One of perks of being self-employed is being able to claim legitimate business expenses to reduce your tax bill. The tricky part? Figuring out what HMRC will allow you to claim.
As a sole trader, your personal money and your business money are technically the same thing. This means HMRC has some fairly tight rules around what counts as a business expense. Read on to discover more details on exactly what you can and can’t claim.
The golden rule of sole trader expenses
HMRC’s basic test is simple: an expense must be “wholly and exclusively for the benefit of the trade.”
In plain English? If you bought it purely for your business, you can claim it. That new laptop for client work? Absolutely. Your summer holiday to Spain? Nice try, but no.
The good news is that sole traders can claim a percentage of costs that have both business and personal use. If you spend 60% of your phone time on business calls, you can claim 60% of your phone bill.
Duality of purpose
HMRC has another test called “duality of purpose” which is basically their way of saying: if you can’t clearly separate the business use from personal use, you can’t claim any of it.
Clothing is the classic example here. Even if you only wear that suit for client meetings, HMRC will still say no because you could theoretically wear it outside of work. More on this below.
The trading allowance: a simple alternative
If you’ve not earned much this tax year and your expenses have been minimal, you might want to consider the trading allowance instead of claiming actual expenses.
This gives you a straight £1,000 deduction from your profit – no receipts, no calculations. It only makes sense if your actual expenses are below £1,000. It’s a simple option that might be useful if you’re just starting out or have had a quiet year.
What expenses can sole traders actually claim?
Let’s dive into the detail and discuss what you can and can’t claim for your business.
Travel expenses
The good news: travel for business purposes is allowable.
The catch: “normal commuting” doesn’t count. If you’re travelling from home to your regular workplace, HMRC won’t let you claim it as an expense. But if you’re travelling to client sites, meetings, or temporary workplaces, that’s allowable.
Mileage rates you can claim:
- Car: 45p per mile for the first 10,000 miles, then 25p per mile after that
- Motorcycle: 24p per mile
- Bicycle: 20p per mile
Keep an accurate mileage log to support your claim. You don’t need petrol receipts unless you want to reclaim VAT on fuel (this isn’t applicable if you’re on the flat rate VAT scheme). Looking for more information on VAT? Read our beginner’s guide to VAT.
Public transport: Claim the full cost of your journey, but make sure you keep your tickets and receipts to back up your claim.
Meals and accommodation
If you’re working away from home, you can claim “reasonable” costs for food and accommodation.
HMRC don’t define what “reasonable” means, which gives you some flexibility. But use common sense – a modest hotel and a decent meal are fine. A five-star suite and champagne lunch at a Michelin-starred restaurant? That’s pushing it. Keep it sensible and you’ll be fine.
Equipment and materials
Need tools, materials, or equipment to do your job? These are fully allowable. This covers everything from a carpenter’s power tools to a graphic designer’s software subscriptions. If you need it to complete work as part of your trade, claim it.
Clothing
This is where HMRC get strict. The only clothing you can claim is stuff that’s clearly and exclusively for work.
You CAN claim:
- Protective clothing like safety boots or hi-vis jackets
- Specialist work clothing you wouldn’t wear outside work
You CAN’T claim:
- Business suits (even if you only wear them for meetings)
- Smart casual clothes for client-facing work
These items fail the duality of purpose test – you could wear them outside of work, so HMRC won’t allow them.
Use of home
If you work from home, you’ve got two options:
Option 1: Simple flat rate Claim £6 per week (£312 per year) with no receipts or calculations needed.
Option 2: Actual costs Work out a reasonable portion of your household bills based on how much you use your home for business. You’ll need detailed calculations to back this up.
Mobile phone and landline costs
Business call costs are fully allowable.
If your business phone or landline has minor personal use, HMRC will generally accept your claim without too much scrutiny. As a sole trader, you can claim a proportion based on your business usage, just be realistic about the split.
Professional subscriptions
Membership fees for trade bodies or subscriptions to work-related publications are allowable.
This includes things like professional insurance, industry association fees, or subscriptions to trade magazines that help you stay up to date in your field.
Bank charges and interest
Business bank account fees and interest on business borrowing are allowable expenses.
Charity donations and Gift Aid
This can get complicated. As a sole trader, you’ll receive tax relief on Gift Aid donations as long as you have a tax liability. But be careful – if you don’t have a tax liability (for example, if your total income is covered by your personal allowance) and you claim Gift Aid, this can actually create an extra tax bill for you.
Accountancy fees
The good news is that your accountant’s fees are fully allowable, giving you a tax-efficient way to get expert advice on your business and your tax position.
The bottom line on sole trader expenses
HMRC’s rules can feel complicated, but they boil down to one simple principle: if it’s genuinely for your business, you can probably claim it. If it’s personal, or if you can’t clearly separate business from personal use, you can’t.
Need help maximising your tax efficiency?
Getting your expenses right means paying the right amount of tax. Our sole trader package includes expert guidance on what you can claim, quarterly reviews to keep you on track, and unlimited support from qualified accountants who actually understand your business.
