Sole Trader Expenses UK 2026: The Complete Guide to What You Can Claim

Claiming every allowable expense is one of the simplest and most impactful things a sole trader can do to reduce their tax bill. Yet most self-employed people underestimate what they can legitimately claim, miss entire categories of expense, or claim incorrectly in ways that create HMRC risk.

This guide covers every major expense category available to UK sole traders in 2026, with clear examples of what is and is not allowable.

The Core HMRC Test: Wholly and Exclusively

Every allowable business expense must pass HMRC's fundamental test: it must have been incurred wholly and exclusively for the purpose of your trade. If an expense has a personal element, even a partial one, you can only claim the business proportion. If the expense is entirely personal, it is not deductible at all.

Travel and Vehicle Costs

Travel to visit clients, attend business meetings, deliver goods, or travel to temporary work locations is deductible. Commuting from home to a fixed regular workplace is not.

Mileage method (simplest): Claim 45p (55p for 2026/27) per mile for the first 10,000 business miles in the tax year, and 25p per mile after that. This covers all vehicle running costs, fuel, insurance, servicing, MOT, depreciation, in one simple figure. No vehicle receipts needed, just a mileage log.

Actual costs method: Calculate the total running costs of the vehicle (fuel, insurance, servicing, finance interest, depreciation) and claim the business-use proportion. This requires more record-keeping but can produce a higher deduction for high-mileage or expensive vehicles.

You must use the same method for a given vehicle for the life of that vehicle.

Public transport costs for business journeys, train, tube, bus, taxi, are fully deductible with receipts.

Overnight accommodation and subsistence on genuine business trips away from your normal place of work are deductible. HMRC has approved benchmark rates for subsistence that do not require receipts for meals.

Home Working Expenses

If you work from home, you can claim a portion of your home running costs as a business expense.

Flat rate (no receipts needed): £10 per month if you work 25 to 50 hours from home, £18 per month for 51 to 100 hours, and £26 per month for over 100 hours.

Actual costs: Apportion your home running costs (gas, electricity, broadband, council tax, mortgage interest or rent) by the number of rooms used for business and the hours of business use. This often produces a substantially higher deduction but requires records and receipts. Note that claiming mortgage interest can affect your CGT position when you eventually sell your home.

Equipment and Technology

Equipment purchased for business use is not deducted as an expense in the year of purchase under normal accounting rules, it goes through capital allowances. However, the Annual Investment Allowance (AIA) lets you deduct 100% of qualifying equipment costs in the year of purchase, up to £1 million per year.

This means a laptop, a desk, a printer, professional tools, or any other qualifying equipment purchased in 2026/27 can be deducted in full this year, reducing your taxable profit immediately.

For equipment used partly for personal and partly for business purposes, only the business proportion is deductible. A laptop used 60% for business and 40% personally: claim 60% of the cost.

Phone and Broadband

A mobile phone used partly for business: claim the business-use proportion of the monthly contract cost. Keep a two-week log at the start of each year to establish your percentage, a 70% business use on a £40 per month contract gives a £336 annual deduction.

Home broadband used for business: claim the business-use proportion. Many sole traders claim 50%. If you upgraded your broadband specifically for business purposes, the incremental cost above your previous package may be 100% deductible.

A separate business SIM or phone used entirely for business is 100% deductible.

Professional Fees and Subscriptions

Accountancy fees for preparing your business accounts and tax return are fully deductible. Legal fees for business matters (not personal legal costs) are deductible. Subscriptions to professional bodies, trade associations, and industry publications relevant to your trade are deductible.

Software subscriptions used for business, accounting software, project management tools, design software, Microsoft 365, are fully deductible.

Training and Development

Training costs are deductible where the training is to update or improve skills you already use in your current trade. A web developer attending a course on a new programming language: deductible. A plumber doing a refresher gas safety course: deductible.

Training to enable you to start a new trade or enter a new profession is not deductible, it is a capital expense rather than a revenue one. A sole trader hairdresser training to become an accountant cannot claim those training costs against their hairdressing income.

Marketing and Advertising

Website costs, social media advertising, Google Ads, business cards, leaflets, signage, and any other marketing spend directly promoting your business are fully deductible.

Client entertaining is specifically disallowed by HMRC, a lunch or dinner with a client where the primary purpose is entertainment rather than a business meeting is not deductible. Staff entertaining (a Christmas meal for employees) has its own rules with a £150 per head annual exemption.

Clothing

Protective clothing and PPE required for your work, safety boots, high-vis vests, hard hats, protective overalls, is deductible. Uniforms with a business logo are deductible. Everyday clothing, even if you wear it only for work, is not deductible because it has a personal element (it provides warmth and covering).

A nurse's uniform: deductible. A suit worn only in client meetings: not deductible.

Stock, Materials, and Cost of Sales

If your business involves buying goods to sell, or using materials to create products or complete jobs, the cost of those goods and materials is fully deductible. This includes raw materials, packaging, wholesale goods, and components.

Stock on hand at year end (not yet sold) is not deductible in that year, it appears on your balance sheet and is deducted when sold.

Insurance

Business insurance, public liability, professional indemnity, tools and equipment, employers' liability, is fully deductible. Personal life insurance or income protection insurance is generally not deductible as a business expense (though pension contributions are handled separately).

Bank Charges and Finance Costs

Business bank account charges, merchant services fees, PayPal fees, and other payment processing costs are deductible. Interest on business loans is deductible. Personal credit card interest is not deductible, even if the card was used for business purchases.

Pre-Trading Expenses

Expenses incurred in the seven years before you started trading, on preparing to set up the business, can be treated as if they were incurred on the first day of trading. This allows you to claim website setup costs, initial equipment, and professional fees paid before officially starting. There is an equivalent process at the other end: if you wind the business down, see our guide on how to tell HMRC you have stopped being self-employed.

Frequently Asked Questions