Business Expenses You Can Claim in the UK
A plain-English guide to what counts as an allowable business expense for sole traders and limited companies, with worked examples and the rules HMRC actually applies.
An expense is allowable if it's incurred wholly and exclusively for the purposes of your business. Common examples include software subscriptions, eligible business travel, marketing and professional fees. A private or dual purpose is not automatically deductible just because there is also a business use. Claim a business proportion only where the business element can reasonably be identified and separated; check the specific rule for the expense and the type of business.
The "wholly and exclusively" rule
For an unincorporated trade, section 34 of ITTOIA 2005 denies a deduction for an expense not incurred wholly and exclusively for the trade. The corresponding company rule is in section 54 of CTA 2009. The test depends on the purpose and facts of the particular cost; there is no one-sentence or paragraph-count shortcut. Keep evidence of what was bought, why it was needed, who used it and how any private element was treated.
HMRC’s examples show why “business use” alone is not enough. Ordinary civilian clothing is normally dual-purpose because it can be worn privately, even if it is useful or required at work. Food for ordinary sustenance is normally a personal living cost; qualifying business travel and overnight subsistence are considered under separate rules. If a trip combines a business purpose with a private holiday, do not assume the whole trip is deductible. A distinct, identifiable business element may be apportioned where it can genuinely be separated; a single cost that serves an inseparable private purpose may fail the test.
For a phone, internet service or asset used for both business and private purposes, deduct only a supportable business share where the cost can reasonably be split. If the private purpose is inseparable or the item is inherently personal, apportionment may not make the cost allowable. Company-paid private benefits may also trigger benefit-in-kind and Class 1A NIC reporting, even where a company expense deduction is available.
Common allowable categories
| Category | Examples | Notes |
|---|---|---|
| Office costs | Stationery, printing, postage, software subscriptions | Personal-use software needs apportioning |
| Travel & subsistence | Train, bus, parking, mileage, hotel, meals on overnight trips | Ordinary commuting to a regular workplace is not allowable |
| Marketing & website | Ads, hosting, design, brand photography, business cards | Entertaining clients is not allowable |
| Professional services | Accountant, bookkeeper, legal advice, business insurance | Personal legal costs are not deductible |
| Training | CPD and courses to maintain your current trade | Courses to start a new trade are usually capital/personal |
| Bank & finance | Business bank account fees, card fees, loan interest | Personal account fees are not allowable |
| Staff costs | Salaries, employer NIC, pension contributions, payroll software | Owner drawings are not an expense for sole traders |
| Home office | Use of home (simplified flat rate or actual apportionment) | Keep a sensible record of the method used |
| Equipment | Tools, laptops, cameras, work clothing required for the role | Larger items go through capital allowances |
| Cost of sales | Stock, raw materials, subcontractors directly used in jobs | Match costs to the period the sales occurred |
This list isn't exhaustive — anything genuinely incurred for the business can potentially qualify. Use it as a sanity check, not a closed menu.
Sole trader vs limited company
The wholly-and-exclusively test applies to both, but the mechanics differ. Sole traders deduct allowable expenses from trading income on their Self Assessment to arrive at taxable profit. Limited companies deduct expenses from turnover to arrive at profit chargeable to Corporation Tax, and additionally have to consider whether anything paid for a director or employee is a taxable benefit-in-kind.
A company can buy almost anything, but if a director or employee personally benefits from it (gym membership, a private health policy, a personal-use laptop), it may need to be reported on a P11D and may attract income tax and Class 1A NIC. Genuinely-business items (a phone provided for work, equipment used in the business) are usually fine.
Working from home
Two methods are commonly used:
- HMRC simplified flat rate for sole traders: a fixed monthly amount based on hours worked from home — easy to apply and hard to argue with, but often lower than the actual cost.
- Actual apportionment: take a sensible share of utility bills, council tax, rent or mortgage interest based on the number of rooms used for work and the proportion of time. Keep the calculation written down.
Limited companies typically reimburse a director using HMRC's flat homeworking allowance, or under a formal rental agreement for a dedicated office space. The latter has tax and capital gains implications — get advice before setting one up.
Travel and mileage
Business travel between temporary workplaces, to clients or to suppliers is usually allowable. Ordinary commuting from home to a regular place of work generally isn't. For cars, you can either claim actual running costs (with apportionment for private use) or use HMRC's approved mileage rates — £55p per mile for the first 10,000 business miles in a tax year, then £25p, for cars and vans. Once you pick a method for a vehicle, stick with it for that vehicle.
Capital items and capital allowances
Bigger purchases with a useful life beyond the current year — laptops, machinery, vans — are usually capital items. Instead of being expensed in one go, they're claimed through capital allowances. Most small businesses can use the Annual Investment Allowance to deduct the full cost of qualifying plant and machinery in the year of purchase, up to a generous annual cap. Cars are treated separately, with rates depending on CO2 emissions.
Records and proof
HMRC expects records to be kept for at least 5 years after the 31 January Self Assessment submission deadline for sole traders, and at least 6 years from the end of the accounting period for limited companies. A bank statement alone isn't proof of what was bought — keep the receipt or invoice too.
Practical setup: a dedicated business bank account, a phone app for receipt photos, and either a spreadsheet or bookkeeping software with bank feeds. Reconcile monthly. The Making Tax Digital regime is expanding, so digital records are increasingly required, not just recommended.
Frequently asked questions
Limited companies can provide one mobile per employee tax-free if the contract is in the company's name. Sole traders typically apportion business and personal use of a single contract.
Generally no — eating during your normal working day isn't an allowable expense. Subsistence on qualifying business travel away from your normal pattern of work is different and can usually be claimed.
Only specific protective clothing, uniforms with a logo, or costumes for performers. Ordinary business clothing isn't deductible, even if you only wear it for work.
No — entertaining clients is specifically disallowed for tax purposes, although you can still pay for it from business funds. Staff entertaining within HMRC's limits is treated differently.
Related guides
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Information on this page is general guidance for UK small businesses and is not financial, tax or legal advice. Tax rules, allowances and product terms change. Always check current information with HMRC, Companies House or a qualified professional before making decisions.