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 UK examples include software subscriptions, business travel, marketing, professional fees, training to maintain your current trade and a share of certain home-office costs. Personal-use elements must be apportioned, and a few categories (entertaining clients, most fines, most commuting) are never deductible.
The "wholly and exclusively" rule
HMRC's core test for deductible business expenses is simple to state and tricky to apply: the cost must be incurred wholly and exclusively for the purposes of the trade. If something has both a business and a private use — your mobile phone, a laptop, your home internet — you can usually only claim the business proportion. Where a private element is incidental (a business trip that includes an unplanned coffee on the way home), the whole cost is usually still allowable. Where the private benefit is meaningful (a "business" trip that's mostly a family holiday), the cost typically isn't.
If you can describe, in one sentence, the specific business reason for the spend and why a reasonable inspector would accept it, you're usually on solid ground. If you have to justify it in three paragraphs, expect challenge.
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 — 45p 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
Related guides
Some links on this page are affiliate or referral links. If you apply through them we may receive a commission, at no extra cost to you. This does not influence our editorial recommendations — see our editorial policy and affiliate disclosure.
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.