Working for yourself means you are responsible for your own tax, and that includes making sure you do not pay more than you need to. One of the simplest ways to do that is to claim every business cost you are entitled to. Yet many people miss out on legitimate self-employed expenses, or claim things they should not and risk a problem with HMRC.
This guide explains what expenses you can claim when self-employed, which costs are not allowed, and how to keep the right records.
Key Takeaways
- Allowable expenses are business costs you can deduct from your income to reduce your taxable profit.
- To qualify, an expense must be incurred wholly and exclusively for your business.
- Common claims include office costs, travel, working from home, insurance, marketing and professional fees.
- Personal spending, commuting and client entertainment are not allowable.
- Good records make claiming easier and protect you if HMRC asks questions.
What Are Allowable Expenses for Self-Employed People?
Allowable expenses are the day-to-day costs of running your business that you can deduct from your income when working out your taxable profit, provided they are incurred wholly and exclusively for business purposes.
In practice, that means you are taxed on your profit rather than your total income. For example, if you earn £30,000 and have £5,000 of allowable expenses, you are taxed on £25,000. Lowering your profit reduces both your Income Tax and your Class 4 National Insurance.
The “wholly and exclusively” test is the key rule. If a cost has a genuine business purpose and no personal element, you can usually claim it. If it is partly personal, you can often claim only the business share.
What Expenses Can You Claim When Self-Employed?
The right claims depend on your trade, but these are the main categories of allowable expenses for self-employed people.
Office Costs and Equipment
Stationery, postage, software subscriptions, phone and internet bills all count when used for your business. Larger purchases such as a laptop, tools or machinery are usually claimed through capital allowances rather than as a standard expense, which can still reduce your tax bill in full in many cases.
Travel and Vehicle Costs
You can claim fuel, parking, train and bus fares, and hotel stays when travelling for business. Everyday commuting to your usual place of work is not allowed. If you use your own vehicle, you can claim either your actual running costs or HMRC’s simplified mileage rates, currently 55p per mile for the first 10,000 miles and 25p after that for cars and vans.
Working From Home
If you work from home, you can claim a proportion of household costs such as heating, electricity and broadband. Alternatively, you can use HMRC’s flat rate, which is a fixed monthly amount based on the hours you work at home. It is currently £10, £18 or £26 per month depending on whether you work 25 to 50, 51 to 100, or 101 or more hours.
Professional Fees and Insurance
Fees for accountants, solicitors and other advisers are allowable, as are business insurance premiums and bank charges on your business account. If you want help keeping your finances in order, our Accountancy & Audit team can support you.
Marketing and Advertising
Website costs, online advertising, business cards, brochures and promotional materials are all claimable. These are a cost of winning work, so they are usually straightforward to justify.
Stock, Materials and Subcontractors
If you buy materials or stock to make or sell your products, or pay subcontractors or staff to help deliver your work, those costs can be deducted. Keep invoices so you can show exactly what each cost relates to.
Training and Professional Subscriptions
Courses that update or improve skills you already use in your business are allowable. Training that helps you move into a completely new trade is not. Subscriptions to trade bodies and professional memberships are usually claimable too.
Work Clothing
You can claim uniforms, protective clothing and clothing with your business logo on it. Ordinary clothes that you could wear every day, even if you only wear them for work, do not qualify.
What Expenses Can’t You Claim?
Knowing what is not allowable is just as important. HMRC does not accept:
- Personal spending, or the personal share of mixed-use costs
- Commuting between your home and usual place of work
- Client entertainment, such as meals and events
- Fines and penalties, including parking and speeding fines
- Everyday clothing and normal food and drink
- Depreciation of equipment, which is replaced by capital allowances
If a cost is mixed, such as a phone used for both business and personal calls, claim only the business proportion and keep a note of how you worked it out.
Simplified Expenses or Actual Costs?
You do not always have to track every pound. HMRC allows simplified expenses for vehicle mileage, working from home and, in some cases, living at your business premises. These flat rates save time and are often the easier option for smaller businesses.
There is also the trading allowance, which lets you deduct up to £1,000 of income instead of claiming actual expenses. It tends to suit people whose real costs are very low, but you cannot use it alongside actual expenses, so it is worth comparing both. Always check current rates and rules on GOV.UK before you file.
How to Keep Records of Self-Employed Expenses
Claiming an expense is only half the job. You also need to be able to prove it. A few habits make this far easier:
- Keep receipts, invoices and bank statements for every claim
- Use a separate bank account for business transactions
- Record expenses regularly rather than once a year
- Keep records for at least five years after the 31 January deadline for that tax year
- Use digital bookkeeping software, as Making Tax Digital for Income Tax is being phased in for self-employed people
Staying organised also makes Self Assessment less stressful. If you would like support with returns and deadlines, our Tax Compliance service can take care of it for you.
When to Get Professional Support
The rules on allowable expenses are straightforward in principle but full of exceptions in practice. A qualified adviser can make sure you claim everything you are entitled to, apportion mixed costs correctly and avoid mistakes that lead to enquiries or penalties.
If you are just starting out, getting this right from day one is especially valuable. Our Business Start Ups & Growth support can help you set up properly and plan for the future.
Final Thoughts
So, what expenses can you claim when self-employed? Any cost that is wholly and exclusively for your business, from office costs and travel to insurance, marketing and professional fees. Claim them accurately, keep good records, and you keep more of what you earn.
To plan ahead, see our guide on the importance of tax planning for businesses.
Need Help With Your Self-Employed Expenses?
At MGRW+, we help sole traders and small businesses claim everything they are entitled to, with clear, practical advice and no jargon. Whether you are starting out or want to make sure your records and returns are in order, our team is here to help. Book a consultation with us today.