Claiming all your allowable expenses is one of the most effective ways to reduce your tax bill as a self-employed person. Yet many sole traders either don’t claim everything they’re entitled to — or claim things they shouldn’t. This guide sets the record straight.
What Are Allowable Expenses?
Allowable expenses are costs incurred wholly and exclusively for business purposes that you can deduct from your income before calculating your tax liability. The key test is whether the expense was incurred “wholly and exclusively” for business use.
💡 Key takeaway
Under the cash basis, you only record income when you receive it and expenses when you pay them — much simpler than accruals for most sole traders.
Office and Administration Costs
You can claim stationery, printing, postage, business phone calls, software subscriptions and professional memberships. If you work from home, you can claim a proportion of heating, electricity and broadband based on the number of rooms and hours used for business.
💵 Cash Basis
- Record income when received
- Record expenses when paid
- Simple — no debtors/creditors
- Default for most sole traders
- Limited to £150k turnover (old rules)
📅 Accruals Basis
- Record income when earned
- Record expenses when incurred
- More accurate picture of profit
- Required for limited companies
- Better for businesses with credit terms
Travel and Vehicle Expenses
Business mileage can be claimed at 45p per mile for the first 10,000 miles and 25p thereafter using the simplified expenses method. Alternatively, you can claim actual vehicle costs — fuel, insurance, servicing — proportioned to business use.
Marketing and Professional Fees
Website costs, advertising, business cards, social media tools, accountant and bookkeeper fees — all allowable. Professional development courses and subscriptions to trade publications directly related to your business are also claimable.
Equipment and Tools
Computers, phones, tools and equipment used for business can be claimed through the Annual Investment Allowance, which allows 100% deduction in the year of purchase for most equipment up to £1 million.
Frequently Asked Questions
Can I claim my mobile phone as a business expense?
If the phone is exclusively for business use, yes — 100%. If it’s also personal, you can claim a reasonable business proportion.
Can I claim meals as a business expense?
Only in limited circumstances — typically when travelling on business away from your normal place of work. Everyday lunch is not allowable.
Do I need receipts for all expenses?
HMRC requires you to keep records of expenses. Digital copies of receipts are acceptable. A bookkeeper can advise on record-keeping best practice.
