As a sole trader, the amount of tax you pay is not based on your total income. It is based on your profit. To calculate your profit, you take your total income and subtract your allowable business expenses. Understanding what you can and cannot claim as an expense is, therefore, one of the most important things you can learn. Ensure you do not pay more tax than you need to.
For new business owners, this can be a confusing area. This guide is written to calmly explain the rules around allowable expenses. To give you an idea of the most common expenses you can claim as a Sole Trader.
The Golden Rule: “Wholly and Exclusively”
HMRC has one main rule for deciding if an expense is allowable for tax purposes. The expense must be “wholly and exclusively” for the purposes of your trade. This means the sole reason for the expense must be for your business.
If there is a dual purpose to the expense (i.e., it is partly for business and partly for personal use), you can only claim the business portion of the cost. A good example is your mobile phone. If you use your personal mobile for both business and private calls, you can only claim the cost of the business calls.
Common Allowable Expenses
While every business is different, there are some common categories of allowable expenses that apply to most sole traders:
- Office costs: This includes things like stationery, postage, and business phone bills.
- Travel costs: You can claim for fuel, parking, train fares, and bus fares for business journeys. You cannot claim for the cost of commuting from home to your normal place of work.
- Stock and materials: If you make or buy goods to sell, the cost of these is an allowable expense.
- Legal and financial costs: You can claim for the fees you pay to an accountant or a solicitor for business purposes.
- Marketing and advertising: The cost of your website, advertising, and professional subscriptions are all allowable.
- Business premises: If you rent an office or a workshop, the rent, business rates, and utility bills are allowable.
- Training: You can claim for training courses that are related to your existing business and are intended to update your skills and knowledge. You cannot claim for training for a new career.
Simplified Expenses
For some types of expenses, HMRC allows you to use simplified expenses. These are flat rates that you can use instead of working out the actual costs. This can be a much easier way to claim for certain things.
The two main areas where you can use simplified expenses are:
Business mileage
Instead of claiming for the actual cost of fuel and running your vehicle. You can claim a flat rate of 45p per mile for the first 10,000 business miles you travel in a year. Any business miles being claimed exceeding 10,000 miles MUST be claimed at 25p per mile.
(Worth noting that, as of April 2026, the flat rate to claim up to 10,000 miles has increased to 55p per mile (for the first time since April 2011!). The amount claimable exceeding 10,000 miles remains unchanged at 25p per mile).
https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles
Working from home (aka Use of Home Office):
You can claim a flat rate based on the number of hours you work from home each month. This is designed to cover the extra cost of gas and electricity.
https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home
What You Cannot Claim
It is just as important to know as a Sole Trader, what you cannot claim. Some common non-allowable expenses include:
- Your own salary or drawings: As a sole trader, you cannot claim your own wages as an expense.
- Most entertainment costs: You cannot claim for the cost of entertaining clients or suppliers.
- Most clothing: You can only claim for specialist work clothing (like a uniform or protective gear), not for everyday clothes that you wear to work. If purchasing clothes which are to be branded/embroidered with company branding and logos this does become an allowable expense, as it will become a uniform used and worn specifically for work purposes, however it is then imperative to provide paperwork and evidence of such clothing being bought, then being branded to be allowed to be claimed back).
- Capital expenditure: The cost of buying large assets for your business (like a computer or a van) is not usually claimed as a day-to-day expense. Instead, you claim for these through a system called capital allowances.
When Getting Advice Can Help
Knowing which expenses you can and cannot claim is a crucial part of managing your business finances. It is easy to miss out on expenses you are entitled to, or to claim for things you should not, which can lead to problems with HMRC. You are not expected to be a tax expert, and getting professional advice can be very valuable.
If you would like calm, practical support, Penney’s Accountancy works with UK small businesses in and around Farnborough and the surrounding areas. We can help you understand which expenses you can claim as a Sole Trader and ensure your tax return is as accurate and tax-efficient as possible.
Want to Learn More in Your Own Time?
For those who want to build their confidence and understand these topics in more detail, Penney’s Finance School offers an online, self-paced business and finance course. It covers everything from company setup to cash flow and tax, allowing you to learn at your own pace.
Important information
The information provided in this article is intended as general guidance for UK businesses only and reflects UK tax legislation and HMRC guidance as of February 2026.
Tax rules and business requirements can change, and individual circumstances vary. Before acting on any of the information above, we recommend speaking to a qualified accountant who can provide advice tailored to your specific situation.