The Complete List of Allowable Expenses for UK Sole Traders 2026

What Are Allowable Expenses?

If you're a sole trader in the UK, allowable expenses are the costs you incur wholly and exclusively for business purposes that you can deduct from your income before calculating your tax bill. The more legitimate expenses you claim, the less tax you pay — it really is that simple.

HMRC's golden rule is that an expense must be incurred "wholly and exclusively" for the purposes of your trade. That doesn't mean every penny has to be 100% business — some costs can be split between personal and business use — but the business portion must be clearly identifiable and reasonable.

This guide covers every major category of allowable expense for UK sole traders in the 2025/26 and 2026/27 tax years, with practical examples to help you claim confidently.

Office and Premises Costs

These are the costs of your working space, whether that's a rented office, a co-working space, or a room in your home.

What you can claim:

• Rent for business premises
• Business rates
• Water rates for business premises
• Electricity, gas, and heating for business premises
• Property insurance for business premises
• Security costs
• Business use of your home (either simplified expenses or actual costs — more on this below)

If you work from home, you have two options. The simplified expenses method lets you claim a flat rate: £10 per month for 25-50 hours of business use, £18 per month for 51-100 hours, or £26 per month for 101+ hours. Alternatively, you can calculate the actual proportion of household costs attributable to business use — typically based on the number of rooms used and the hours of use.

Travel and Transport

Travel expenses are one of the most commonly claimed — and most commonly misunderstood — categories.

What you can claim:

• Vehicle costs (fuel, insurance, MOT, repairs, breakdown cover) for business journeys
• Mileage at HMRC approved rates (45p per mile for the first 10,000 miles, 25p thereafter)
• Train, bus, and taxi fares for business travel
• Hotel accommodation for overnight business trips
• Parking charges at business destinations
• Congestion charges and tolls for business journeys
• Bicycle costs for business travel
• Air fares for business travel

What you cannot claim:

• Travel between your home and your regular place of work (this is commuting)
• Parking fines or speeding fines
• Travel costs for a journey that is partly personal unless you can clearly separate the business portion

You must choose between the mileage method and the actual costs method for vehicle expenses — you cannot mix and match. If you use simplified mileage expenses, that single rate covers fuel, insurance, repairs, and depreciation all in one. With Accounted, Penny tracks your mileage automatically when you log trips via WhatsApp.

Stock and Materials

If you sell physical goods or use materials in your work, these costs are allowable.

What you can claim:

• Raw materials and stock for resale
• Direct costs of producing goods
• Packaging materials
• Freight and delivery costs for goods you sell
• Small tools and equipment used in production

The cost of stock is usually claimed when it's sold, not when it's purchased. If you buy £5,000 of stock but only sell £3,000 worth in the tax year, you claim £3,000 in that year.

Staff Costs

If you employ people or use subcontractors, these costs are deductible.

What you can claim:

• Employee salaries and wages
• Employer's National Insurance contributions
• Employer pension contributions
• Recruitment costs (advertising, agency fees)
• Subcontractor costs (but watch out for CIS if you're in construction)
• Benefits provided to employees
• Training costs for staff

If you hire subcontractors in the construction industry, you may need to operate the Construction Industry Scheme (CIS) and deduct tax at source.

Clothing and Uniforms

This is a surprisingly restrictive area.

What you can claim:

• Protective clothing required for your work (hard hats, steel-toed boots, high-visibility jackets)
• Uniforms with your business logo that aren't suitable for everyday wear
• Costumes for performers
• Specialist clothing required by your profession

What you cannot claim:

• Smart clothes for meetings, even if you only wear them for work
• A suit, even if you'd never wear it outside of client meetings
• Warm clothing for working outdoors (unless it's specialist protective gear)

The test is whether the clothing is everyday wear or genuinely specialist. A plumber's overalls? Yes. A consultant's blazer? No.

Marketing and Advertising

Getting the word out about your business is a perfectly legitimate expense.

What you can claim:

• Website design and hosting
• Online advertising (Google Ads, Facebook Ads, Instagram promotion)
• Business cards and printed materials
• Trade show and exhibition costs
• PR and marketing agency fees
• Sponsorship of local events (if genuinely for business promotion)
• Email marketing software
• Social media management tools

Professional Fees and Services

Expert advice is deductible — including the cost of keeping your books in order.

What you can claim:

• Accountancy fees
• Legal fees related to your business (but not fines or penalties)
• Professional indemnity insurance
• Public liability insurance
• Trade or professional body subscriptions
• Regulatory fees and licences
• Debt collection costs
• Architect or surveyor fees (if revenue, not capital)

Financial Costs

The costs of running your business finances are allowable.

What you can claim:

• Bank charges on your business account
• Credit card charges
• Interest on business loans
• Hire purchase interest (the interest element only)
• Leasing payments for business equipment
• Credit reference checks on customers
• Bad debts that you've genuinely written off

Technology and Software

In today's world, most sole traders rely on technology.

What you can claim:

• Computer hardware (laptops, monitors, keyboards) — either as capital allowances or if under the Annual Investment Allowance
• Software subscriptions (accounting software, design tools, project management)
• Cloud storage
• Domain name registration and renewal
• Mobile phone costs (business proportion)
• Broadband (business proportion if working from home)
• Printer ink and consumables

If you use a phone or computer for both personal and business purposes, you can only claim the business proportion. Keeping a simple log of usage for a typical month gives you a reasonable percentage to apply.

Professional Development

Investing in your skills can be tax-deductible — but there are important limits.

What you can claim:

• Training courses that update or maintain existing skills
• Professional journals and publications
• Books related to your trade
• Conference attendance fees
• CPD (Continuing Professional Development) costs required by your profession

What you cannot claim:

• Training to acquire new skills for a different trade
• Courses that bring new capabilities rather than updating existing ones

The distinction matters: a web developer learning a new programming language is updating existing skills. A web developer training to become a plumber is acquiring new skills for a different trade.

Insurance

Various forms of business insurance are deductible.

What you can claim:

• Professional indemnity insurance
• Public liability insurance
• Employer's liability insurance (compulsory if you have employees)
• Business premises insurance
• Business equipment insurance
• Product liability insurance
• Cyber insurance
• Business interruption insurance

What you cannot claim:

• Personal life insurance
• Private health insurance (for yourself — employer-provided health insurance for staff is allowable)

Entertainment and Hospitality

This is one of the most restrictive categories.

What you generally cannot claim:

• Client entertainment (meals, drinks, event tickets)
• Hospitality for potential customers

Limited exceptions:

• Staff entertainment up to £150 per head per year (the annual party exemption)
• Advertising gifts costing less than £50 per recipient per year, carrying a conspicuous business advertisement, and not being food, drink, tobacco, or vouchers

Yes, that client lunch is not tax-deductible. It's one of the most common misconceptions in self-employment.

Repairs and Maintenance

Keeping your business assets in working order is deductible — but improving them is treated differently.

What you can claim:

• Repairs to business equipment, vehicles, and premises
• Maintenance costs
• Replacing like-for-like (e.g., replacing a broken window with an equivalent window)

What you cannot claim as revenue expense:

• Improvements and upgrades (these may qualify for capital allowances instead)
• Initial repairs to an asset that was in disrepair when you bought it

The distinction between a repair and an improvement matters enormously. Replacing a broken boiler with a similar model is a repair. Replacing it with a superior system that adds value to the property is an improvement.

Capital Allowances

Some expenses are capital rather than revenue — meaning you're buying assets that will last more than a year. These are claimed differently.

Annual Investment Allowance (AIA):

You can claim 100% of the cost of qualifying plant and machinery up to £1,000,000 per year through the AIA. This covers most business equipment purchases.

What qualifies:

• Vehicles (but cars have special rules — typically only the business proportion, and CO2 emissions matter)
• Machinery and equipment
• Computer hardware
• Office furniture
• Tools

What doesn't qualify:

• Land and buildings (but integral features and fixtures may qualify)
• Items you use for entertaining

Pension Contributions

If you make pension contributions as a sole trader, they're treated slightly differently from other expenses. You don't deduct them from your trading profits — instead, you get tax relief on them separately. But the effect is similar: they reduce your tax bill.

You can contribute up to £60,000 per year (or your total earnings, whichever is lower) and receive tax relief. Basic rate relief is given automatically; higher and additional rate relief is claimed through your Self Assessment return.

Simplified Expenses

HMRC offers simplified expenses for three categories, designed to reduce record-keeping for sole traders:

1. Business use of home: Flat rates of £10, £18, or £26 per month based on hours worked
2. Business mileage: 45p per mile (first 10,000), 25p per mile (thereafter)
3. Living at your business premises: Flat rates based on the number of people living there

You can choose simplified expenses for some categories and actual costs for others — but once you've chosen a method for a particular category, you generally need to stick with it for that asset.

Common Mistakes to Avoid

1. Claiming personal expenses as business costs. HMRC's investigations team is experienced at spotting this. If an expense isn't genuinely for business, don't claim it.

2. Not keeping receipts. You need to keep records for at least five years after the 31 January filing deadline. Digital records are fine — and Accounted makes this effortless with WhatsApp receipt capture.

3. Forgetting to claim legitimate expenses. Many sole traders under-claim because they don't realise something is allowable. This guide should help with that.

4. Mixing up revenue and capital expenditure. Getting this wrong can trigger an HMRC enquiry. When in doubt, check or ask your accountant.

5. Not splitting mixed-use expenses. If you use your phone 60% for business, claim 60%. Don't claim 100%, and don't claim nothing.

How Accounted Helps You Claim Every Penny

Tracking expenses doesn't have to be painful. With Accounted, you simply photograph your receipts and send them to Penny via WhatsApp. Our AI reads the receipt, categorises the expense, and matches it to your bank transactions automatically.

You'll never miss an allowable expense, and you'll have a complete digital record that satisfies HMRC's requirements.

Ready to stop leaving money on the table? Start your free trial today and let Penny handle the bookkeeping while you focus on growing your business.