Why Another Expenses List Will Not Help You
Search for self-employed expenses and you will find dozens of lists. Office costs, travel, clothing, staff, marketing, insurance. They are all broadly correct and almost none of them answer the question people actually have, which is "can I claim this?"
Lists work for the obvious cases. Nobody needs telling that a plumber can claim for copper pipe. The trouble starts with the things that are partly business and partly not: the phone, the car, the spare room, the laptop the kids also use, the lunch on a long job, the course that might be for a new line of work. Those are where the money is, and those are where a list goes quiet.
So this guide does it the other way round. It starts with the test HMRC applies, then works through the categories, then shows a full claim for one sole trader with the tax worked out. If you understand the test, you can answer most questions yourself.
The One Test That Decides Everything
The rule sits in section 34 of the Income Tax (Trading and Other Income) Act 2005. An expense is deductible only if it is incurred wholly and exclusively for the purposes of the trade.
HMRC reads that as two separate questions.
1. What was the purpose of spending the money? Not the effect, the purpose. Buying a coat that happens to keep you warm on site is not the same as buying a coat because your trade requires one.
2. Is any part of the cost identifiable as business use? If an item is used for business and private purposes, you can usually claim the business part, provided there is a fair way to measure it. Mileage logs, call itemisation and hours worked from home all do that job.
The second point matters more than people realise. "Wholly and exclusively" sounds as if any private use kills the claim. It does not. Section 34 explicitly allows a deduction for an identifiable part or proportion of an expense. What kills the claim is a cost that is inseparably mixed, where you cannot carve out a business share because the private benefit and the business benefit are the same thing.
The classic example is clothing. In Mallalieu v Drummond (1983), a barrister claimed for the plain black clothes the court required barristers to wear. The House of Lords refused it. The clothes also kept the wearer warm and decent as well as meeting the court's dress rules, and those purposes could not be separated. That case is why ordinary clothing is not allowable even if you only ever wear it to work.
Run any doubtful cost through those two questions and you will get the right answer more often than any list will give you.
What You Can Usually Claim
These are the main categories HMRC recognises, with the points that tend to trip people up.
| Category | Typical costs | Watch out for |
|---|---|---|
| Stock and materials | Goods for resale, raw materials, direct costs of jobs | Stock you take for personal use must come out |
| Office and admin | Stationery, postage, printing, software subscriptions, phone and broadband | Claim only the business share of a mixed phone or broadband bill |
| Travel | Fuel, parking, train and bus fares, hotels on business trips | Ordinary commuting is never allowable |
| Vehicles | Insurance, repairs, servicing, fuel, or simplified mileage instead | You cannot claim both mileage and actual costs on the same vehicle |
| Premises | Rent, business rates, utilities, insurance, repairs for business premises | A home office has its own rules, see below |
| Staff | Wages, employer pensions, employer National Insurance, subcontractors | Your own drawings are not a cost of the business |
| Professional fees | Accountants, solicitors, surveyors, professional body subscriptions | Fines and penalties are not allowable |
| Financial costs | Bank charges, card fees, interest on business loans and overdrafts | The capital part of a loan repayment is not an expense |
| Marketing | Advertising, website costs, directories, business cards | Client entertaining and hospitality are not allowable |
| Clothing | Uniforms, branded workwear, protective clothing | Everyday clothing, even if worn only for work |
| Training | Courses that update or maintain skills for your existing trade | Training to start a different trade |
| Insurance | Public liability, professional indemnity, equipment cover | Personal life or income protection policies |
Two of these are worth a little more detail.
Training. In 2024 HMRC rewrote its guidance on training costs after a lot of pressure from the profession. The updated position is that training which keeps your skills current, or helps you keep pace with new technology and methods in the trade you already carry on, is allowable. An electrician taking a course on EV charger installation is updating an existing trade. An electrician retraining as a dog groomer is not.
Food. You cannot claim your normal daily lunch, even on a busy day. Subsistence becomes allowable when you are travelling for business outside your normal pattern of work, for example an overnight job away from home or a one-off trip to a supplier in another city. If you work on site somewhere different every week, HMRC looks at what your normal pattern actually is, and site lunches are usually part of it.
What You Cannot Claim
Some costs are blocked by statute, regardless of purpose.
- Business entertainment, including client meals, drinks and event tickets. Section 45 of ITTOIA 2005 disallows them outright. Staff entertaining is a separate matter and is generally allowable.
- Fines and penalties, including parking and speeding fines. The cost of parking itself is fine. The ticket for parking badly is not.
- Your own wages, drawings and tax. Money you take out of a sole trade is not a cost of the trade, and nor are your Income Tax and Class 4 National Insurance bills.
- Commuting between home and a permanent workplace.
- Everyday clothing, for the reason above.
- Capital repayments on loans and hire purchase. The interest is allowable. The bit that reduces the debt is not.
- Depreciation in your accounts. If you use traditional accounting, relief for equipment comes through capital allowances instead. If you use the cash basis, most equipment is simply an expense when you pay for it.
- Personal gym membership, private medical insurance and other personal costs, even where you can argue they help you work.
Simplified Expenses or Actual Costs?
HMRC offers flat rates for three types of cost, to save you working out the real figure. You can use them or not, and the choice is separate for each.
Vehicles. For 2026/27 the simplified mileage rate for cars and vans is 55p a mile for the first 10,000 business miles and 25p after that. Motorcycles are 24p. The 55p rate is new; it was 45p until 5 April 2026, so the return you file in January 2027 for 2025/26 still uses 45p. Our HMRC mileage rates guide covers the change in detail.
Working from home. If you work 25 hours or more a month at home, you can claim £10, £18 or £26 a month depending on hours. Those bands have not changed since 2013 and are now well below what a genuine home office costs. Our working from home tax relief guide shows the apportionment method, which usually gives a much bigger figure.
Living at your business premises. If you live in the premises, for example a B&B or care home, you can deduct a flat amount for private use instead of apportioning bills: £350 a month for one person, £500 for two, £650 for three or more.
The vehicle choice is the one that matters, because it is permanent. Once you use simplified mileage for a vehicle, you must keep using it for as long as that vehicle is in the business. And if you have already claimed the purchase price, through capital allowances or as a cash basis expense, simplified mileage is no longer available for it. You make the decision once, in the year the vehicle arrives, and live with it. The worked example below shows why that is not a small decision.
A Worked Example: A Sole Trader Electrician in Potters Bar
Tom runs a one person electrical business from home in Potters Bar. For the 2026/27 tax year Tom invoices £58,000. Tom is on the cash basis, which has been the default for sole traders since April 2024.
In June 2026 Tom buys a second-hand van for £12,000 and drives it 11,000 business miles in the year, out of about 13,000 in total, so business use is 85 percent. Running costs are £2,600 fuel, £1,100 insurance and £700 servicing.
Here is what goes on the return.
| Expense | Total cost | Allowable | Why |
|---|---|---|---|
| Materials and parts | £9,400 | £9,400 | Direct cost of jobs |
| Van purchase and running costs | £16,400 | £13,940 | 85% business use, vans are not cars so the purchase is deductible on the cash basis |
| Hand and power tools | £1,200 | £1,200 | Equipment, deductible when paid on the cash basis |
| Mobile phone | £540 | £378 | 70% business use from itemised bills |
| Public liability insurance | £320 | £320 | Wholly for the trade |
| Accountant | £600 | £600 | Professional fees |
| Working from home | n/a | £216 | 60 hours a month at the £18 flat rate |
| Branded hi-vis and safety boots | £180 | £180 | Protective and branded clothing |
| EV charger installation course | £450 | £450 | Updates skills in the existing trade |
| Site lunches | £1,300 | £0 | Normal pattern of work, not travel |
| Parking fine | £70 | £0 | Penalties are not allowable |
| Christmas drinks with a builder who sends work | £150 | £0 | Business entertainment |
| Total | £26,684 |
Profit is £58,000 less £26,684, which is £31,316.
Tax for 2026/27, using the £12,570 Personal Allowance, 20 percent basic rate Income Tax and 6 percent Class 4 National Insurance:
- Taxable profit above the Personal Allowance: £18,746
- Income Tax at 20 percent: £3,749.20
- Class 4 National Insurance at 6 percent: £1,124.76
- Total: £4,873.96
The van decision, done properly
Now suppose Tom had used simplified mileage instead. 10,000 miles at 55p plus 1,000 at 25p is £5,750, against £13,940 for the actual costs. Expenses fall to £18,494, profit rises to £39,506, and the tax bill becomes £7,003.36. Choosing actual costs saves £2,129.40 this year.
That looks decisive. Look at five years before you decide.
Assume Tom keeps the van five years, drives the same mileage, and sells it for £4,000 at the end.
- Simplified mileage: £5,750 a year for five years is £28,750 of deductions.
- Actual costs: £12,000 purchase plus £4,400 a year of running costs is £34,000. At 85 percent that is £28,900. The £4,000 sale price is then taxable on the same 85 percent basis, £3,400, leaving net deductions of £25,500.
Over the life of the van, the flat rate gives Tom about £3,250 more in deductions, worth roughly £845 at a 26 percent marginal rate. Actual costs win the first year by a mile and lose over five.
This is a direct result of the 55p rate. At 45p the flat rate would have given £23,750 over five years and actual costs would have won comfortably. The rise has moved the crossover, and anyone running this comparison from memory is probably using the old answer.
Which is right for Tom depends on things the numbers do not show. If cash is tight in year one, or Tom expects higher profits later that push into the 40 percent band, taking the deduction early can still be the better call. If the van might be sold after two years, actual costs almost certainly win. The point is that it is a real decision with a real value, and the default most people make, ticking the mileage box because it is easy, is sometimes right by accident rather than by design.
Expenses Do Not Make You Richer
This deserves its own heading because we hear the opposite so often.
A £100 expense saves a basic rate sole trader £26 in Income Tax and Class 4 National Insurance. You are still £74 worse off than if you had not spent the money. At higher rate, the saving is £42 and you are £58 worse off.
Claim everything you are entitled to. Do not buy things to get the tax back. The year end splurge on equipment you were not going to buy anyway is one of the most reliable ways small businesses make themselves poorer.
Records, and Why They Matter More From This Year
You need a record of each expense: a receipt, invoice or bank entry, and for mixed costs, the working that supports the business share. Keep them for at least five years after the 31 January filing deadline for the year. For 2026/27 that means until 31 January 2033.
Most of what we see go wrong in an enquiry is not an invalid claim. It is a valid claim with no evidence behind it. HMRC can disallow a perfectly proper expense if you cannot show it happened or how you worked out the business share.
Making Tax Digital for Income Tax raises the stakes. Since 6 April 2026, sole traders and landlords with qualifying income over £50,000 send quarterly updates with expenses already sorted into HMRC's categories. That threshold drops to £30,000 in April 2027 and £20,000 in April 2028. Expense categorisation used to be a January problem. It is becoming a quarterly one, and the people who will find it easiest are the ones who already use bookkeeping software and a separate business bank account.
If your turnover is below the VAT registration threshold of £90,000, the short self-employment pages of the return let you enter total expenses as a single figure. That is a reporting convenience, not a lower standard of evidence. You still need the records behind the number.
Things Worth Knowing That Rarely Make the Lists
Pre-trading costs count. Money you spent getting ready to trade, up to seven years before you started, can be claimed as if spent on your first day, provided it would have been allowable once trading. Equipment, a website, insurance and initial marketing often qualify.
The trading allowance replaces expenses, not adds to them. If your gross income is small, you can deduct a flat £1,000 instead of actual expenses. You cannot have both. Our trading allowance guide explains when that is a good trade and when it quietly costs you money.
Your own home can become a capital gains question. If a room is used exclusively for business, part of your home may lose Private Residence Relief when you sell. Most people avoid this by making sure the room has some private use. It is a good reason not to describe your spare room as "exclusively" anything unless it really is.
Losses are not wasted. If expenses exceed income, the loss can usually be set against other income, carried back or carried forward. That is particularly useful in a first year with set-up costs.
Do Self-Employed People Need an Accountant?
Honestly, not always. If you have one income stream, few mixed costs, no vehicle and income comfortably below the MTD thresholds, you can file your own return using HMRC's guidance and do a perfectly good job.
The cases where an accountant usually pays for themselves are the ones in this article: a vehicle entering the business, a home office worth apportioning, a year with a loss, equipment on finance under the cash basis, or the first year inside Making Tax Digital. In Tom's case, one decision about one van was worth over £2,000 in year one. That is more than most sole traders pay for a year of accountancy.
The other reason is less about money. People who do their own returns tend to under-claim rather than over-claim, because they are nervous about getting it wrong. Our guide to what an accountant does covers the rest.
Our View
Learn the test, not the list. The wholly and exclusively test, plus the rule that an identifiable business share is allowable, answers nearly every question. Lists go out of date. The test has not changed since 2005, and its predecessor wording goes back more than a century.
The vehicle decision deserves ten minutes of arithmetic. It is the largest single expense choice most sole traders make, it is permanent for that vehicle, and the 2026 rate change has moved the answer for a lot of people.
The flat rates for home working are now a false economy for most. They were meant to be roughly fair. Thirteen years of frozen bands later, they are simply low.
Evidence beats ambition. A modest claim with clean records survives an enquiry. A generous claim with a shoebox of faded receipts usually does not.
How IAK Can Help
We prepare tax returns for sole traders, freelancers, tradespeople and landlords across North London and Hertfordshire. Part of that is making sure every allowable cost is in the return, with the business share worked out properly and the evidence in place.
The more valuable part is the decisions that come before the return: whether a new van goes in at cost or on mileage, whether a home office is worth apportioning, whether the cash basis is right for you, and how to set up your records so Making Tax Digital is a non-event. If you would like a second pair of eyes on last year's claim, or want to get this year right from the start, get in touch or read more about our personal tax service.
Sources
- Expenses if you're self-employed, GOV.UK, for HMRC's categories of allowable expenses, the treatment of mixed business and private costs, and the costs you cannot claim.
- Simplified expenses if you're self-employed, GOV.UK, for the working from home bands, the flat rates for living at business premises and the rule that simplified mileage cannot be used on a vehicle where capital allowances have been claimed.
- Income Tax (Trading and Other Income) Act 2005, section 34, for the wholly and exclusively rule and the deduction for an identifiable part or proportion of an expense. Section 45 covers business entertainment and section 57 covers pre-trading expenses.
- BIM37000: wholly and exclusively, HMRC Business Income Manual, for HMRC's approach to purpose, duality and apportionment.
- Mallalieu v Drummond [1983] 2 AC 861, House of Lords, for the principle that clothing with an inseparable private purpose is not deductible.
- Self-employed National Insurance rates, GOV.UK, for the 6 percent main Class 4 rate and the £12,570 lower profits limit.
- Making Tax Digital for Income Tax, GOV.UK, for the £50,000, £30,000 and £20,000 qualifying income thresholds.