One of the most straightforward ways to reduce your tax bill as a UK sole trader is to claim allowable expenses. Yet a lot of sole traders either claim too little — missing out on legitimate deductions — or too much, which creates problems if HMRC ever asks questions.
This guide covers what qualifies, what does not, and how to handle the grey areas.
The basic rule
HMRC’s test for an allowable expense is whether it was incurred “wholly and exclusively for the purposes of the trade.” That phrase does the heavy lifting.
If you bought something entirely for your business, you can claim the full cost. If you bought something that mixes business and personal use, you can only claim the business portion — and you need to be able to justify that split.
What you can claim
Office and equipment
If you work from a dedicated office or studio, rent, rates, and utilities are allowable in full. If you work from home, you can claim a proportion of household costs based on the space and time used for business — or use HMRC’s simplified flat rate of £10/month for 25–50 hours worked per month, £18/month for 51–100 hours, or £26/month for more than 100 hours.
Equipment you buy for business use — computers, monitors, cameras, tools — can be claimed in full in the year of purchase as a capital allowance (under the Annual Investment Allowance). This includes second-hand equipment.
Software and subscriptions
Business software, cloud tools, and professional subscriptions you use for your work are allowable. This includes design tools, project management apps, accounting software, and professional memberships relevant to your trade.
Personal subscriptions — streaming services, news sites you read for pleasure — are not, even if you occasionally find them professionally useful.
Travel and transport
Business mileage is claimable at HMRC’s approved mileage rates: 45p per mile for the first 10,000 miles in the tax year, 25p per mile after that (for cars). You can claim train, bus, and taxi fares for business journeys too.
Commuting from your home to a regular place of work is not an allowable expense. Travel between client sites, to meetings, or to temporary workplaces is.
If you use a vehicle for both business and personal trips, you can only claim the business proportion. Keep a mileage log — it is the clearest evidence if HMRC asks.
Marketing and advertising
Website costs, domain registration, hosting, advertising spend, printed materials, and anything else you pay to promote your business is allowable in full.
Professional fees
Accountant fees, solicitor fees for business matters, and professional indemnity insurance are all claimable. So are bank charges on a business account.
Training and development
Training that helps you improve skills you already use in your business is allowable. If you are a graphic designer who takes an advanced typography course, that qualifies.
Training that would help you move into a different field — a coder taking a plumbing course, for example — does not count, because it is not “wholly and exclusively” for your current trade.
Phone and broadband
If you use your phone or broadband for both business and personal purposes, you can claim the business proportion. A simple split based on usage is acceptable — just be able to justify it. If you have a separate business phone, that cost is allowable in full.
Stock and materials
If your business involves making or selling things, the cost of goods, raw materials, and any direct costs of production are allowable. This includes postage and packaging for goods you send to customers.
What you cannot claim
Client entertainment. Entertaining clients — taking them for lunch, to events, or buying them gifts — is not an allowable expense in the UK, even if it is clearly business-related. There is a small exemption for staff entertaining (£150 per head per year), but sole traders without employees cannot use it.
Clothing. Clothes you could conceivably wear outside of work are not allowable, even if you only wear them for client meetings. The exception is clothing that is exclusively for work and could not reasonably be worn otherwise — protective gear, branded uniforms, costumes.
Fines and penalties. Parking fines, tax penalties, and similar charges are never allowable expenses.
The personal portion of dual-use costs. If something is 60% business use and 40% personal, you can claim 60% — but not the rest.
Keeping records
You do not need to send receipts to HMRC when you file, but you need to keep them in case you are asked. HMRC can investigate up to seven years back for regular returns, longer for suspected fraud.
For most sole traders, a simple system works fine: a folder (physical or digital) with receipts, a record of mileage, and a log of what was claimed and why. The more consistently you track expenses as you go, the less painful it is at the end of the year.
The simplified expenses option
For some costs — working from home, using your vehicle for business, and living on your business premises — HMRC offers simplified flat-rate expenses. These are easier to calculate and do not require you to work out the exact business proportion.
They are not always the most beneficial option, but for sole traders who find the calculations fiddly, they are a legitimate alternative.
Allowable expenses are one of the few areas where being thorough actually reduces your tax bill — so it is worth spending time on. The key is keeping records as you go, being honest about the business/personal split, and not guessing at things you are unsure about.
When in doubt, ask your accountant. A small fee for clarity is usually worth more than the risk of a query from HMRC.
Griffio lets you log and categorise expenses as you go, so by the time your accountant needs the numbers, they are already there.