Sole Trader Expenses: What You Can Actually Claim
If you are a sole trader, you can claim allowable business expenses to reduce your taxable profit. In simple terms, that means you only pay tax on your profit after deducting costs that HMRC accepts as business expenses. But there is an important catch: the expense must be for your business, and if it is partly personal, you can only claim the business part. HMRC also says you cannot claim expenses if you use the £1,000 trading allowance.
A lot of sole traders either underclaim because they are too cautious, or overclaim because they rely on vague advice from social media. The better approach is to work from HMRC’s own rules and keep proper records from the start. HMRC’s main guide to expenses if you’re self-employed is the starting point for most of the common categories.
The basic rule on sole trader expenses
The core rule is straightforward. HMRC says allowable expenses are costs related to your business purchases and running costs. That can include office costs, travel, stock, business premises costs, advertising, some training, and certain legal and financial costs. But money you take out of the business for yourself is not an expense, and anything with private use has to be restricted to the business element only.
That is where mistakes usually happen. The category might sound business-related, but the detail matters. A phone bill may be claimable in part. A laptop may be treated differently depending on your accounting basis. Travel to a client meeting may be allowable, but commuting from home to your usual workplace is not.
Common sole trader expenses you can usually claim
HMRC says sole traders can normally claim business expenses in areas such as office, property and equipment, travel, clothing, staff costs, reselling goods, legal and financial costs, and marketing, entertainment and subscriptions.
That means costs such as these are often allowable:
- stationery, postage, printing, software and phone bills
- rent, utilities and insurance for business premises
- stock, raw materials and goods bought for resale
- business insurance, bank charges and loan interest
- website costs, advertising and trade subscriptions
- staff wages, subcontractors and employer’s National Insurance
- work-related training that updates existing business skills
But “often allowable” does not mean automatic. The expense still has to be for business purposes and supported by proper records.
Working from home
Working from home is one of the most common grey areas. HMRC says you may be able to claim a proportion of home costs such as heating, electricity, Council Tax, rent, mortgage interest, internet and telephone use, provided you use a reasonable method to separate the business part from the personal part.
You may also be able to use simplified expenses for working from home. HMRC’s current flat rates are £10 per month for 25 to 50 hours of business use, £18 per month for 51 to 100 hours, and £26 per month for 101 hours or more. HMRC also says the flat rate does not include telephone or internet expenses, so the business element of those still has to be worked out separately.
Travel and mileage
HMRC says sole traders can claim costs such as fuel, insurance, servicing, parking, public transport, hotel rooms and meals on overnight business trips. But HMRC also says you cannot claim non-business travel, fines, or travel between home and work.
If you use your own vehicle, you may be able to use simplified mileage rates instead of actual running costs. HMRC’s current rates are 45p per mile for the first 10,000 business miles in a car or goods vehicle, 25p per mile after that, and 24p per mile for motorcycles. Once you use flat rates for a vehicle, HMRC says you must continue to do so for as long as you use that vehicle in the business.
Phone, internet and mixed-use costs
Phone and internet bills are another area where people either claim too much or too little. HMRC says you can claim the business proportion of these costs, but not the personal part. That same principle applies to any mixed-use expense. If something is partly business and partly personal, you need a reasonable basis for separating the business share.
This is one of the easiest areas to get wrong because the cost feels work-related. But HMRC is not interested in what feels fair. It wants a defensible business proportion.
Clothing, entertaining and other expenses people get wrong
Some of the most searched expenses are also the ones people misunderstand most.
HMRC says you can claim clothing expenses for uniforms, protective clothing and costumes for actors or entertainers. But you cannot claim for everyday clothing, even if you wear it only for work.
HMRC also says you cannot usually claim for client entertaining, event hospitality or most gifts. That catches a lot of people out because they assume client lunches are a business cost just because they were business-related in a practical sense. HMRC’s rule is narrower than that.
On the legal and financial side, HMRC says accountancy and legal fees can count if they are for business reasons, along with things like professional indemnity insurance, bank charges and interest on business loans. But HMRC also says you cannot claim fines, loan repayments, or the cost of preparing and submitting your own Self Assessment tax return.
Training and software
Training is another area where detail matters. HMRC says you can claim for training courses that improve or update skills and knowledge you already use in your business, including administrative skills that support the business. But you cannot claim training that helps you start a new business or move into a new unrelated area.
HMRC also says software can be treated differently depending on the type of software and the accounting basis you use. Some software costs can be claimed as allowable expenses, while others may fall under capital allowances unless you use cash basis.
Keep records and claim properly
HMRC says you need to keep records of all sales, income and business expenses, along with proof such as receipts, invoices and bank statements. You do not usually send those records in with the tax return, but you must keep them in case HMRC asks to see them. HMRC also says records generally need to be kept for at least 5 years after the 31 January submission deadline for the relevant tax year.
That record-keeping matters just as much as knowing the rules. A valid expense without evidence can still become a problem if HMRC asks questions later.
The safest way to think about sole trader expenses
The best mindset is not “what can I get away with?” It is “what can I justify under HMRC’s rules?” If the cost is genuinely for the business, recorded properly, and treated in line with HMRC guidance, it may be claimable. If it is personal, mixed, vague or unsupported, it is where errors tend to happen.
At Merranti, we help sole traders work out what they can claim, what needs to be adjusted, and how to keep records properly so expenses are handled correctly from the start. If you are unsure whether you are underclaiming or overclaiming, we can help you get it right.
