What expenses can I claim and what is allowable?

If you run a business, you can deduct allowable business expenses from your income before calculating tax.

You pay tax on profit, not turnover. Claiming the correct expenses reduces your taxable profit.

The key rule is that an expense must be wholly and exclusively for business use.

This means:

• If a cost is fully for business, it is usually allowable

• If it is fully personal, it is not allowable

• If it is partly business and partly personal, only the business portion can be claimed

This rule applies to both sole traders and limited companies, although the way it is recorded may differ.

Full HMRC guidance for self employed expenses is available here:
https://www.gov.uk/expenses-if-youre-self-employed

Common allowable business expenses

Below are examples of expenses that are usually allowable if they are for business purposes.

Office and premises costs

• Rent for business premises

• Business rates

• Utilities such as electricity and water

• Office cleaning

• Insurance

If you work from home, you may be able to claim a portion of household costs.

Travel costs

• Business mileage

• Train, bus and taxi fares for business journeys

• Parking fees

• Hotel accommodation for business trips

Travel must be for business purposes. Ordinary commuting between home and a regular workplace is not allowable.

Mileage rates and rules are available here:
https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles-

Professional costs

• Accountant fees

• Legal fees related to the business

• Professional subscriptions relevant to your trade

• Software subscriptions used for the business

Staff costs

• Salaries and wages

• Employer National Insurance

• Pension contributions

• Staff training

• Staff uniforms

Marketing and advertising

• Website costs

• Online advertising

• Printed marketing materials

• Business cards

Equipment and tools

• Laptops

• Phones used for business

• Tools and machinery

• Office furniture

These may be treated as capital allowances rather than day to day expenses, depending on the item.

Common disallowable expenses and grey areas

Some costs are not tax deductible, including:

• Personal expenses

• Client entertaining

• Fines and penalties

• Clothing that is not a uniform or protective clothing

• The personal element of mixed use costs

There are also areas that often cause confusion.

Clothing

Everyday clothing is not allowable, even if you only wear it for work. Uniforms and protective clothing are usually allowable.

Entertaining

Client entertaining is generally not allowable for tax, even if it is business related.

Mixed use expenses

If something is used for both business and personal purposes, such as a mobile phone or home broadband, you can normally only claim the business portion.

Keeping clear records of how you calculated the business percentage is important.

Working from home

If you work from home, you may claim:

• A flat rate simplified expense

• Or a proportion of actual household costs

The method used depends on your circumstances.

HMRC guidance is available here:
https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home

Why good record keeping matters

You must keep records of:

• What you spent

• When you spent it

• What it was for

If HMRC reviews your accounts, you must be able to show that expenses were business related.

Claiming the correct allowable expenses ensures you do not overpay tax, while avoiding disallowable costs helps prevent unexpected adjustments later.