What Expenses Can Sole Traders Claim? (And What Records to Keep)
As a sole trader you're taxed on profit, not turnover - so every legitimate expense you claim comes straight off your tax bill. For most sole traders paying basic-rate income tax plus Class 4 National Insurance, £100 of expenses saves £26. For a higher-rate taxpayer, it's £46. Our guide to how much tax to set aside shows what that means for the money you put by.
Yet we see the same two problems again and again: people under-claiming because they didn't know a cost qualified, and people over-claiming in ways that would struggle to survive an HMRC enquiry. This guide sets out exactly what you can and can't claim, the shortcuts worth using, and what records to keep.
It's part of our sole trader series of simple explainers and sits beneath our main Sole Trader Tax Guide, which covers the wider tax picture.
📋 Table of Contents
✅ The Golden Rule: Wholly and Exclusively
An expense is allowable only if it's incurred wholly and exclusively for the purposes of your trade. Where a cost has both personal and business use - your phone, your car, your broadband - you claim the business proportion, and you need to be able to show how you arrived at it.
That last part matters. A sensible, documented apportionment is defensible. A round number plucked from the air isn't.
🔀 Trading Allowance or Actual Expenses?
If your gross self-employed income is over £1,000, you have a choice each year:
Claim the £1,000 trading allowance as a flat deduction, with no receipts needed, or
Deduct your actual allowable expenses
You can't do both. The allowance suits people with very low costs - a tutor or consultant with almost no overheads. For most sole traders, actual expenses come to considerably more than £1,000, so deducting them saves more tax. Work it out each year rather than assuming.
🧾 What You Can Claim
Running the business:
Stock, raw materials and goods for resale
Tools and small equipment
Business insurance and public liability cover
Professional and trade subscriptions
Accountancy, bookkeeping and legal fees relating to the trade
Bank charges and interest on a business account or business loan
Getting work in:
Advertising, marketing and promotional costs
Website hosting, domain names and design
Printing, business cards and signage
Premises and admin:
Rent, rates, heat and light on business premises
A proportion of your home costs if you work from home (see below)
Phone and broadband, business share
Stationery, postage and software subscriptions
People:
Staff wages, employer's NI and pension contributions if you employ anyone
Subcontractor costs
Training:
Training that updates or maintains the skills you already use in your business is allowable. Training to acquire a wholly new skill or start a different trade generally isn't, as HMRC treats it as capital in nature.
🏠 Working From Home: Flat Rate or Actual Costs?
Two methods, and you can pick whichever gives the bigger claim.
Method 1: HMRC's simplified flat rate. No calculations, no apportionment - just log your hours:
Hours worked at home per month | Flat rate |
25 to 50 hours | £10 a month |
51 to 100 hours | £18 a month |
101 hours or more | £26 a month |
You need at least 25 hours in a month to claim anything for it, and the maximum is £312 a year. Two things it doesn't cover: phone and internet, which you claim separately as a business proportion.
Method 2: a proportion of your actual costs. Work out a fair share of rent or mortgage interest, council tax, utilities and insurance, usually based on rooms used and time spent. More work, but often a bigger claim if you work from home full time or have high bills.
A quick comparison: if your household utilities are £90 a month and business use is half, the actual-cost method gives £45 a month against the flat rate's £26. Worth doing the sum before defaulting to the simple option.
🚗 Vehicles and Travel
You can claim business journeys - visiting clients, collecting supplies, travelling to temporary workplaces. Commuting from home to a permanent base doesn't count.
Again, two methods:
Simplified mileage rates:
Cars and vans: 55p a mile for the first 10,000 business miles, then 25p
Motorcycles: 24p a mile
Bicycles: 20p a mile
The 55p rate applies from 6 April 2026, up from 45p - the first increase since 2011, so a lot of guidance still quotes the old figure.
Actual running costs: fuel, insurance, servicing, repairs and road tax, apportioned to business use, plus capital allowances on the vehicle itself.
One important catch: once you've used simplified mileage for a particular vehicle, you must keep using it for that vehicle for as long as you have it. You can't switch to actual costs later, so choose deliberately at the start.
Other travel - train fares, parking, congestion charge, and reasonable overnight accommodation and meals when away on business - is claimable on top. Parking fines are not.
🔧 Equipment and Capital Allowances
Bigger purchases that you'll use for years - a laptop, machinery, a van, tools, office furniture - are capital items rather than running costs. They're claimed through capital allowances instead.
For most sole traders this is simpler than it sounds, because the Annual Investment Allowance lets you deduct the full cost in the year you buy it, up to £1 million a year. That's far above what a typical sole trader spends, so in practice most equipment gets 100% relief immediately.
Cars are the exception - they don't qualify for the Annual Investment Allowance
and have their own rules based on CO2 emissions.
❌ What You Can't Claim
Client entertaining - meals, drinks or hospitality for customers, never allowable
Ordinary clothing, even if you only wear it for work. Uniforms, branded workwear and protective gear are fine
Your own wages or drawings - as a sole trader you're not an employee of your business
Everyday meals while working near home. Reasonable subsistence on genuine business travel is allowable
Fines and penalties, including parking tickets and late-filing penalties
Personal use of any mixed-use cost
Charitable donations from the business, which are dealt with differently
🧮 Worked Example: Ellie's First Full Year
Ellie is a freelance graphic designer. She invoices £46,000 and works from home around 90 hours a month.
Software subscriptions: £1,200
New laptop and monitor (Annual Investment Allowance): £2,100
Professional indemnity insurance: £340
Accountancy fees: £420
Advertising and website: £680
Home working, flat rate at £18 a month: £216
Phone and broadband, business share: £360
Mileage, 1,200 business miles at 55p: £660
Client lunches: £290 ❌ not allowable - client entertaining
Her allowable expenses total £5,976, giving a taxable profit of £40,024.
Had she missed the home-working claim, the mileage and the phone share - the three most commonly forgotten - she'd have overstated her profit by £1,236, costing around £321 in income tax and Class 4 NI combined.
📁 What Records to Keep, and for How Long
HMRC expects records supporting everything on your return:
Sales invoices and records of all income
Receipts and invoices for every expense
Bank and credit card statements
Your mileage log
Your home-working hours or apportionment calculation
Records of stock and work in progress
How long? At least five years after the 31 January filing deadline for that tax year. For 2026/27, that means until 31 January 2033.
Bank statements alone aren't enough. They show money left your account, not what it was for. HMRC wants the underlying invoice or receipt.
And from April 2026, sole traders with qualifying income over £50,000 must keep those records digitally and file quarterly under Making Tax Digital, with thresholds falling to £30,000 in 2027 and £20,000 in 2028. Our MTD for ITSA guide explains what that involves, and good bookkeeping habits now make it painless later.
⚠️ Common Mistakes to Avoid
Claiming the trading allowance and expenses. It's one or the other, not both.
Forgetting the small recurring costs. Software, subscriptions, bank charges and phone shares add up to hundreds a year and are the most commonly missed.
Treating equipment as a running cost. Capital items go through capital allowances - though the Annual Investment Allowance usually gives you the full deduction anyway.
Claiming client entertaining. It never qualifies, however business-related the conversation was.
Mixing personal and business banking. It makes apportionment guesswork and claims hard to defend.
Switching vehicle methods. Once you've claimed simplified mileage on a vehicle, you're committed to it for that vehicle.
Claiming everyday clothing. Only uniforms, branded kit and protective equipment count.
Claiming VAT twice. If you're VAT-registered, claim the cost excluding any VAT you reclaim on your VAT return. Our guide to VAT for sole traders explains how that works.
💬 Frequently Asked Questions
Can I claim for lunch while I'm working? Not for ordinary meals near your normal place of work. Reasonable subsistence while travelling on genuine business is allowable.
Can I claim my laptop? Yes, usually in full in the year you buy it through the Annual Investment Allowance. If you also use it personally, claim the business proportion.
Can I claim expenses from before I started trading? Generally yes. Costs incurred wholly for the business in the seven years before you start trading can usually be treated as incurred on your first day.
Do I need receipts for everything? Yes, ideally. Bank statements don't show what a payment was for, and that's precisely what HMRC needs to see.
Is the flat rate or actual cost method better for home working? It depends on your hours and bills. The flat rate is simpler and caps at £312 a year; actual costs often give more if you work from home full time.
Can I claim a suit I bought for client meetings? No. HMRC treats ordinary clothing as having a dual purpose, even if you'd never wear it otherwise.
💡 Key Takeaways
You're taxed on profit, not turnover - and £100 of expenses saves most sole traders £26.
The test is wholly and exclusively; apportion mixed-use costs and document how.
Choose either the £1,000 trading allowance or actual expenses, whichever is higher.
Home working: £10, £18 or £26 a month flat rate, or a share of actual costs.
Mileage at 55p for the first 10,000 miles, then 25p - and you're locked into whichever vehicle method you pick.
Equipment goes through capital allowances, with the Annual Investment Allowance usually giving full relief immediately.
Client entertaining and ordinary clothing are never claimable.
Keep records for five years after the filing deadline, digitally if MTD applies.
📥 Free Download: Sole Trader Allowable Expenses Checklist
Want a simple checklist to work through before you file? Download our Sole Trader Allowable Expenses Checklist - a one-page list of every claimable cost in this guide, the flat rates, and the records to keep alongside each one.
📞 Not Sure What You Can Claim? Ask ASBA Accounting
At ASBA Accounting, we help sole traders across Crawley and West Sussex claim everything they're entitled to, without straying into territory HMRC will question. We'll handle your tax return, make sure nothing's missed, and get your records ready for Making Tax Digital.
👉 Get in touch today or call us on 01293 525656 for friendly, straightforward advice.
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