptions.
Training courses are genuinely broader than they used to be: training to keep your existing skills current, or to learn new skills that still relate to your existing trade, is allowable. Training to start an entirely different business isn’t.
Clothing is the narrow one: only uniforms, protective clothing, or costumes qualify; see below for why.
Simplified expenses: flat rates instead of tracking everything
If keeping detailed records of every mile driven or every hour worked from home sounds like more admin than it’s worth, HMRC’s simplified expenses scheme lets you use flat rates instead of calculating actual costs.
Vehicle mileage is the change worth knowing about: as of 6 April 2026, the rate rose from 45p to 55p per mile for the first 10,000 business miles in the year, dropping to 25p per mile after that. It’s the first change to this rate since 2011, so if you’ve seen 45p quoted anywhere recently, including in older versions of guides like this one, that figure is now out of date. Motorcycles stay at a flat 24p per mile regardless of distance.
Working from home is based on hours worked per month:
| Hours worked from home | Flat rate |
|---|---|
| 25–50 hours | £10/month |
| 51–100 hours | £18/month |
| 101+ hours | £26/month |
This covers general household running costs only. You can still claim the business proportion of your actual phone and broadband bills separately, on top of the flat rate.
Living at your business premises is relevant if you run something like a guesthouse or small care home and live on-site: instead of working out your actual private-use proportion, you total your premises costs and subtract a flat monthly amount (£350 for one person living there, £500 for two, £650 for three or more) to arrive at the claimable business figure.
The trading allowance: an alternative to claiming expenses at all
If your actual expenses are modest, you can claim a flat £1,000 trading allowance instead of working out real costs, which is useful for smaller or part-time self-employment where receipts are minimal. The one firm rule: you can’t do both. Claim the £1,000 allowance against a particular income and you can’t also deduct actual expenses for that same income. It’s one or the other.
Where people trip up
A few things HMRC is consistently clear aren’t allowable, however reasonable they might feel. Client entertaining (meals, hospitality, or most gifts for clients, suppliers or customers) isn’t deductible, even though it’s genuinely spent for business purposes. Everyday clothing doesn’t qualify either: a suit you only wear to client meetings still fails the test, because it has ordinary everyday use outside work; only uniforms, genuine protective clothing, or costumes for actors and performers make the cut. Fines and penalties for breaking the law are never allowable, in any circumstance. Money drawn from the business for personal use isn’t an expense at all. Drawings are a distribution of profit you’ve already been taxed on, not a cost of running the business.
One nuance catches people out more than the rest: fees for preparing your business accounts and the self-employment pages of your return are allowable, but the fee for preparing your personal Self Assessment return as a whole isn’t treated as a business cost.
A change on the horizon: not here yet
The government has announced an intention to raise the trading income reporting threshold from £1,000 to £3,000, so that more people with small amounts of side income won’t need to file a full tax return at all. Don’t confuse this with the £1,000 trading allowance itself, which isn’t changing. Income above £1,000 will still be taxable, just reported through a simpler route once this comes in. No firm date has been confirmed yet, so don’t plan around it until it’s actually in force.
Getting the claim right, not just the receipt kept
The mileage rate change is a good example of why it’s worth having someone keep an eye on this rather than relying on whatever figure you last looked up. Small, easily-missed updates like this add up over a tax year. Our tax services cover Self Assessment and expense claims, and our Self Assessment deadlines guide shows how this fits into your filing calendar. Get in touch if you’d like your current expense claims looked over.
Last reviewed: 19 August 2026. This is general guidance, not personalised advice. Rules and figures may have changed since publication, so please check with us before acting on it.
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