Allowable expenses for self-employed UK: A practical guide
If you’re a sole trader, you can deduct expenses to reduce your tax bill. Find out what costs qualify and how to claim.
Being self-employed comes with a lot of freedom — but also a fair amount of admin, and one of the most important things to get right is your expenses. Claim too little and you pay more tax than you need to. Claim things you shouldn’t, and you run the risk of a question from HMRC.
The good news is that allowable expenses are genuinely useful. HMRC lets you deduct the costs of running your business from your taxable profit, which means your tax bill is only calculated on what’s left. For many sole traders and freelancers, this makes a significant difference.
This guide covers the main categories of allowable expenses for the self-employed, including what you can and can’t claim — plus a specific section on car expenses, which trips people up more than almost anything else.
Key takeaways:
- Allowable expenses reduce your taxable profit
- Must be wholly and exclusively for business use
- Common claims include travel, office costs, and marketing
- You can claim either actual costs or simplified expenses
Here is what we will cover:
- What is an allowable expense?
- What can I claim as self-employed? A list of allowable expenses
- What can I claim on my self assessment tax return?
- What Expenses Are Not Allowed by HMRC?
- Should You Use the £1,000 Trading Allowance or Expenses?
- Making Tax Digital (MTD) and Allowable Expenses
- Frequently asked questions about allowable expenses
- Final Thoughts
What is an allowable expense?
An allowable expense is a business cost you can deduct from your income before your tax bill is calculated. HMRC’s basic rule is that the expense must be ‘wholly and exclusively’ for the purpose of running your business. Mixed-use costs — your personal mobile used partly for business calls, for example — can usually be claimed in proportion to the business use.
If your turnover is relatively low, it’s worth knowing about the £1,000 trading allowance. You can use this instead of claiming actual expenses, but you can’t use both — so run the numbers before deciding which approach saves you more. This process will be easier if you’ve kept your expenses organised (adding them to accounting software will help you achieve this).
What can I claim as self-employed? A list of allowable expenses
Below, we cover some of the things you can claim for. To reiterate, we assume you’re using cash basis accounting, as the rules for traditional accounting can be slightly different.
You can add these figures to your Self Assessment tax return. Most self-employed allowable expenses fall into the following categories:
Office and Equipment Costs
- Stationery, printing, and postage
- Laptops, monitors, and software
- Office furniture and supplies
Travel and Mileage
- Business journeys by car, van, or public transport
- Parking fees and tolls
- Accommodation for business trips
Marketing and Advertising
- Website hosting and design
- Online ads and social media promotion
- Printed marketing materials
Professional and Financial Costs
- Accountancy fees
- Insurance premiums
- Bank charges and loan interest
Phone and Internet
- Business portion of mobile and broadband bills
Home Office Costs
- A proportion of rent, utilities, and council tax
- Based on time and space used for business
Staff and Subcontractors
- Salaries and freelance payments
- Employer National Insurance contributions
Stock and Materials
- Goods for resale
- Raw materials used in production
Can you write off a car as a business expense in the UK?
This is one of the most common questions self-employed people have — and the answer depends on how you use the vehicle and which method you choose to claim.
Option 1: Simplified mileage rate
The simplest approach is to use HMRC’s approved mileage rates. For the first 10,000 business miles in a tax year, you can claim 45p per mile. Above that, the rate drops to 25p per mile. You keep a mileage log and claim the total on your tax return. No need to track fuel costs, insurance, or servicing separately — it’s all rolled into the rate.
This method suits most sole traders and freelancers who use their car for some business travel but don’t want the admin of tracking every motoring cost. Once you’ve chosen this method for a vehicle, you must stick with it.
Option 2: Actual costs (capital allowances)
If the vehicle is used predominantly for business, you may be able to claim a proportion of the actual costs — fuel, insurance, servicing, road tax — plus capital allowances on the purchase price. This is more complex and generally makes sense only if the business use is high and the vehicle is expensive.
For limited company directors, different rules apply. Buying a vehicle through your company and claiming it as a business asset can be tax-efficient, but it also has benefit-in-kind implications if there’s any personal use. It’s worth getting specific advice here.
The key point for both methods: you cannot claim for personal journeys. If your car is 50% business use, you can only claim 50% of costs through the actual-cost method — or apply the mileage rate to business miles only.
What can I claim on my self assessment tax return?
Self-employed allowable expenses list
Your Self Assessment return lets you claim allowable business expenses to reduce the profit figure that income tax is calculated on. The main categories are the same as those listed above — office costs, travel, marketing, professional fees, phone and broadband, financial costs, and use of home.
Beyond business expenses, you can also use your return to claim:
- Pension contributions — these attract tax relief and reduce your tax bill
- Gift Aid donations — claiming these on your return ensures you benefit from higher-rate relief if applicable
- Marriage Allowance (if eligible) — if you’re married and one partner earns below the Personal Allowance
- Capital allowances — for larger purchases like equipment or vehicles
One thing worth noting: expenses must be ‘wholly and exclusively’ for business purposes. If something has a personal element, only the business portion is claimable. And you should always keep receipts — HMRC can ask you to substantiate any claim.
What Expenses Are Not Allowed by HMRC?
It’s just as useful to know what’s off the table:
- Client entertainment (taking a client to lunch, for example)
- Your own salary or drawings from the business
- Clothing that isn’t a specialist uniform or protective equipment
- Personal travel, including your regular commute
- Fines and penalties
- Capital repayments on a mortgage (only the interest element is claimable for home office use)
Should You Use the £1,000 Trading Allowance or Expenses?
If your expenses are low, the £1,000 trading allowance may be simpler.
- Use the allowance if your total expenses are below £1,000
- Claim actual expenses if they exceed £1,000
- Compare both options before deciding
This simple step can make a noticeable difference to your tax bill.
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Making Tax Digital (MTD) and Allowable Expenses
From April 2026, sole traders earning over £50,000 will need to use Making Tax Digital (MTD) for Income Tax rather than the traditional Self Assessment process. If you’re above this threshold, you’ll submit quarterly updates to HMRC digitally, rather than a single annual return.
As a self employed, keep in mind that under Making Tax Digital guidelines for sole traders, paper expense receipts are no longer accepted—you’ll need to retain digital copies to make a claim.
The rules around allowable expenses don’t change under MTD — what you can claim remains exactly the same. What changes is the process for recording and reporting those expenses. MTD-compatible software tracks everything throughout the year, which actually makes claiming expenses easier, not harder.
Here’s some of our articles explaining everything you need to know about MTD for Income Tax:
If you start using MTD for Income Tax as of April 2026, then 2024/25’s Self Assessment tax return—due by 31 January 2025—will be the penultimate Self Assessment tax return you submit.
You will then submit one more—on 31 January 2027, for 2025/26—after you have begun following the MTD for Income Tax rules for the 2026/27 tax year.
E-Book: Switching from Self Assessment to Making Tax Digital
Worried about following MTD’s rules in April 2026? This brief yet comprehensive guide explains what you need to know: How you do accounting now, and how you should do it in future.
Frequently asked questions about allowable expenses
Capital expenses are investments in assets that will benefit your business over a long period of time. That is to say, they have an enduring benefit.
Revenue expenses are the day-to-day running costs of your business.
Understand the difference so you can claim the correct amounts.
If you use cash basis accounting, most capital expenditure is treated as an allowable expense, although there are exceptions such as cars, land, and buildings.
Keep invoices, bank statements, and receipts related to your business expenses. Organise these digitally to make it easier at tax return time.
If HMRC decides to audit your business, you must provide proof of your allowable expenses.
If you can’t provide these records, HMRC might amend your tax return to exclude them, and charge additional tax, interest, and penalties, where appropriate.
Although limitations or special rules may exist, certain startup costs could be considered allowable expenses.
Is business insurance an allowable expense?
Yes, you can claim business insurance premiums as an allowable expense.
Generally, you can claim educational expenses directly related to your current business.
However, training costs that qualify you for a new trade are not allowable.
Yes, if you have multiple businesses—each business can have its own set of allowable expenses. You’ll need to keep these separate for accounting purposes.
Can I claim costs incurred before my business officially started?
You could claim some pre-trading expenses, but specific rules and limitations may apply.
Expenses related to business growth (such as hiring new staff or moving to a larger office) can be allowable expenses. You might need to claim certain other capital expenditures differently.
There are no special tax rules for ‘scaling up’, but many costs associated with growth such as hiring staff, additional marketing, or moving to new premises may be allowable.
However, some expansion-related costs (like buying or improving property or equipment) may be treated as capital rather than revenue.
Final Thoughts
Understanding allowable expenses for self-employed work is key to managing your finances efficiently. By knowing what you can claim, keeping accurate records, and choosing the right method, you can reduce your tax bill while staying compliant.
If you’re unsure, using accounting software or speaking to a professional can help ensure everything is handled correctly.
Editor’s note: This article was first published in December 2019 and has been updated several times for relevance.
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