Allowable Business Expenses for Sole Traders - Complete Guide for 2026/27

One of the most effective ways to reduce your tax bill as a sole trader is to claim every allowable business expense. Many sole traders under-claim because they do not know what qualifies or do not keep enough evidence. Good records make the difference.

The opposite mistake matters too. A claim should not be made just because a payment came from a business bank account or because it felt useful while working. A clean expense record shows what was bought, why it relates to the trade, when it was paid, and whether any private use has been removed. That is the practical foundation for a self-assessment return that is both efficient and defensible.

The Basic Rule

HMRC allows expenses incurred wholly and exclusively for the purposes of the business. If an expense has both business and personal use, only the business proportion is deductible. Keep receipts and records for every claim.

For mixed costs, consistency matters. A sole trader may use a phone, broadband connection, vehicle, or room at home for both private life and business. The records should show how the business share was calculated and why the method is reasonable. If the evidence is thin, the claim becomes harder to support later even when a genuine business cost exists.

Office and Administration Costs

• Stationery, printer ink, paper, and postage.

• Computer equipment and software used for business.

• Business telephone and broadband costs, restricted for personal use where needed.

• Professional subscriptions and trade publications.

• Accountancy fees.

Administration costs are easy to miss because they arrive in small amounts. Software subscriptions, postage, printer supplies, cloud storage, domain renewals, and professional tools can be spread across bank statements and card providers. A bookkeeping routine that captures recurring subscriptions as well as larger invoices helps stop valid costs being lost at year end.

Travel and Vehicles

• Business mileage in your own car at HMRC approved mileage rates.

• Train, bus, taxi, parking, and accommodation costs for business trips.

• Subsistence on qualifying overnight business travel.

Ordinary commuting between home and a permanent workplace is not an allowable business journey.

Travel claims need a business purpose. Keep the date, destination, reason for the trip, and supporting receipt or mileage record. If you use mileage rather than actual vehicle running costs, apply the chosen method consistently. Overnight work trips may involve accommodation and subsistence, but private detours or ordinary home-to-work travel should not be folded into the claim.

Home Office Costs

If you work from home, you may claim a business proportion of heating, electricity, broadband, rent, or mortgage interest where the facts support it. HMRC simplified flat rates may also be available depending on hours worked from home.

Home working is common for consultants, creatives, online sellers, and tradespeople handling admin outside client sites. The claim should reflect real use. Think about the space used, the time spent there, and which household costs are relevant. A simple note of the method used can save a long reconstruction when the tax return is prepared.

Staff and Subcontractor Costs

• Wages, salaries, employer National Insurance, and employee pension contributions.

• Payments to subcontractors for business work.

• Training costs directly relevant to current business activities.

Payments to people are an area where records quickly become important. Keep invoices from subcontractors, payroll summaries for employees, and enough detail to show what training relates to. Where a cost develops an existing trade skill it may be treated differently from spending that creates a new trade or personal qualification, so the description of the expense matters.

Marketing and Advertising

• Website design, hosting, and domain fees.

• Google Ads and social media advertising.

• Business cards, flyers, signage, and customer samples.

Marketing costs often span several channels at once. Website hosting, design work, photography, printed materials, paid search, social campaigns, and product samples may all support sales. Keep supplier invoices and campaign receipts together so the return does not depend on memory of which card transaction belonged to which advert.

What You Cannot Claim

• Client entertainment.

• Ordinary clothing, except uniforms or protective clothing where rules allow.

• Fines and penalties.

• Personal expenses.

This is where discipline protects the claim. Client entertainment can feel commercial without being deductible. Ordinary clothes remain personal even when you choose them for work. Penalties do not become business expenses just because they arose while trading. If a receipt contains both business and personal items, record only the business part.

Capital Allowances

Larger purchases such as equipment, computers, and some vehicles may be claimed through capital allowances rather than day-to-day revenue expenses. The Annual Investment Allowance can allow qualifying assets to be written off in the year of purchase.

Capital spending should be flagged before the return is finalised. A laptop used in the trade, specialist equipment, and some larger tools may not be treated in exactly the same way as stationery or postage. Good asset records show purchase date, cost, business use, and disposal details if the asset is later sold or replaced.

A Practical Expense Checklist

• Keep receipts, invoices, mileage logs, and bank evidence together.

• Separate private spending from business spending as early as possible.

• Review recurring subscriptions before the year-end file is prepared.

• Record the business proportion used for mixed-use costs.

• Ask before claiming uncertain costs rather than guessing.

That checklist turns expense claims into a habit instead of a year-end scramble. The cleaner the evidence, the easier it is to prepare the return and spot costs that genuinely belong in the business figures.

Claim Every Legitimate Expense

Countify prepares self-assessment tax returns for sole traders across Glasgow and the UK, helping clients capture every legitimate expense. Call 07515 646845 for a free initial consultation.