If you're self-employed in the UK, the expenses you claim directly reduce your tax bill. HMRC lets you deduct allowable business costs from your income before calculating what you owe. Every legitimate expense you miss is money left on the table.
This guide covers each category of allowable expense, what you cannot claim, how to keep HMRC-compliant records, and how the rules change under Making Tax Digital — which is now live for the highest income bracket as of 6 April 2026.
HMRC's statutory test is that expenditure is deductible only if it is incurred wholly and exclusively for the purposes of the trade, profession or vocation (s.34 ITTOIA 2005, with detailed HMRC guidance in the Business Income Manual at BIM37000). Where a cost has both business and private use, only the identifiable business proportion is deductible. HMRC specifically recognises apportionment for mixed-use costs such as motor expenses and use of home.
You cannot claim actual expenses and the £1,000 trading allowance against the same self-employment income. If gross trading income is no more than £1,000 you may not need to tell HMRC, subject to exceptions (Gov.uk — Tax-free allowances on property and trading income). The trading allowance applies to gross income, not profit, so a business turning over £1,500 with £700 of expenses still needs to register and file. If gross income exceeds £1,000 you can either claim allowable expenses or claim the trading allowance — not both.
Coming change worth knowing: From 2027/28, HMRC has confirmed the reporting threshold for trading income will rise to £3,000. The trading allowance itself stays at £1,000, but where gross income is between £1,000 and £3,000 you will be able to declare it through a new simplified online service rather than a full Self Assessment return. (HMRC, March 2025 announcement.)
How you declare expenses on your Self Assessment return depends on your turnover and is set out on the latest HMRC self-employment supplementary pages.
If your annual turnover is below £90,000 (the current VAT registration threshold), you can use the short self-employment pages, SA103S, and report a single total figure for all allowable expenses in box 20 (Gov.uk — SA103S; SA103S Notes 2025–26). You must still keep detailed underlying records.
If your turnover is £90,000 or more, you must use the full self-employment pages, SA103F, and break expenses down into HMRC's specific boxes (Gov.uk — SA103F; SA103F Notes 2025–26).
Even if your turnover is under £90,000, organising your bookkeeping under the SA103F box structure makes filing easier — and is how MTD-compatible software will categorise your data going forward.
Important caveat: The expense boxes described below are taken from HMRC's 2025/26 published SA103F (last updated 6 April 2026). The 2026/27 form is not yet live. The category structure has been stable for years, but you should re-confirm against the published 2026/27 form once HMRC releases it.
From the 2024/25 tax year onwards, the cash basis is HMRC's default method for sole traders and partnerships without corporate partners (Gov.uk — Cash basis). Under cash basis you record income when you receive payment and expenses when you pay them. The previous turnover cap was removed for 2024/25.
Under traditional (accruals) accounting you record income when it is earned and expenses when they are incurred. You can opt into traditional accounting by ticking box 10 on SA103F. It is sometimes preferable for businesses with high stock, complex receivables, or that need accruals accounts to obtain finance.
Key differences for expenses:
These are HMRC's actual box headings on the 2025/26 SA103F (boxes 17 to 30). Use them to organise your records, even if you file the short SA103S.
Raw materials, stock for resale, direct production costs, commissions, discounts. Under traditional accounting you adjust for opening and closing stock at year-end. Taxi/minicab drivers and road-haulage operators put fuel costs here, not in box 20 (SA103F Notes 2025–26).
Total payments made to CIS subcontractors. If you take on subcontractors you may need to register as a contractor under the Construction Industry Scheme.
Salaries, wages, bonuses, employee pension contributions, employee benefits, agency fees, subcontract labour costs not included elsewhere, and employer's National Insurance. Do not include payments to yourself, your own pension, or your own NI.
You have two options for vehicle running costs (Gov.uk — Car, van and travel expenses).
Simplified mileage expenses. Claim a flat rate per business mile. The HMRC-approved rates for 2026/27 — unchanged since 2011 — are (Gov.uk — Simplified expenses: Vehicles):
| Vehicle | Flat rate per business mile |
|---|---|
| Cars and goods vehicles, first 10,000 miles | 45p |
| Cars and goods vehicles, after 10,000 miles | 25p |
| Motorcycles | 24p |
This covers fuel, insurance, MOT, servicing, repairs, and depreciation. Keep a mileage log with dates, destinations, business purpose and miles.
A common myth: bicycles at 20p/mile. Self-employed cyclists cannot use simplified expenses. The Gov.uk simplified-expenses table for sole traders only covers cars/goods vehicles and motorcycles — there is no bicycle rate. The 20p/mile figure is the AMAP rate that applies to employees receiving mileage from an employer. Self-employed cyclists must claim actual costs.
Actual vehicle costs. Claim the business proportion of fuel, insurance, road tax, MOT, servicing, repairs, parking, and breakdown cover, plus capital allowances on the purchase price (and remember the 15% lease-rental disallowance for cars hired on or after 6 April 2021 with CO₂ emissions over 50g/km, per the SA103F Notes). Once you choose simplified or actual for a particular vehicle, you must stick with it for that vehicle — but you can use different methods for different vehicles.
Other travel. Train and bus fares, taxis, flights, hotel accommodation, parking, and meals on overnight business trips — for business journeys only. Ordinary commuting between home and a regular workplace is not allowable.
Our UK Mileage Tracker has saved routes, the 45p/25p threshold auto-calculated, and quarterly summaries ready for your tax return.
View Mileage Tracker — £1.99Rent for business premises, business and water rates, light, heat, power, property insurance, security, waste disposal, and the business proportion of home costs (or the simplified-expenses flat rate for working from home — see below).
Repairs to business premises, equipment and vehicles; maintenance contracts. The cost must restore the asset to its original condition. Improvements that enhance an asset beyond its original state are capital expenditure, not repairs.
Phone running costs (business proportion), postage, stationery, printing, small office equipment, and computer software (under two years old).
Advertising in newspapers and directories, mailshots, free samples, website costs, online advertising, business cards, trade-directory listings, social-media advertising, and SEO costs (Gov.uk — Marketing, entertainment and subscriptions).
Business entertainment of clients, suppliers or customers — and hospitality at events — is recorded in this box only to be added back as a disallowable expense. It is not tax-deductible for sole traders. HMRC is strict on this.
Interest on business loans, bank overdrafts, hire-purchase interest, and finance fees. Capital repayments are not allowable. Interest on personal mortgages or personal loans is not allowable unless the loan was taken out wholly and exclusively for the business.
Bank charges on a business account, overdraft and credit-card charges, lease-interest payments, and alternative finance payments. Capital repayments do not go here.
Per the SA103F Notes, this box is only used if you use traditional accounting. The debt must have previously been included in turnover. General bad-debt provisions, debts not included in turnover, and debts relating to fixed assets are disallowed. Under cash basis, bad debts are not relevant because the income was never recorded.
Fees for accountants, solicitors, surveyors, architects, professional indemnity insurance and other professionals — where the work relates to the trade.
The position on accountancy fees is more nuanced than widely understood. HMRC's Business Income Manual at BIM46450 confirms: "Fees incurred for preparing accounts for commercial reasons and for many other accountancy services satisfy the 'wholly and exclusively' test." Strictly, fees for "computing and agreeing the tax liability on trading profits" are not allowable. However, HMRC has a longstanding published practice of allowing normal recurring legal and accountancy expenses incurred in preparing accounts and agreeing the tax computation on trading profits.
In practice:
If your accountant's invoice covers both business and personal work, claim only the business proportion.
Depreciation is shown on the form for accounting purposes but is always disallowed for tax. Use capital allowances instead.
Trade or professional journals and subscriptions to relevant professional bodies, sundry running costs, and net VAT payments where applicable. Excluded by HMRC: payments to clubs, charities or political parties; everyday clothing.
Allowable: uniforms with your business logo; protective clothing required for your work (safety boots, hard hats, hi-vis jackets); costumes for performers (Gov.uk — Clothing expenses). Not allowable: everyday clothing, even if only worn for work.
In March 2024 HMRC clarified and broadened its position on training costs (Gov.uk — BIM35660; Gov.uk — BIM42526). Training costs incurred by a sole trader are now generally allowable where the course:
Training is not allowable if it is to start a new, unrelated trade or to acquire skills disconnected from the existing business. HMRC's manual at BIM35660 contains worked examples on both sides of the line.
Our MTD Quarterly Tracker has all the HMRC expense categories pre-built, with quarterly summaries and a submission-ready pack for your software.
View MTD Tracker — £5.99HMRC offers three categories of simplified expenses (Gov.uk — Simplified expenses). They are optional flat rates available to sole traders and partnerships without corporate partners.
If you work from home for 25 or more hours per month, you can use a flat rate instead of apportioning household bills (Gov.uk — Working from home):
| Hours of business use per month | Flat rate per month |
|---|---|
| 25 to 50 hours | £10 |
| 51 to 100 hours | £18 |
| 101 or more hours | £26 |
The flat rate covers heating, lighting, electricity and similar utilities for the workspace. It does not cover business telephone calls or internet — claim the business proportion of those on top.
Alternatively, calculate the actual business proportion of household costs (rent, mortgage interest, council tax, utilities, broadband) by rooms, time used, or another reasonable method. For high-utility homes, this is often more generous than the flat rate.
The flat mileage rates above (45p / 25p / 24p). These replace tracking actual vehicle running costs.
If you live in your business premises (B&B, guesthouse, pub, small care home), calculate total premises expenses, then deduct a flat amount for personal use, and claim the rest (Gov.uk — Living at your business premises):
| Number of people living there | Monthly flat-rate personal-use deduction |
|---|---|
| 1 | £350 |
| 2 | £500 |
| 3 or more | £650 |
For example, on £15,000 of total premises costs with two people living there year-round: deduct 12 × £500 = £6,000, claim £9,000 as a business expense.
HMRC explicitly disallows:
HMRC requires you to keep records of all business income and expenses, which must be accurate, complete and readable (Gov.uk — Business records).
What to keep:
How long to keep them. Self-employed individuals must retain business records for at least 5 years after the 31 January submission deadline for the relevant tax year (Gov.uk — How long to keep your records). For the 2026/27 tax year — return due 31 January 2028 — keep records until at least 31 January 2033.
If you submit a return more than four years late, records must be kept for 15 months after sending the return.
Penalties. HMRC can charge up to £3,000 per failure where you do not keep or preserve adequate records.
MTD for Income Tax became mandatory on 6 April 2026 for the first cohort (Gov.uk — Use Making Tax Digital for Income Tax).
| Mandation date | Threshold (qualifying income in prior year) |
|---|---|
| 6 April 2026 (now in force) | More than £50,000 (based on 2024/25) |
| 6 April 2027 | More than £30,000 (based on 2025/26) |
| 6 April 2028 | More than £20,000 (based on 2026/27) |
"Qualifying income" is gross income (turnover before expenses), not profit. It combines self-employment and/or property income. Employment, savings, dividends and pension income do not count.
What MTD requires:
Read our full guide: Making Tax Digital for Income Tax: What's Changing from April 2026
Class 2 National Insurance was abolished from 6 April 2024 for the self-employed (with voluntary contributions still possible to maintain State Pension entitlement). For 2026/27 you only pay Class 4 NI: 6% on profits between £12,570 and £50,270, and 2% above £50,270. NI is not a deductible business expense, but it is part of your overall self-employment tax position and worth tracking alongside.
This article is general guidance for UK sole traders, reviewed against current HMRC and GOV.UK guidance on 27 April 2026 for 2026/27 planning. It is not personal tax advice. The form-box references reflect the latest published HMRC SA103F/SA103S forms (2025/26, last updated 6 April 2026); final 2026/27 form references should be re-confirmed once HMRC publishes the 2026/27 forms in late 2026 / early 2027. For complex situations — partnerships, mixed income streams, capital allowances on a vehicle, MTD readiness, accountancy fees with mixed business and personal work — speak to a qualified accountant or tax adviser.