Maximising Tax Deductions: Allowable Expenses for Sole Traders

Navigating the complexities of claiming expenses as a sole trader can be daunting. In this guide, we break down what you can and cannot claim to ease the process for you.

The HMRC summary of what can be claimed is anything that is wholly and exclusively for business use. They also need to be reasonable. But that also comes with some grey areas. In this post we will look at the most common expenses that we come across. Please note that we are also going to cover ‘Capital Allowances’ which are, in fact, different to a business expense, but to keep things simple we will include them in this post!

Office Costs

• stationery
• printing
• postage
• phone bills
• internet
• software subscriptions
• rent for business premises (whether that is an office or coworking space – or working from home, although working from home as it’s own set of rules which you can read more about here)
• insurance
• utilities and business rates if you rent an office or business premises
• repairs or maintenance to equipment or property

Travel costs

• fuel
• parking
• train or bus fares
• vehicle insurance
• accommodation and meals on certain trips

Note: Travel is a tricky area and should be considered carefully. We recommend you look at this FAQ we posted about travel and subsistence. You may also wish to look at simplified expenses for mileage which is usually easier to claim and works out the same (if not better). You can even claim mileage for travelling on your bike!

Clothing

• uniform
• protective clothing
• costumes

Staff costs

• salaries (not your own)
• pensions and employers NI contributions
• benefits
• training
• subcontracted labour

Reselling goods

• stock to resell
• materials and any costs associated with producing goods to sell

Legal and financial

• accountancy fees
• bookkeeping fees
• legal or other professional fees for your business
• insurance policies (such as professional indemnity and public liability)
• bank and credit card fees
• foreign transaction fees
• interest on loans and credit cards

Marketing, entertainment and subscriptions

• advertising
• website
• trade or professional journals
• trade body or professional organisation membership (if related to your business)
• domain costs
• attending networking events

Training Costs

• relevant training courses for your businesses

You can read more about training here as there are some quirks as to what can and can’t be claimed for training. Please note that in March 2024 HMRC announced a revision to allowable training costs and we will update when we have more information confirmed.

Capital Allowances

• equipment (such as computers, phones, printers)
• machinery
• business vehicles
• furniture (for example a desk, office chair, filing cabinet)

What Expenses Can’t be Claimed?

• penalties and fines
• clothing that doesn’t have a logo or provide a safety/protective purpose
• commuting expenses (eg travel from home to office)
• childcare
• pet care
• capital repayment of loans or mortgage (although the interest can be claimed)
• charitable donations (these should be processed through your self assessment but aren’t allowable as a business expense)
• gym membership
• golf club membership
• beauty and hair care
• political donations
• every day meals (look at our travel and subsistence post for more information on what can be claimed)
• medical insurance
• pension contributions (although relief can be claimed if you’re a higher rate taxpayer through your self assessment)
• taking a client to lunch
• your drawings from the business

As a sole trader if you have a cost that is both personal as well as for business (eg a mobile phone bill) you can apportion our the amount of business to personal use. You may also choose to claim simplified expenses. We have written about simplified expenses in more detail here.

For a more detailed looked at these expenses, you can visit the HMRC page, Expenses if you’re self employed. If you are unsure of whether an expense is an allowable or deductible expense for your business, contact the HMRC Self Assessment helpline (or webchat), or ask your accountant.

Ready to streamline your finances and maximize your deductions as a sole trader? Work with us to navigate the complexities of tax returns and expense management. Book in a Discovery Call to speak with us about how we can work together.