If you're self-employed in the UK, you can deduct allowable business expenses from your income before calculating the tax you owe. That means you only pay tax on your profit, not your total turnover. The basic rule is straightforward: an expense must be incurred "wholly and exclusively" for the purposes of your business. Where things get complicated is in the detail — what counts, what doesn't, and what falls somewhere in between.
What kinds of expenses are generally allowable?
Most day-to-day costs of running your business qualify, provided they meet the wholly and exclusively test. The following categories cover the bulk of what self-employed people can claim.
Office and admin costs
Stationery, printer ink, postage, software subscriptions used for work, and phone bills (the business-use portion) all qualify. If you buy a laptop or other equipment solely for business use, that qualifies too — though the way you claim it may differ depending on whether you use cash basis or traditional accounting.
Travel and vehicles
Travel costs for business journeys are allowable. The simplest approach for most sole traders is to use HMRC's approved mileage rates — 45p per mile for the first 10,000 business miles in a year, then 25p per mile after that — rather than claiming the actual costs of running the vehicle. This avoids having to work out the business-use proportion of fuel, insurance, and servicing. Commuting from home to a regular fixed workplace does not count as a business journey.
Marketing and professional fees
Website hosting, online advertising, business cards, and any professional subscriptions relevant to your trade are allowable. Accountancy fees — including what you pay someone like us to prepare your self-assessment return — are also a legitimate business expense.
Stock and materials
If you buy goods to resell, or materials to complete work for clients, those costs are deductible in the period they relate to. This is one of the cleaner areas: if you spent money to deliver what a client paid you for, it almost certainly qualifies.
Insurance
Business insurance — public liability, professional indemnity, and similar policies — is allowable. Personal insurance policies are not.
What about working from home?
You can claim a proportion of your household costs if you work from home, but you cannot claim the full amount. The simplest method is HMRC's flat rate: £10 per month if you work from home between 25 and 50 hours a month, £18 per month for 51 to 100 hours, and £26 per month for over 100 hours. Alternatively, you can work out the actual proportion of costs — heating, electricity, broadband — that relate to your work use, though this requires more record-keeping. If you use a dedicated room exclusively for business, the calculation is more straightforward, but claiming a portion of your mortgage interest or rent can create complications if you later sell the property, so it is worth getting advice before going down that route.
What expenses can you not claim?
Anything with a personal element that you cannot separate out is generally not allowable. A business lunch with a client where you are also eating is technically dual-purpose and, under HMRC's strict interpretation, does not qualify — entertaining clients is specifically disallowed for tax purposes, even if it feels like a legitimate business cost. Clothing is another common misunderstanding: a suit bought for client meetings does not qualify because you could wear it outside work. Protective clothing or a uniform with a company logo is a different matter.
Fines and penalties — including HMRC late-filing penalties — are never allowable. Neither are political donations or most charitable gifts made through the business (though Gift Aid has its own separate rules).
Does it matter whether I keep receipts?
Yes, it does. HMRC can ask you to substantiate any expense you have claimed, and "I remember spending it" is not sufficient evidence. You should keep records — receipts, bank statements, invoices — for at least five years after the 31 January self-assessment deadline for the relevant tax year. Digital copies are acceptable, so photographing receipts as you go is a practical habit worth building from the start.
If you are based in or around Tring and your self-employment is relatively recent, it is worth sitting down with an accountant in your first year to go through what you have spent. People commonly miss legitimate deductions simply because they did not know something qualified, and equally, some confidently claim things that do not. Getting it right early is much simpler than correcting it later.
