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Self-employed allowable expenses you can claim on

Money Matters

Self-employed allowable expenses you can claim on

If you’re self-employed, allowable expenses can reduce your Self Assessment tax bill.

In this article, we talk about how your business can claim back money.

Here’s what we cover:

Income tax relief: How you can reduce your tax by claiming on business expenses

As a sole trader or freelancer, it’s crucial to understand your basic allowable expenses—even if you’re paying an accountant to help with your tax return.

You can claim tax back on some of the costs of running your business—what HMRC calls allowable expenses. These appear as costs in your business accounts deducted from the profit you pay tax on.

Expenses can reduce the average sole trader’s tax bill—often significantly.

For example, if your turnover is £80,000 and you claim £20,000 in allowable expenses, you only pay tax on the remaining £60,000—a substantial saving.

You can also use simplified expenses.

These flat rates allow you to quickly calculate tax relief on vehicles, working from home and living on your business premises. It can make working your expenses significantly easier.

On the Gov.uk website, you can find the most common expenses you can claim for self-employed and the most common expenses you can claim for if you rent out a property.

Self-employed allowable expenses list

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.

Office equipment and tools

You can claim expenses for business equipment such as laptops, PCs, printers, and computer software that your business has used for less than two years.

You can’t claim tax back on small tools.

Stationery and communications

As well as the usual paper, envelopes and pens, you can also claim back tax on postage and printing, including the costs of printer ink and cartridges that you use as part of your business.

With more businesses now trading online, this allowance also applies to electronic communications – so you can claim tax back on your business phone, mobile and internet bills.

Phone and internet

If you use your phone, mobile and internet for personal and business use, you’ll need to demonstrate a realistic way of dividing the costs and can only claim tax back on the part for business use.

If you can’t show this, you can’t claim any tax back.

Professional and financial services

If you get advice from an accountant, lawyer or other professional as part of your business, you can claim tax back on their fees.

You can also claim allowable expenses for hiring surveyors and architects for your business, just not for personal home improvements.

If you have a business bank account, you can claim tax relief on bank, overdraft and credit card charges or interest on business loans.

You can also claim tax back on hire purchase, lease, or other financial payments for equipment you use in your business.

Pension contributions

Contributions to your pension are not a business expense, so they don’t affect your self-employed profits. However, you are eligible for tax relief on any contributions you make, which your pension provider will automatically claim.

Staff and employee costs

You can claim tax relief on employee and staff salaries, bonuses, pensions, benefits, staff and employee costs, agency fees, subcontractors, and employer’s National Insurance contributions.

Travel costs

There’s a host of allowable expenses you can claim for if you must travel for business, including train, bus, taxi, airfares, and accommodation costs.

But these only apply if the primary reason for your journey or stay was for business.

If you take a trip that combines business and pleasure, you can only claim tax relief on costs that you can show are separate from the private part of your journey.

If you can’t split up the costs, you can’t claim tax relief on any part.

Car and vehicle costs

If you use a vehicle as part of your business, you can claim tax relief for expenses such as petrol, insurance, and repairs.

Mileage allowance

As a self-employed person, you can add up all your motor expenses for the year and work out the separate business element of the total cost.

However, keeping track and working this out takes time and effort.

Instead, you can claim mileage allowance, a simplified expense that lets you calculate the costs for running your vehicle.

Other vehicle-related areas you can claim expenses on include:

  • Parking
  • Breakdown cover
  • Hire charges.

Again, tax relief only applies to these if they are business rather than private expenses.

You can’t claim tax back on parking or other fines incurred while driving. There’s no tax relief for breaking the law.

Food and clothing

Everybody needs food and clothing but claiming for them on expenses depends on what you’re using them for.

Clothing

Generally, you can’t claim for clothing if it’s something you’d wear as part of an everyday wardrobe. So, even if you’ve bought a suit for work, you can’t claim for its cost.

But, if you must buy a uniform that identifies what you do or needs special protective clothing to do your job, you can claim for that.

You can’t claim for non-uniform items such as shoes and socks.

If you’re an entertainer, and the clothes you’re buying are a costume for a stage, TV or film performance, then you can claim tax relief on those.

Clowns, magicians, acrobats and Elvis impersonators – we bet HMRC enjoys reading your clothing claims!

Laundry

If you wear a uniform or special protective clothing, you can claim expenses if you wash, repair, or replace it.

Food

You can only claim money back on food and drink if it’s a business expense, meaning it must be outside your usual working routine, such as a business trip.

Stock and materials

You can claim tax back on:

  • Items that you resell, e.g. stock
  • Raw materials that you use to make goods for sale
  • Direct costs from producing goods.

Marketing and advertising

You can claim tax back on the costs of advertising and marketing your business, including costs for hosting and maintaining your company website.

But beware, you may think that treating a customer or supplier to lunch is ‘marketing’, but HMRC considers it as ‘entertaining’, which you can’t claim tax back for.

If you’re a member of a professional trade body or organisation as part of your business, you can claim tax relief on your membership fees. Subscriptions to trade or professional journals are also allowable expenses, so claim for those too.

Read more about Self Assessment

What expenses can I claim when working from home?

As a sole trader, you may run your businesses from home.

In this case, you can only claim tax back on the proportion of those expenses that relate to the space you use for your business, including heating, electricity, council tax and mortgage interest.

You’ll need to find a realistic way of dividing the costs.

You may divide your bills according to the number of rooms you use for your business or the time you spend working from home.

How can I track my allowable expenses?

You should track your business expenses throughout the year and keep organised records. If you are unincorporated or a sole trader, you must keep records for five years after 31 January of the relevant tax year.

Ideally, you’d use accounting software, which saves time and is more accurate than using spreadsheets.

It should let you import expenses and receipts—if you have paper receipts, you can often snap and capture them digitally.  

How do I claim my self-employed business expenses?

You work out what you can claim back and add the details to your tax return.

If you’ve kept your expenses organised (adding them to accounting software will help you achieve this), that will make this process easier.

And ultimately, it could be a matter of giving a single figure for your allowable expenses or providing a detailed breakdown on your tax return.

Either way, you should accurately work out your expenses in case HMRC comes back with questions.

Final thoughts on allowable expenses

Understanding allowable expenses can make all the difference to your cash flow.

If you know what you can and can’t claim back, it makes things much easier come tax return time.

While we’ve covered some key expenses you can claim back, getting support from an accountant or tax adviser can make all the difference here.

Give yourself plenty of time to get your head around your allowable expenses, speak to the experts if you need to, and ensure you don’t have to pay more tax than is required.

Editor’s note: This article was first published in December 2019 and has been updated for relevance.

Taking care of tax if you’re self-employed

Getting your taxes right is vital. Read this guide for support with Self Assessment, and learn how Making Tax Digital will change how you manage your tax returns from April 2024.

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Comments (13)

  • Hi

    If a marketing client sends money for advertising in March, that will be spent in the next financial year, what do you put that under on tax return?

    • Hi Matt,

      Your accountant will be able to advise you on this.

      If you then require support with recording this in your Sage software, our Q&A Live team will be able to help you with this. This specialist team are available Monday to Friday, 9am to 5pm at http://www.sage.com/uk/qa and will response in minutes, if not seconds and provide you with real time support.

      Regards,

      Paul
      Sage UKI

  • Our staff are engineers who have to work on a vessel to overhaul the engines. They have to go away for two weeks. I know you can have a tax/ni free pay of £5 per night, for overnight expenses in the UK and £10 per night if abroad, but are there any other tax/ni free payments for being away for 14 nights please?….. for food/misc etc. Thank you

    • Hi Tina,

      This is something HMRC will need to discuss with you. You can contact them directly to discuss this here http://1sa.ge/bDjv50BBhom or on 0300 322 9434.

      If you then require support with recording this in your Sage software, our Q&A Live team will be able to help you with this. This specialist team are available Monday to Friday, 9am to 5pm at http://www.sage.com/uk/qa and will response in minutes, if not seconds and provide you with real time support.

      Regards,

      Paul
      Sage UKI

  • I have a bike hire company which requires me to, well, purchase bikes to hire out – obviously. Can these bikes go down as stock and materials? Or do they go somewhere else?

    • Hi Lucy,

      Your accountant will be able to advise you on this.

      If you then require support with recording this in your Sage software, our Q&A Live team will be able to help you with this. This specialist team are available Monday to Friday, 9am to 5pm at http://www.sage.com/uk/qa and will response in minutes, if not seconds and provide you with real time support.

      Regards,

      Paul
      Sage UKI

  • My daughter is a part-time teacher and is paid by PAYE for that part of her income.
    She is also an artist and will need to pay tax on her profits from that.
    How do I do a tax return for her?

    • Hi Deborah,

      The first thing she will need to do is register for Self-Employment. But once that is done she will need to do a Self-Assesment Return, and all of her income from both the teaching job and the artistry will go on the return and the tax will be worked out on her total income.

      Hope that helps
      Regards Martin

  • I have a small business which uses a credit card machine. I pay for the use of this service – quarterly charge and a percentage charge for every transaction.

    I am filling in my tax return on a cash basis . I am informed that I can only claim £500 tax relief on financial charges. I consider the credit card machine as a financial charge. At present my financial charges sit well above £500. Can I place these expenses elsewhere on my tax return?

    • Dear Robert,

      I don’t know where you were told this, but you can claim the actual amount deducted/paid for credit card costs.

      They can all go on the same place on the tax return.

      Regards
      Martin

  • Setting up as a self employed gardener. Planning on doing the book keeping myself and then just using an accountant at the end of the year to check and submit my tax return. Can I claim allowable expenses for time I spend doing book keeping? Eg 2 hrs a week. What rate should I use? Know I can claim fees for the accountant.

    • Karen, if you are paying yourself to do the bookkeeping then it would also be ‘income’ you would have to declare ,so your costs would cancel out with extra income. If someone else does the bookkeeping for you it would be an expense as you would pay them. Unfortunately you do a lot of ‘work’ that is unpaid organising yourself as a self employed person.

    • Hi Karen,

      This is something HMRC will need to look into for you. You can contact them directly to discuss this on 0800 328 5644.

      Regards,

      Paul
      Sage UKI