- You can only claim costs incurred wholly and exclusively for your business, though mixed-use costs like your phone can be split by the business proportion.
- Simplified expenses let you use flat rates for vehicles and home working instead of totting up actual costs, and sometimes they beat the real figures.
- You claim either the £1,000 trading allowance or your actual expenses, never both, so run the numbers before you choose.
Sole trader expenses are the business costs you can deduct from your income before HMRC works out the tax you owe.
The rule behind all of them is simple: a cost has to be incurred wholly and exclusively for your business. Get it right and you pay tax only on your actual profit, not your turnover.
Plenty of this you can handle yourself once you know the categories. Where the admin gets in the way, sole trader accounting is one thing Sleek can take off your plate.
Most people leave money on the table not by breaking the rules, but by forgetting whole categories of cost.
What can a sole trader claim as an expense?
A sole trader can claim any cost that’s incurred wholly and exclusively for the business, and that covers far more than most people track. The usual ones are premises, stock, equipment, travel, phone and internet, software, professional fees, insurance, and marketing.
The phrase “wholly and exclusively” is HMRC’s, and it does a lot of work. If a cost is purely for the business, you claim all of it. If it’s part business and part personal, you claim the business share and nothing more.
That split is where sole traders trip up, so there’s a whole section on it below.
The wholly and exclusively test
The wholly and exclusively test asks one question of every cost: was this spent only to run the business? If yes, it’s allowable. If it also served a personal purpose, only the business portion qualifies.
A tin of paint for a client’s job passes. A work lunch you’d have eaten anyway doesn’t. A mobile you use for both work and family sits in the middle, and you claim the business fraction.
Keep that test in your head as you read the categories. It settles almost every “can I claim this?” question before you’ve finished asking it.
Expenses by category
Here’s the working list of allowable costs for a typical sole trader, with the condition attached to each and the evidence you’d want to keep.
Category | What you can claim | Evidence to keep |
Premises and rent | Rent, business rates, utilities and insurance for a workspace you rent | Lease, invoices, bills |
Home as office | The business share of household running costs, or a flat rate | Bills, hours log, floor calculation |
Phone and internet | The business proportion of line rental and usage | Itemised bills |
Travel and vehicles | Business mileage or actual running costs, plus fares, parking and tolls | Mileage log, tickets, receipts |
Equipment and tools | Kit you use for the work, often via capital allowances | Purchase invoices |
Software and subscriptions | Accounting software, design tools, trade subscriptions | Receipts, renewal emails |
Stock and materials | Goods for resale and raw materials | Purchase invoices |
Professional fees | Accountant, solicitor and other business advisers | Fee notes |
Insurance | Public liability, professional indemnity, contents | Policy documents |
Training | Courses that update skills for your existing trade | Booking confirmations |
Marketing | Website, ads, printing, business cards | Invoices |
Bank and finance | Business account fees, interest on business loans | Statements |
Staff and subcontractors | Wages, and payments to subcontractors | Payroll records, invoices |
Clothing | Uniforms, branded kit and protective gear only | Receipts |
Some of the small, miscellaneous costs are the easiest to lose track of, and it’s worth reading up on sundry expenses explained so they don’t slip through. A few categories carry conditions worth spelling out, so they get their own sections next: mixed-use costs, vehicles, equipment, and clothing.
Costs you use for both business and personal life
Mixed-use costs are the ones you split, claiming only the business proportion, and the method is the same whatever the cost. Work out how much of the total was for the business, on a basis you can defend, then claim that share.
Take your mobile. If your itemised bills show roughly 60% of use is business, you claim 60% of the bill. Broadband works the same way. So does a laptop you use evenings for personal browsing.
The key is consistency and a record. HMRC doesn’t expect a stopwatch, but it does expect a reasonable basis you’ve stuck to.
A repeatable method for any mixed cost
- Take the total cost for the year.
- Decide the fairest measure of business use: hours, mileage, floor space, or itemised usage.
- Apply that percentage to the total.
- Write down how you reached the figure and keep it with your records.
Pick your basis once, at the start of the year, and apply it the same way every month. A basis you can explain in one sentence is a basis HMRC rarely argues with.
Working from home
You can claim for working from home either by working out the business share of your actual household costs or by using HMRC’s simplified flat rate. The flat rate depends on how many hours a month you work from home: £10 for 25 to 50 hours, £18 for 51 to 100 hours, and £26 for 101 hours or more.
Actual costs mean taking a slice of rent or mortgage interest, council tax, heating, lighting and water, based on the rooms you use and the time you use them. That can beat the flat rate in a smaller home, but it’s more work.
The flat rate is quicker and needs only an hours log, though it doesn’t cover phone or internet, which you claim separately. There’s a fuller walkthrough on claiming for working from home if you want to compare both methods in detail.
Vehicle and travel costs
You can claim vehicle costs for a sole trader in one of two ways: the simplified mileage rate, or a business proportion of your actual running costs. You pick one method per vehicle and stick with it for as long as you use that vehicle in the business.
The simplified mileage rate for cars and vans is 55p per mile for the first 10,000 business miles in the 2026/27 tax year, then 25p per mile after that. For motorcycles it’s 24p per mile. The car and van rate rose from 45p in April 2026, its first increase since 2011, so any older guide quoting 45p is now out of date.
Actual costs mean claiming the business share of fuel, insurance, servicing, repairs and depreciation. It can be worth more if you run an expensive vehicle, but you can’t also claim capital allowances on a vehicle you’re claiming mileage for.
Other travel stays claimable on top of mileage: train and bus fares, parking, tolls and business-trip accommodation. Your daily commute to a regular workplace doesn’t count.
Simplified expenses: flat rates instead of receipts
Simplified expenses are HMRC flat rates you can use instead of calculating actual costs, and they exist for three things: vehicle mileage, working from home, and living on your business premises. They’re optional, and they’re only for the self-employed, not limited companies.
The point is less paperwork. You claim a fixed rate rather than apportioning real bills, so you keep a mileage log or an hours log rather than a shoebox of receipts.
They don’t always win, though. In a larger home, or with a costly vehicle, actual costs can give a bigger deduction. Run both in your first year, then settle on the method that fits your pattern. You can switch home-working and premises methods each tax year, but once you choose mileage for a vehicle you’re locked in for that vehicle.
Equipment and capital allowances
Equipment you buy for the business, like a laptop, tools or a machine, is usually claimed through capital allowances rather than as a day-to-day running cost. For most sole traders that means the annual investment allowance, which gives 100% relief in the year you buy.
The distinction is capital versus revenue. A £40 keyboard is a running cost you claim outright. A £4,000 workstation is capital, and the annual investment allowance lets you deduct the full amount in year one, up to a limit of £1 million a year.
That limit is far above what any normal sole trader spends, so in practice the full cost of your kit comes off your profit the year you buy it. Cars are the main exception and follow their own rules.
What you can’t claim
Some costs are never allowable, however the money moved, and being clear about them is what keeps the rest of your return credible. The wholly and exclusively test rules most of them out.
- Client entertainment, including taking a customer to lunch or to an event
- Everyday clothing, even something you bought specifically for meetings
- Fines and penalties, such as parking tickets or a late-filing penalty
- Personal costs and anything with a private purpose
- Your own drawings, the money you take out to live on
Drawings catch people out most. Money you pay yourself isn’t a business expense; it’s profit you’ve already been taxed on. There’s no salary to deduct when you’re a sole trader, because you and the business are the same person for tax.
The trading allowance instead of expenses
The trading allowance is a £1,000 tax-free allowance you can claim against your self-employed income instead of your actual expenses. You claim one or the other, never both, so it only makes sense when your real costs come in under £1,000.
If you earned £3,000 and spent £400, the trading allowance leaves £2,000 taxable, which beats deducting the £400. If you spent £1,500, claim the actual expenses instead. The maths decides it.
If your gross self-employed income for the year is £1,000 or less, the allowance usually means you owe nothing and may not need to file at all. There’s a fuller explanation of the trading allowance and when it’s worth using.
Records you need to keep
You must keep your business records for at least 5 years after the 31 January submission deadline for the tax year they relate to. So records for your 2025/26 return, due 31 January 2027, need keeping until 31 January 2032.
Digital copies are fine. HMRC accepts scans and photos of receipts, and if you’re within Making Tax Digital for Income Tax you’ll be keeping records digitally by law anyway.
What to hold on to: sales and takings, purchase and expense receipts, mileage and home-working logs, and bank statements. If a record is lost and you can’t replace it, use a best estimate and tell HMRC you’ve done so.
Deductions people most often miss
The commonly missed deductions aren’t obscure; they’re ordinary costs sole traders forget to log. Being specific here is more useful than a vague promise that an accountant will “find savings”.
- Bank charges and interest on a business account or loan
- Professional subscriptions and trade body memberships
- Software renewals paid annually, which slip past monthly tracking
- Use of home, when you assume it’s too small to bother with
- Business mileage for short local trips that never make it into a log
- Accountancy and bookkeeping fees themselves
None of these is aggressive. They’re allowable costs that go unclaimed because they weren’t recorded at the time, which is exactly why capturing expenses as you go matters more than hunting for them in January.
How expenses affect your tax bill
Your allowable expenses reduce your taxable profit, and it’s the profit, not your turnover, that your Income Tax and National Insurance are worked out on. Claim £5,000 of genuine expenses against £30,000 of income and you’re taxed on £25,000.
Lower profit can also reduce your payments on account, the advance payments towards next year’s bill. So expenses don’t just cut this year’s tax; they can ease the cash flow squeeze of the January and July instalments.
You report the totals on the self-employment pages of your return. There’s a guide to putting expenses on your self assessment return that walks through where each figure goes, and a step-by-step on how to file a self assessment tax return if you’re doing it yourself this year.
Where sole trader rules differ from limited company rules
Sole trader expense rules aren’t the same as a limited company’s, because a sole trader and their business are one legal person for tax while a company is separate. The wholly and exclusively principle applies to both, but the mechanics differ.
A company can pay its director a salary and deduct it; a sole trader can’t deduct drawings. Simplified expenses are for the self-employed only, so a company can’t use flat-rate mileage in the same way. If you trade through a company, or are weighing it up, see how expenses work in a limited company.
How Sleek helps with sole trader expenses
Claiming expenses correctly is mostly about capturing costs through the year and applying the right test to each one. Plenty of sole traders manage that themselves, and where you can, you should.
Where it helps to hand over is when the volume gets heavy, the mixed-use splits get fiddly, or you simply don’t have time to reconcile it all before the deadline. Sleek’s in-house accountants review the full year rather than just filing the figures you send, which is how missed deductions get caught.
Disclaimer: The preceding information is not legal advice. This content is aimed to provide general guidance. For more formal or legal advice, contact Sleek directly.
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FAQs on sole trader expenses
Can I claim my mobile phone as a sole trader?
Yes, but only the business proportion if you also use the phone personally. Work out a fair split from your itemised bills, say 70% business, and claim that share of the line rental and usage. If a phone and its contract are used purely for the business, you can claim the full cost. Keep the bills as evidence.
Can I claim expenses from before I started trading?
Yes. Costs you incurred in the seven years before you started trading can be claimed as if they happened on your first day of business, provided they’d have been allowable had you already started. Typical examples are a laptop, initial stock, or insurance bought during setup. Keep the receipts, and enter them in your first year’s accounts.
Can I claim for taking a client to lunch?
No. Client entertaining isn’t allowable for a sole trader, however the deal talk went. That covers meals, drinks, events and hospitality for customers or suppliers. The rule is strict and applies even when the entertaining is genuinely for the business. Your own subsistence on a business trip away from your normal base is a separate matter and can qualify.
Can I claim the cost of training courses?
Yes, if the training updates or maintains skills you already use in your trade. A plumber’s refresher on new regulations qualifies. HMRC tends to disallow courses that give you an entirely new skill or let you start a different trade, treating those as capital rather than a running cost. Keep the booking and a note of how it relates to your work.
Can I claim a home office if I rent rather than own?
Yes. Renters claim the business share of rent, council tax, and utilities in exactly the same way an owner apportions mortgage interest and bills. Base the split on the rooms used for work and the time spent. If the apportionment feels fiddly, the simplified flat rate for hours worked from home is the simpler alternative.
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Do I have to register for VAT to claim expenses?
No. Claiming business expenses against Income Tax has nothing to do with VAT registration. You deduct allowable costs on your self assessment return whether or not you’re VAT registered. VAT registration is a separate obligation tied to your turnover, and it changes how you handle VAT on purchases, not whether the cost is an allowable expense.
Can I claim expenses if I made a loss?
Yes, and claiming them is how the loss is calculated in the first place. If your allowable expenses exceed your income, you have a trading loss, which you report on your self assessment return. Depending on your circumstances you may be able to set that loss against other income or carry it forward against future profits.
