What expenses can a UK sole trader claim?

A UK sole trader can claim office supplies, phone and broadband, software subscriptions, computer equipment, working-from-home costs, business mileage and travel, stock and raw materials, packaging, subcontractor and staff costs, premises rent and utilities, accountant and legal fees, professional insurance, trade-body memberships, bank charges, marketing and advertising. Each expense must be incurred wholly and exclusively for the business.

What is the 'wholly and exclusively' rule for sole trader expenses?

An expense is allowable only if it is incurred wholly and exclusively for business purposes. If something is partly personal — for example a phone bill where 60 percent of use is for business — you can claim only the business portion, in this case 60 percent.

Can I claim working from home as a sole trader?

Yes. HMRC offers two methods. Simplified expenses use a flat monthly rate: 10 pounds for 25 to 50 hours per month at home, 18 pounds for 51 to 100 hours, and 26 pounds for 101 hours or more. The actual-cost method calculates the business proportion of rent or mortgage interest, council tax, electricity, gas, water, broadband and insurance — for example claiming 20 percent if you use one room out of five exclusively for business.

Can a sole trader claim business mileage?

Yes. The HMRC Approved Mileage Allowance Payment rate is 55p per mile for the first 10,000 business miles in the tax year and 25p per mile after that, for cars and vans. Motorcycles are 24p per mile and bicycles 20p per mile. Your daily commute from home to a permanent workplace is not a business journey and cannot be claimed.

How much tax do business expenses save a sole trader?

Tax is calculated on profit, which is income minus allowable expenses. Every pound claimed as an expense reduces taxable profit by one pound. A basic-rate taxpayer saves 20p in tax per pound claimed. A higher-rate taxpayer saves 40p. For example, claiming 6,000 pounds in expenses cuts a basic-rate tax bill by 1,200 pounds, or 2,400 pounds at the higher rate.

Can I claim my daily commute as a sole trader?

No. Travel from home to a permanent workplace is treated as commuting by HMRC and is not deductible. Travel to client sites, temporary workplaces, suppliers and meetings is a business journey and is deductible at mileage rates or actual cost.

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Every Expense a UK Sole Trader Can Claim in 2026/27

By Remus Pantea · 16 April 2026 · Last updated 12 May 2026 · 10 min read

The golden rule: An expense is allowable if it's incurred "wholly and exclusively" for your business. If something is partly personal, you can claim the business portion. This guide covers every major category with real numbers.

If you're self-employed in the UK, every legitimate business expense you claim reduces your taxable profit — and your tax bill. Yet most sole traders miss deductions they're entitled to, simply because they don't know what qualifies.

This guide lists every common allowable expense for the 2026/27 tax year, with worked examples showing exactly how much each one saves you.

How expenses reduce your tax bill

Your tax is calculated on profit, not revenue. Profit = income minus allowable expenses. Every pound you claim as an expense reduces your taxable profit by one pound.

Worked example: You earn £40,000 and claim £6,000 in expenses. Your taxable profit is £34,000. At the 20% basic rate (after the £12,570 personal allowance), your tax bill drops by £1,200. If you're a higher-rate taxpayer, the saving doubles to £2,400.

Office, equipment & supplies

Stationery & postage: Paper, printer ink, envelopes, stamps, packaging materials
Phone & broadband: Business percentage of your monthly bill (e.g. 60% business use = claim 60%)
Software & subscriptions: Accounting software, cloud storage, Microsoft 365, domain names
Computer & equipment: Laptops, phones, tablets, printers under £1,000 (items over £1,000 may need capital allowances)
Tools & small equipment: Hand tools, safety equipment, measuring instruments

Working from home

If you work from home, you can claim a proportion of your household bills. HMRC offers two methods:

Simplified expenses (flat rate):

25–50 hours/month at home: £10/month
51–100 hours/month: £18/month
101+ hours/month: £26/month

Actual costs (proportion method): Calculate the business percentage of rent/mortgage interest, council tax, electricity, gas, water, broadband, and insurance. For example, if you use one room out of five exclusively for business, claim 20%.

Worked example: Your annual household bills total £12,000. You use one room (20%) exclusively for business, 5 days a week. Claim: £12,000 × 20% = £2,400. At 20% tax, that's £480 saved.

Travel & vehicles

Business mileage: 55p/mile for the first 10,000 miles, then 25p (cars/vans). 24p for motorcycles, 20p for bicycles
Parking & tolls: Business parking, congestion charges, bridge tolls
Public transport: Train, bus, tube, taxi fares for business journeys
Hotels & meals: Overnight business travel only (not your daily lunch)

Not claimable: Your daily commute from home to a permanent workplace. Home to your regular office is commuting, not a business journey.

Worked example: You drive 12,000 business miles in a year. Claim: 10,000 × 55p + 2,000 × 25p = £5,000. At 20% tax, that's £1,000 saved. At 40%, it's £2,000. See our full HMRC mileage rates guide.

Stock, materials & direct costs

Raw materials: Building materials, fabric, ingredients, components
Goods for resale: Stock, wholesale purchases
Packaging: Boxes, tape, labels, shipping materials
Subcontractor payments: Including CIS deductions if you're in construction

Staff costs

Employee wages & salaries: Gross pay including bonuses
Employer's NI contributions: Currently 15% above the threshold
Pension contributions: Employer contributions to workplace pensions
Freelancer/agency costs: Payments to self-employed contractors
Training: Courses that update existing skills (not courses for a different career)

Premises

Rent: Business premises or co-working space
Business rates: Not council tax (that's the home office method)
Utilities: Electricity, gas, water for your business premises
Repairs & maintenance: Fixing, repainting, replacing fittings (not improvements)
Cleaning: Office/workspace cleaning services
Insurance: Building and contents insurance for business premises

Professional services & fees

Accountant fees: Tax return preparation, bookkeeping, payroll services
Legal fees: Contracts, debt recovery, business disputes (not personal legal issues)
Professional indemnity insurance: PI, public liability, employer's liability
Trade body memberships: RICS, CIOT, ACCA, federation of small businesses
Bank charges: Business account monthly fees, transaction charges
Business insurance: Professional indemnity, public liability, cyber insurance

Marketing & advertising

Website costs: Hosting, domain renewal, design, SEO
Advertising: Google Ads, Facebook Ads, print ads, flyers
Business cards & signage: Printed materials, vehicle wraps, shop signs
Trade shows & exhibitions: Stand hire, promotional materials, travel to events

Clothing

Claimable: Branded uniforms, safety boots, PPE, high-vis vests, hard hats, overalls
Not claimable: Everyday clothes, even if you only wear them for work. A plain black suit is not a uniform.

Financial costs

Business loan interest: Interest payments on loans used for business purposes
Credit card interest: On business purchases only
Hire purchase: Interest element of HP agreements for business assets
Bad debts: Invoices you've raised but will never be paid

VAT (if registered)

If you're VAT registered under the standard scheme, you reclaim input VAT on business purchases. If you're on the Flat Rate Scheme, you don't reclaim VAT on most purchases but pay a lower percentage of your gross turnover.

Limited cost trader rule: If your goods purchases are under 2% of turnover (or under £1,000/year), the flat rate becomes 16.5% regardless of your trade sector. Most service businesses fall here.

The £1,000 trading allowance (and the £3,000 change coming)

If your total self-employment income is under £1,000 per year, you don't need to register as a sole trader or file a tax return. If it's over £1,000, you can choose to either:

Deduct the £1,000 trading allowance instead of actual expenses (useful if your expenses are low), or
Deduct your actual expenses (better if they exceed £1,000)

You can't use both.

The £3,000 reporting threshold (announced, not yet live)

The Government has announced plans to raise the Self Assessment reporting threshold for trading income from £1,000 to £3,000 gross within this Parliament — full announcement on GOV.UK: Boost for side-hustlers as 300,000 people to be taken out of tax returns. Important nuances most coverage gets wrong:

This is a reporting threshold, not a tax-free allowance. The £1,000 trading allowance still works the way it does today.
If you earn between £1,000 and £3,000 from self-employment after the change goes live, you still owe tax on the income above £1,000 — you'll just pay it through a new HMRC online service rather than a full Self Assessment return.
If you earn over £3,000 you'll continue to file Self Assessment as now (or MTD ITSA from the relevant phase-in date).
The exact go-live date hasn't been confirmed at the time of writing — HMRC will publish it on GOV.UK.

Practical takeaway: if you've a side hustle hovering around the threshold, keep tracking expenses anyway. The £3,000 figure is gross, not profit — so a courier earning £2,500 in fares with £800 in fuel and tyres is still under the limit, but a re-seller turning over £3,200 with a £100 cost of goods is over it. The records you keep are what proves which side of the line you're on.

National Insurance after the Class 2 scrap (April 2024)

Class 2 NIC for self-employed people was abolished from 6 April 2024 (HMRC's official rates page is Self-employed National Insurance rates). A lot of guides — and a lot of accountants — haven't fully caught up. Here's the current position for sole traders in 2026/27:

Class 2 NIC is no longer payable as a flat weekly amount on profits above the small profits threshold. You don't owe it; you don't pay it.
Class 4 NIC is what self-employed people actually pay. The 2026/27 rates are 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.
State Pension qualifying years are still credited automatically if your profits are at or above the small profits threshold (£6,725 for 2026/27). You no longer have to pay Class 2 to "buy" the year.
Voluntary Class 2 contributions are still available if your profits fall below the small profits threshold and you want to keep building your State Pension record. This is the only situation where the form still uses the words "Class 2" in 2026/27.

Worked example: a sole trader with £38,000 profit in 2026/27 owes Class 4 NIC of (38,000 − 12,570) × 6% = £1,525.80. Class 2 doesn't enter the calculation. The tax you owe on that profit is calculated separately through the income tax bands.

Lesser-known wins on the new NIC structure:

You get a State Pension qualifying year for free between £6,725 and £12,570 of profit. Before April 2024 you'd have paid voluntary Class 2 (£179 a year) to "buy" this year. Now you're credited automatically. If you used to pay voluntary Class 2, stop — HMRC are quietly issuing refunds where people kept paying after the abolition.
If your profit is below £6,725, voluntary Class 2 is still the cheapest way to fill a State Pension gap. £3.45/week (£179.40/year) buys a qualifying year. Class 3 voluntary contributions cost £907.40/year for the same outcome. Most people don't realise Class 2 is still a route — HMRC quietly removed the radio button from the online form, but it exists if you call them.
Profit below the personal allowance (£12,570) means zero income tax AND zero Class 4 NIC. Combined with the trading allowance and reasonable expenses, you can run a side hustle making £14,000 gross and pay nothing if your costs are tracked properly. Most side-hustle guides ignore this combined effect.

Selling on eBay, Vinted, Etsy: when HMRC wants to know

Online platforms (eBay, Vinted, Etsy, Depop, Airbnb, Uber, Deliveroo and others) now report seller earnings directly to HMRC under the international Digital Platform Reporting rules — HMRC explains exactly what's reported in Check if you need to tell HMRC about your income from online platforms. If you've ever wondered whether HMRC actually finds out about side income from these platforms — the answer is yes, automatically, once a year. There's also a campaign hub at taxhelpforhustles.campaign.gov.uk aimed specifically at platform sellers.

Two things determine whether the activity is taxable:

Is it trading? Selling old clothes from your wardrobe = not trading. Buying clothes specifically to resell, or making things to sell, or providing a service for money = trading. HMRC's "badges of trade" guidance is the test.
How much did you earn? If your gross income from trading activities crosses £1,000 in a tax year, you must register as self-employed and either declare actual profit or use the trading allowance.

What this means for typical platform sellers:

Selling unwanted personal items below original purchase price — not taxable. Unless you cross into reselling for profit (where buying-to-sell is the giveaway), clear-outs aren't trading. Keep proof you owned the items personally if HMRC ever queries.
Buy-to-resell, handmade goods, vintage curation — trading from the first £. The trading allowance gives you the first £1,000 free; everything above is taxable profit reported on your Self Assessment or MTD return.
Driving for Uber / Deliveroo / Just Eat — always trading. No question about it. Mileage is your biggest deduction — track every business mile (see our HMRC mileage rates guide).
Renting a room on Airbnb — covered by the £7,500 Rent a Room scheme if you live in the property. Above that, declare on Self Assessment.

If you're trading and you've never told HMRC, the safest route is to register voluntarily before the platform reporting cycle catches you. Penalties for unregistered trading start at £100 and grow with the amount of unpaid tax.

Platform-seller tips most articles miss:

Platform fees are deductible expenses. Vinted's "buyer protection fee," eBay's final value fee, Etsy's transaction + payment-processing fees, Depop's 10% commission, Airbnb's host service fee — all reduce your gross taxable income. Most casual sellers report what hit their bank account; what HMRC actually wants is gross sales and fees as a separate expense line. The numbers are the same; the audit trail is night-and-day better.
The £1,000 trading allowance is per person, not per platform. If you sell £700 on Vinted and £500 on eBay, that's £1,200 combined — over the threshold. People treat each platform as a separate £1,000 budget; HMRC sees them as one trading activity.
Mileage to the post office is a business expense for online resellers. 55p per mile for the first 10,000 miles a year. If you drop off 100 parcels and the round trip is 4 miles, that's 400 miles × 55p = £180 of allowable expense most resellers never claim.
Personal-effects sales below original cost are capital losses, not taxable income. If you bought a coat for £300 and sold it on Vinted for £80, that's a personal disposal, not trading — and disposals at a loss don't trigger Capital Gains Tax. Keep proof of original purchase price for anything over £100; a screenshot of the original receipt is enough. This is the cleanest defence if HMRC questions a high-volume Vinted/eBay seller.
Selling to clear a flat or after a relative's death — not trading at all. "Badges of trade" requires intention. One-off clearances are explicitly outside the trading rules. Document the situation with a one-paragraph note in your records (e.g. "Sept 2026: cleared late aunt's house contents on eBay") in case the platform reporting flags you.
Cash-in-hand on Airbnb / Vinted is a trap. If a buyer pays you outside the platform to "save fees," the transaction is still trading income. The platform won't report it — but if HMRC pieces it together from your bank account it looks like deliberate concealment, which is a much worse penalty bracket than late filing.

What you can NOT claim

These are the most common mistakes HMRC looks for:

Personal expenses: Groceries, personal travel, childcare, gym membership
Entertainment: Taking clients to dinner, hospitality, gifts over £50
Your daily commute: Home to permanent workplace
Fines & penalties: Parking tickets, speeding fines, HMRC penalties
Personal clothing: Even if you only wear it for work
Capital items at full cost: Items over £1,000 use capital allowances (Annual Investment Allowance), not revenue expenses
Drawings: Money you take out of the business for personal use

Common mistakes that trigger HMRC enquiries

Claiming 100% of mixed-use items: If your phone is 60% business, claim 60%. Not 100%.
No receipts: Bank statements alone may not be enough. HMRC wants to see the receipt showing what was bought, from where, and the VAT breakdown.
Expenses wildly out of proportion: If you earn £30,000 and claim £25,000 in expenses, expect questions.
Round numbers: Claiming exactly £500 for "office supplies" every quarter looks made up. Real expenses have odd numbers.
Claiming entertainment: HMRC disallows client entertainment. This is their #1 adjustment reason in enquiries.

How to track your expenses (the easy way)

From April 2026, sole traders earning over £50,000 must keep digital records under Making Tax Digital. But even if you're below the threshold, going digital now means:

No shoeboxes of crumpled receipts at year end
Expenses categorised to the correct SA103F box automatically
Mileage logged with date, destination, and purpose
Records exportable in seconds for your accountant

PocketReceipt does exactly this. Snap a photo of any receipt and AI extracts the store, amount, date, VAT, and category. Smart warnings flag duplicates and capital items before you save. Free on iOS and Android.

Once your receipts are scanned, CodeIQ by Bank Reconciler automates the bookkeeping — upload a bank statement and its AI matches transactions, classifies VAT, and reconciles everything against Xero, QuickBooks, Sage, or Pandle in minutes.

Try CodeIQ →

Summary: quick-reference expense checklist

Category	Examples	SA103F Box
Cost of goods	Stock, materials, direct costs	Box 17
Car/van expenses	Mileage, fuel, insurance, repairs	Box 18
Travel & subsistence	Train, hotel, meals on overnight trips	Box 19
Staff costs	Wages, employer NI, pensions	Box 20
Premises	Rent, rates, utilities, insurance	Box 21
Repairs	Property repairs, equipment maintenance	Box 22
General admin	Phone, postage, stationery, software	Box 23
Advertising	Website, ads, business cards	Box 24
Interest	Business loan/credit card interest	Box 25
Other	Professional fees, insurance, bad debts	Box 26

Sources: ITTOIA 2005 · BIM35000–47000 · EIM31240–31350 · HMRC HS222 · Finance Act 2024

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