A-Z Guide to Business Expenses for Sole Traders

This guide provides an extensive A-Z breakdown of common business costs, their tax implications, and links to HMRC guidance for more clarity. Understanding what you can and can’t claim will help you avoid common tax pitfalls and maximise your savings.

A

Advertising & Marketing

Promoting your business is essential, and the good news is advertising and marketing expenses are fully tax-deductible as long as they are exclusively for business purposes. This includes:

• Digital ads (social media, Google Ads).

• Website development and branding costs.

• Business cards, brochures, and promotional materials.

Just ensure that expenses solely serve business growth and are not personal in nature.
HMRC Guidance

Animals

You may be able to claim tax relief on the costs associated with some animals, such as farm animals or guard dogs. There’s further information in the ‘Dogs’ section of this guide.

B

Bank Interest & Overdraft Charges

• Business accounts

If you have a business bank account that’s separate from your personal accounts, you can claim your interest and charges incurred for tax relief. If you are preparing your accounts on the cash basis, you can claim a maximum of £500 a year in interest and charges.

• Personal accounts

If you use a personal account for your business banking, the tax relief you can claim on interest and charges depends on how much you use the account for business purposes. Minimal business use means you shouldn’t claim these costs, but if the account is mainly for business, you can include some charges—just be ready to justify them if HMRC asks. If you use the cash basis of accounting, remember there’s a £500 cap on these claims.

Broadband

• Home Broadband: When your internet is used for both personal and business activities, you can claim only the percentage used for work. Document this split to avoid discrepancies with HMRC.

• Office Broadband: Fully claimable if your broadband contract is strictly for business use.
  HMRC Guidance

Business Use of Home

You can claim a simplified flat rate allowance for some of your business use of home expenses (unless you operate as a limited liability partnership). This allowance covers heating, lighting, and power. For other home working costs, you’ll need to claim tax relief by calculating a proportion of your actual expenses.

C

Charitable Donations

Charitable contributions are not classified as business expenses for sole traders. However, you can receive tax relief by donating through Gift Aid to a registered charity.

Childcare

Nice try, but claiming childcare for your own kids as a business expense won’t pass with HMRC. As much as parenting feels like a full-time job, sadly, it doesn’t qualify for tax relief!

Clothing

Only clothing that is necessary for your business qualifies for tax relief. This includes:

• Branded uniforms.

• Protective or specialist workwear (e.g., safety boots).
  General clothing, even if worn while working, does not qualify.
  HMRC Guidance

Computer Equipment & Electronics

• For private and business use

If you buy new computer equipment that you’re going to use partly for work and partly for personal use, you have to work out how much you’re going to use it for business, and then include only that proportion of the cost in your accounts.

• For business use only

If you buy computer equipment that’s just going to be used for your business, you’ll be able to claim tax relief on the full cost of the equipment as a capital asset.

• Equipment brought into a business

If you already own equipment like a computer or office chair and want to use it for your business, you can claim tax relief based on its market value at the time you brought it into the business. Check platforms like eBay for similar items to estimate the value.

• Second-hand equipment

If you buy a piece of equipment second-hand, you can still claim it as a capital asset at the cost you bought it for because the equipment is new to you. Don’t forget that unless you have a VAT receipt and are VAT registered, you can’t reclaim VAT on second-hand equipment.

Remember, if you’ll still use the equipment for personal use, you’ll need to calculate the business usage percentage and only claim that portion in your accounts.

Council Tax

If you work from home, you can claim a proportion of your Council Tax cost.

Cycling

HMRC says that sole traders and partners can’t claim tax relief on business journeys undertaken by bicycle. If you employ anyone, then your employees can claim tax relief on business bicycle travel - but you can’t!

D

Dogs

Expenses for working dogs, such as guard dogs or those required for your business (e.g., in farming), can be claimed. This may include costs like food, veterinary bills, and training, as long as the animal is essential to your operations. Proper documentation is necessary to validate these expenses.

E

Electricity

• Home Office: You can claim a proportion of your electricity bill based on business use, which may include heating, lighting, and powering equipment.

• Business Premises: Full electricity costs are allowable if they are exclusively for your business.
  HMRC Guidance

Entertaining

• Clients: Entertaining clients, such as meals or gifts, is not tax-deductible.

• Employees: Limited entertaining expenses, such as Christmas parties or employee events, may qualify if they meet specific HMRC criteria (e.g., under £150 per head).
  HMRC Guidance

F

Flights

Flights for business purposes are tax-deductible, but if the trip involves both business and personal activities, only the business-related portion is claimable. Maintain flight itineraries and receipts to ensure compliance.
HMRC Travel Expenses

Food & Drink

• While Travelling: If you're traveling for work, meals purchased during the trip are allowable. This applies to overnight stays or travel outside your normal working pattern. Receipts are essential for claims.
  HMRC Guidance

• At Home Office: If you don’t have employees, you can’t claim tax relief on food and drink you buy for yourself while working from home or in your usual office. However, if you do have employees, you can provide basic refreshments like tea, coffee, and biscuits, as well as free meals in a canteen, and claim tax relief—as long as it’s available to all staff.

G

Gas

• Home

If you work from home, you can claim tax relief on a percentage of your gas costs, based on how much you use your home for business. You can't claim both the percentage and the flat rate allowance, though. For further guidance see Business use of home.

• Office

You can claim the full cost of heating and lighting your business premises for tax relief.

Gifts

To Employees

Trivial benefits valued under £50 (e.g., holiday gifts) can be claimed as tax-free. Cash or vouchers do not qualify.

To Clients

Gifts branded with your company’s name (e.g., pens, mugs) are allowable, provided their value is under £50. Items such as alcohol or tobacco cannot be claimed.
HMRC Guidance

H

Hotel Accommodation

Hotels required for overnight business travel are tax-deductible. If the trip involves personal travel, only the portion directly related to business can be claimed. Retain receipts and clear documentation.
HMRC Travel Expenses

I

Insurance

Business-related insurance policies, such as public liability or professional indemnity insurance, are fully allowable. Personal policies like life or health insurance are not deductible.
HMRC Guidance

M

Mileage

Claim mileage costs using HMRC’s flat rates (e.g., 45p per mile for the first 10,000 miles). Maintain a detailed log of trips to ensure compliance.
HMRC Mileage Rates

Mobile Phone

• Personal Phone: Claim the percentage of your usage related to business calls, messages, or apps.

• Business Phone: If the phone is solely for business use, the entire cost is deductible.

Mortgage

If you work from home and pay a mortgage, you may be able to claim tax relief for a proportion of the interest that you pay, but not the capital repayment.

P

Parking Fines & Speeding Tickets

Nice try, but no! You can’t claim tax relief on fines or speeding tickets—even if they happened during a business trip. HMRC won’t cover the cost of breaking the law!

Petrol or Fuel

See mileage.

Pension Contributions

Sole traders cannot claim personal pension contributions as a business expense. However, these may qualify for personal tax relief.
HMRC Pension Contributions

Professional Fees

Fees for accountants, solicitors, or professional memberships directly related to your business are allowable expenses.
HMRC Guidance

Professional Subscriptions

You can claim tax relief on the cost of annual subscriptions paid to a professional institute or society, if membership of that body gives you the right to use a qualification and you use that qualification in your business.

For example, a self-employed bookkeeper could claim the cost of their Institute of Bookkeepers subscription. You can also claim tax relief on the cost of subscriptions to trade associations such as your local Chamber of Commerce.

Property Repairs To Your Home

If you work from home, you may be able to claim tax relief on certain property repairs. If a repair is solely for the part of your home used for business, you can claim the full cost based on the business use of that space.

For example, if your home office makes up one of ten rooms and you use it 90% for business, you could claim 90% of the repair cost. For whole-house repairs, like fixing the roof, you can claim a proportionate amount based on your business use. However, repairs to areas not used for business, like a kitchen renovation, aren’t eligible for tax relief.

R: Rent

• Home Office:

Proportionally claim rent if you work from home, based on space and time used for business purposes.

• Office Space:

Rent for dedicated office or workspace is fully deductible.

S

Solicitor

See: Professional fees

Stationery

If you buy stationery to use for the business, such as business cards or compliment slips, you can claim tax relief on the full amount of this cost.

T

• Home

If you work from home without a separate business phone line, you can claim the full cost of business calls (using an itemised bill) and a percentage of the line rental based on business use. However, if you’re using the flat rate allowance for home working, it doesn’t cover business calls.

• Office

If you have a separate phone line or mobile for business, you can claim tax relief on all the calls and line rental for this phone.

Tolls and car parking

You can claim tax relief for the full cost of tolls and car parking fees you pay while travelling on business. If you are claiming tax relief using the mileage method see: Vehicle, you can claim tax relief on the costs of tolls and car parking in addition to the mileage. Remember, however, that you can’t claim tax relief on parking fines! See: Parking fines and speeding tickets for more detail.

Train tickets

You can claim tax relief on train tickets if the trip was mainly for business. If the journey included both business and personal travel, you can only claim the business portion. If the costs can’t be separated, tax relief isn’t available.

Travel

HMRC doesn’t give any explicit guidance about what counts as a claimable business journey for sole traders. It only says that if the travel is “regular and predictable”, or between home and a “base of operations” such as a co-working space where you spend most of your working days, then the costs couldn’t be claimed.

Got a trip coming up? Speak to Finance Box about your specific requirements.

Training costs

If you're self-employed, you can only claim tax relief on training that refreshes or updates your existing skills. For example, a web developer taking a course on the latest industry trends can claim the cost. However, training that teaches entirely new skills or qualifications isn’t eligible for tax relief.

V

Vehicle Expenses

Sole traders can claim business mileage or actual vehicle running costs (fuel, maintenance). Ensure you keep accurate records of mileage logs and receipts.
HMRC Mileage Rates

W

Water

• Home

If your business relies heavily on water, like a car valeting service, you’ll need to arrange a separate business charge with your water company. In this case, you can claim tax relief on the full cost. However, if your business use is minimal, you won’t be able to claim any tax relief.

• Office

You can claim tax relief on the full cost of water at your business premises.

Website Hosting

Expenses for website hosting, development, and maintenance are deductible if the website directly supports your business operations.

X

Xmas Parties

Sole traders cannot claim expenses for personal or client entertainment, including Christmas parties. Only employee events qualify for tax relief.

Z

Zebras

Well… unless your business is a zebra sanctuary or you're using it as an office security system (good luck training it), HMRC is unlikely to approve. But if you can prove it's exclusively for business use, maybe as a company mascot, then we’d love to see you try.

Conclusion

Navigating business expenses as a sole trader doesn’t have to be complicated. By knowing which costs are allowable and keeping accurate records, you can reduce your tax burden and ensure compliance with HMRC regulations. When in doubt, consult a professional accountant to ensure you’re making the most of your deductions.

HMRC Self-Employed Expenses Guide