What expenses can I claim as a sole trader?
As a sole trader, you can usually claim business expenses that are genuinely linked to running your business. These reduce your taxable profit, which means you pay tax on profit rather than total income.
GOV.UK explains that self-employed people can deduct allowable expenses from turnover to work out taxable profit in its guide to expenses if you are self-employed. Merranti’s business expense guide explains the same principle in more practical terms: the cost must be business-related, justifiable and supported by records.
The main risk is not failing to claim anything. The risk is claiming expenses without understanding where the line is between business and personal spending.
The basic rule: business costs only
For sole traders, expenses should be linked to the trade. Personal costs are not allowable just because they were paid from the business bank account.
GOV.UK says allowable expenses do not include money taken from the business for personal use in its self-employed expenses overview. Merranti’s guide to the tax risks of mixing personal and business money is useful here because it explains how blurred personal and business spending can create problems during tax return preparation or an HMRC enquiry.
A good test is simple: would you have incurred the cost if you were not running the business? If the answer is no, it may be allowable. If the answer is yes, you need to look more carefully.
Office, software and equipment costs
Sole traders can often claim office and running costs. GOV.UK lists examples such as phone, mobile, internet, postage, stationery, printing, printer ink and certain business software in its guide to office, property and equipment expenses.
Common examples include:
- stationery
- printer ink
- postage
- business software
- website hosting
- cloud bookkeeping subscriptions
- business phone costs
- business broadband proportion
- office rent
- business insurance
Merranti’s what counts as a business expense article gives a wider explanation of office costs, software, tools, phones and mixed-use costs.
For larger items such as computers, tools, machinery or equipment, the treatment can depend on whether the item is revenue expenditure, capital expenditure, cash basis accounting or capital allowances. Merranti’s cash basis guide is useful for sole traders because cash basis is now the default approach for many unincorporated businesses.
Working from home
If you work from home, you may be able to claim part of your household costs. GOV.UK says this can include a proportion of heating, electricity, Council Tax, mortgage interest or rent, internet and telephone use, where a reasonable method is used to divide business and personal use. This is covered in GOV.UK’s self-employed expenses overview.
You can also consider simplified expenses. GOV.UK’s working-from-home simplified expenses guide says flat rates can be used if you work from home for 25 hours or more a month.
This is one area where overclaiming is common. Claiming the whole rent, mortgage or broadband bill is unlikely to be correct if there is personal use. Merranti’s business expense guide explains why apportionment matters where a cost has both business and private use.
Travel and mileage
Sole traders can usually claim business travel costs. GOV.UK’s car, van and travel expenses guide includes examples such as vehicle insurance, repairs, fuel, parking, train fares, bus fares, taxi fares, hotel rooms and meals on overnight business trips.
You cannot normally claim ordinary commuting or non-business travel. GOV.UK is clear that travel between home and work is not allowable in its self-employed travel expenses guidance.
For vehicles, you can either claim actual costs or, where suitable, use mileage-based simplified expenses. GOV.UK’s vehicle simplified expenses guide gives flat rates of 45p per mile for the first 10,000 business miles for cars and goods vehicles, 25p per mile after that, and 24p per mile for motorcycles.
Merranti’s guide on claiming flights as a business expense is useful for sole traders who travel for suppliers, events, content creation or client work, especially where a trip has both business and personal elements.
Stock, materials and subcontractors
If you sell goods, make products or provide trade services, stock and materials can be a major expense.
GOV.UK’s reselling goods expenses guide says sole traders can claim costs such as goods for resale, raw materials and direct costs from producing goods. It also says you cannot claim for goods or materials bought for private use.
If you use subcontractors or staff, GOV.UK’s staff expenses guide says allowable costs can include employee salaries, bonuses, pensions, benefits, agency fees, subcontractors, employer’s National Insurance and training courses related to the business.
These areas need clean records because they directly affect profit. Merranti’s year-end tax planning guide for sole traders is a useful internal link for reviewing expenses, stock, subcontractors and profit before 5 April.
Marketing, websites and subscriptions
Marketing costs are usually allowable where they are for the business. GOV.UK’s marketing, entertainment and subscriptions guide lists advertising, bulk mail advertising, free samples and website costs as examples of allowable business expenses.
This can include:
- website design
- hosting
- domain names
- online advertising
- printed marketing
- business cards
- social media advertising
- directory listings
- trade subscriptions
However, client entertainment is a common trap. GOV.UK says entertaining clients, suppliers and customers is not allowable in its marketing and entertainment expenses guidance.
Merranti’s what expenses can I claim as a deduction article gives a practical breakdown of common claimable costs and the areas that often cause confusion.
Accountancy, legal and financial costs
Professional fees can be allowable where they are for business purposes. GOV.UK’s legal and financial costs guide says accountancy, legal and other professional fees can count as allowable business expenses where they are for business reasons.
This can include:
- accountancy fees for business accounts
- bookkeeping support
- professional indemnity insurance
- business loan interest
- business bank charges
- hire purchase interest
- leasing payments
However, not every legal or financial cost is allowable in the same way. GOV.UK says fines for breaking the law are not allowable, and legal costs of buying property or machinery may need capital allowance treatment instead. The same GOV.UK guide to legal and financial costs explains these exclusions.
Merranti’s Self Assessment tax return guide is useful where sole traders are unsure whether they need to file a return or how their business expenses feed into Self Assessment.
Clothing, meals and personal costs
Some costs feel business-related but are not always allowable.
Ordinary clothing is a common example. A sole trader may need to look smart for clients, but ordinary clothing usually has a personal purpose as well. Protective clothing, uniforms or branded clothing can be different, depending on the facts. Merranti’s business expense guide explains clothing, meals and mixed-use costs in more detail.
Meals can also be misunderstood. GOV.UK’s travel expenses guidance allows meals on overnight business trips, but ordinary daily meals are not usually business expenses just because you were working that day.
This is where record keeping and judgement matter. A receipt alone does not make a cost allowable. You need to be able to explain the business reason.
Simplified expenses: easier, but not always better
Simplified expenses let sole traders use flat rates instead of calculating actual costs for some areas.
GOV.UK’s simplified expenses overview says simplified expenses can be used by sole traders and partnerships with no companies as partners, but not by limited companies.
Simplified expenses can cover:
- business mileage
- working from home
- living at business premises
They do not cover every business cost. GOV.UK says all other expenses must be calculated using actual costs in its simplified expenses overview.
Simplified expenses are easier, but not automatically better. If your actual business costs are high and properly evidenced, actual costs may produce a better result. This should be checked before completing the tax return.
What records should sole traders keep?
You do not usually send receipts to HMRC with the tax return. But you must keep evidence.
GOV.UK’s how to claim expenses guide says you should keep records of all business expenses as proof and make sure the records are accurate.
Useful records include:
- receipts
- invoices
- bank statements
- mileage logs
- supplier statements
- software subscriptions
- platform reports
- notes explaining business use percentages
- home office calculations
- travel and accommodation evidence
Merranti’s guide on how long to keep accounting records in the UK is a useful next step if you are unsure how long records should be kept.
Digital records are also becoming more important. Merranti’s Making Tax Digital guide for sole traders explains how MTD for Income Tax will change record keeping and quarterly reporting for some sole traders.
Common mistakes to avoid
The first mistake is claiming costs simply because they were paid from the business account. A business bank account helps with organisation, but it does not make a personal cost tax deductible.
The second mistake is claiming 100% of mixed-use costs. Phones, broadband, cars and home office costs often need apportionment.
The third mistake is confusing drawings with expenses. Merranti’s guide on how to pay yourself from your business explains that sole traders are taxed on profit, not on the amount they withdraw from the business.
The fourth mistake is missing small recurring costs. Software, bank fees, subscriptions, postage and website costs can add up over the year.
The fifth mistake is keeping poor records. If HMRC asks questions later, weak evidence can make an otherwise reasonable claim harder to defend.
Speak to Merranti before submitting your tax return
Sole trader expenses are not just a list of receipts. The correct treatment depends on the type of cost, whether it is wholly business-related, whether there is private use, whether simplified expenses are better, and whether the item is revenue or capital.
Merranti’s business expense guide, sole trader year-end planning guide, cash basis guide, Self Assessment guide and Making Tax Digital guide are useful starting points if you want to understand the connected issues.
If you are unsure whether your expenses are allowable, or you want your Self Assessment return checked before submission, contact Merranti Accounting before the filing deadline.
