If you are self-employed, every allowable expense you claim reduces your taxable profit — and the tax you pay. But there is a catch: you can only claim costs that were incurred wholly and exclusively for your business. Get it right and you keep more of what you earn; get it wrong and you risk an HMRC enquiry.
This guide explains allowable expenses for self-employed people: what you can and cannot claim, the rates and allowances that apply, and the mistakes to avoid.
The Wholly and Exclusively Rule
HMRC allows you to deduct allowable expenses for self-employed people that were incurred wholly and exclusively for the purpose of your trade. If a cost has any private purpose, it is not allowable in full — although some mixed costs can be split, with only the business part claimed.
For example, if you use your mobile phone for both business and personal calls, you can claim the business share of the bill. The key is to work out that share honestly and keep evidence of how you did it.
What You Can Claim
Most of the day-to-day costs of running your business are allowable expenses for self-employed people, including:
- Office costs: stationery, printing, postage, computer equipment and software.
- Phone and internet: the business share of your phone, broadband and mobile costs.
- Professional fees: accountancy, legal advice, insurance and subscriptions to trade or professional bodies.
- Marketing: advertising, website costs and business cards.
- Staff costs: wages, pension contributions and employers’ National Insurance.
- Training: courses that maintain or update the skills you need for your existing business.
- Protective clothing and uniforms: items you need for the work itself, such as overalls, safety boots or branded uniforms.
Business Travel: The 45p Per Mile Rule
Travel to see clients, visit suppliers or attend business meetings is allowable, but journeys between your home and a regular workplace are not. If you use your own car or van, you can claim mileage under the simplified expenses rules: 45p per mile for the first 10,000 business miles in a tax year, and 25p per mile after that.
Alternatively, you can claim the actual costs of running the vehicle — fuel, insurance, repairs and servicing — adjusted for any private use. You should choose one method for a vehicle and stick with it. Whichever method you use, keep a mileage log: the date, the reason for the journey and the miles travelled.
What You Cannot Claim
Some costs are never allowable, however much they feel like business spending:
- Everyday clothing: suits, shirts and ordinary clothes are not allowable, even if you only wear them for work. Only uniforms and protective clothing count.
- Client entertaining: the cost of entertaining clients is generally not allowable for tax purposes.
- Fines and penalties: parking fines, speeding fines and late filing penalties are never allowable.
- Private spending: the personal share of any mixed cost, such as a family holiday tagged on to a business trip.
- Capital items: the cost of larger assets, such as a van or major equipment, is dealt with through capital allowances rather than as a day-to-day expense.
Simplified Expenses and the £1,000 Trading Allowance
HMRC offers simplified flat rates for some costs, such as working from home and living in your business premises, which can save you the work of calculating an exact business share. Another option is the £1,000 trading allowance: if your total trading income is £1,000 or less in a tax year, you do not pay tax on it and need not register. If your income is above £1,000, you can deduct the £1,000 allowance instead of adding up your actual expenses — but you cannot use it as well as claiming expenses, so work out which gives you the bigger deduction.
Keeping Records — and Setting Money Aside for Tax
Whatever you claim, keep the evidence: receipts, invoices, bank statements and a log of business journeys. Good records are your best defence if HMRC ever asks questions, and they make your tax return far quicker to prepare. Our bookkeeping basics guide shows what to keep and for how long. If you file a Self Assessment return, the deadlines are strict — read our guide to Self Assessment tax return deadlines in the UK for the key dates, payments on account and penalties.
It is also wise to set money aside for your tax bill as you earn. Our cash flow forecasting guide explains how a simple 13-week forecast can help you plan for tax payments and quiet periods alike.
How to Claim Allowable Expenses for Self-Employed People
- Keep receipts and a simple record of each expense as you go, rather than sorting through a year of paperwork at once.
- Keep business and personal spending separate — a separate bank account or card for the business makes this far easier.
- Add up the allowable business share of each cost at the end of the year.
- Enter the total on your tax return and keep the evidence for at least five years after the 31 January filing deadline.
Common Mistakes to Avoid
- Claiming everyday clothing, such as a suit, as a business expense.
- Claiming the whole phone or broadband bill when only part is for business.
- Forgetting to keep receipts or a mileage log.
- Claiming the £1,000 trading allowance and detailed expenses together.
- Forgetting that the private share of a cost is never allowable.
Frequently Asked Questions
Can I claim the cost of using my car?
Yes. Allowable expenses for self-employed people include 45p per mile for the first 10,000 business miles in a car or van in a tax year, and 25p per mile after that, under the simplified expenses rules. Alternatively, you can claim the business share of the actual running costs — but travel between home and a regular workplace does not count.
Can I claim for working from home?
Yes. You can claim a fair proportion of your household bills, such as heating, electricity and broadband, or use HMRC’s simplified flat rate for working from home.
Can I claim everyday clothes I wear for work?
No. Everyday clothing is not allowable, even if you buy it mainly for work. Only uniforms and protective clothing can be claimed.
What is the £1,000 trading allowance?
If your total trading income is £1,000 or less in a tax year, you do not pay tax on it and generally do not need to register for Self Assessment. If your income is over £1,000, you can deduct the £1,000 allowance instead of adding up your actual expenses — but you cannot do both.
How We Can Help
Claiming the right allowable expenses for self-employed people can save you a significant amount of tax — but only if your records are complete and the rules are followed. Financial Accounting Firm helps sole traders and landlords prepare accurate tax returns and keep their records in order. Contact us to discuss your tax return, or read about our tax return and bookkeeping services on our Services page.
This article is general information only and should not be taken as personal tax or financial advice. Tax rules can change, and your position will depend on your own circumstances.
