A Guide to Allowable Self Employed Expenses

Every pound of allowable expense you claim is a pound off your taxable profit. For a basic-rate taxpayer, £1,000 of missed expenses means £200 of unnecessary tax (plus National Insurance). Yet many self-employed people under-claim — unsure what counts. This guide sets out the rules and the most common allowable expenses for 2026/27.

Want every allowable expense claimed? Our accountants will prepare your Self Assessment tax return for a fixed fee from £199 + VAT.

What Are Allowable Expenses?

Allowable expenses are the day-to-day running costs of your business — office supplies, travel, insurance, software — that HMRC lets you deduct from your income before calculating tax. The key test is that each cost must be incurred wholly and exclusively for the purposes of your trade. See HMRC’s guide to self-employed expenses for the official rules.

The “Wholly and Exclusively” Rule

This is the golden rule of expenses. A laptop used only for business qualifies in full. A mobile phone used 70% for business and 30% personally can be claimed at 70% — you must apportion dual-purpose costs on a reasonable basis. Purely personal spending (your weekly shop, family holidays, commuting to a regular workplace) never qualifies.

Common Allowable Expenses for the Self-Employed

1. Office Costs

Stationery, printer ink, postage, computers, software subscriptions and business phone bills all qualify. Larger equipment — a £2,400 laptop, for example — is usually claimed through the Annual Investment Allowance (£1 million), giving 100% relief in the year of purchase. Read how to claim office supplies for a worked example.

2. Travel and Motoring

Business travel is claimable: fuel, parking, train and plane fares, hotels and meals on overnight trips. For car use, most sole traders use HMRC’s mileage rates — 45p per mile for the first 10,000 business miles and 25p thereafter. Example: 8,000 business miles × 45p = £3,600 of tax-free motoring costs. You cannot claim ordinary commuting between home and a regular workplace.

3. Working From Home

You can claim a proportion of household costs — heating, electricity, internet — based on business use. Alternatively, HMRC’s simplified flat rates let you claim £10, £18 or £26 per month depending on hours worked, with no calculations needed. At 60 hours a month, £18 × 12 = £216 a year of effortless relief.

4. Professional Fees and Insurance

Accountancy and legal fees, professional subscriptions, and business insurance (public liability, professional indemnity) are all allowable. Note that fines and penalties — including HMRC penalties — are never deductible.

5. Marketing and Advertising

Website design and hosting, online advertising, social media promotion, business cards and printed materials all count. Entertaining clients, however, is specifically disallowed.

6. Stock, Materials and Equipment

Raw materials, goods for resale, and tools used in your trade are deductible. Capital equipment generally goes through the Annual Investment Allowance as described above.

7. Staff and Subcontractor Costs

Wages, salaries, employer National Insurance contributions, pension contributions and payments to freelancers or subcontractors all qualify. Keep payroll records meticulously — HMRC checks these closely.

What You Cannot Claim

• Personal and living costs with no business purpose
• Client entertaining and hospitality
• Fines and penalties
• Everyday clothing (unless protective uniform or costume)
• Commuting to your regular place of work

Keeping Records of Your Expenses

Keep invoices and receipts for every expense, and store them digitally — HMRC can ask to see records up to six years after the tax year. Accounting software or even a well-organised spreadsheet beats a shoebox. Good records are also your defence if HMRC opens an enquiry.

How to Claim Allowable Expenses

Enter your total expenses in the self-employment section of your Self Assessment tax return. You have two approaches:

• Actual costs: add up every receipt — best when your real costs exceed the flat rates
• Simplified expenses: use HMRC’s flat rates for vehicles, home working and living on business premises

For a broader overview aimed at freelancers specifically, see our freelancer expenses guide.

Frequently Asked Questions

What is not an allowable expense?

Personal costs, client entertaining, fines and penalties, and ordinary commuting are never allowable.

Can I use HMRC’s flat rates instead of receipts?

Yes — simplified expenses cover vehicle mileage, working from home and living on business premises. Compare both methods and use whichever gives the bigger deduction.

Can I claim for my home office?

Yes — either a fair proportion of household bills or HMRC’s flat rates of £10, £18 or £26 per month depending on hours worked.

Are accountancy fees tax-deductible?

Yes. Professional fees for running your business, including what you pay us to prepare your return, are allowable expenses.

What if an expense is partly personal?

Apportion it on a reasonable basis and claim only the business proportion — for example, 70% of a phone bill for 70% business use.

Related Guides

• How to Claim Office Supplies as a Self-Employed Worker
• What Business Expenses Are Tax-Deductible for Freelancers
• How to Register for Self Assessment as a Sole Trader

Conclusion

Allowable expenses are one of the most powerful — and most underused — tools for cutting your tax bill. Learn the “wholly and exclusively” rule, claim every category that applies, keep clean records, and compare actual costs against HMRC’s flat rates. Do that, and you will keep more of what you earn, completely within the rules. If you would rather a professional maximised your claim, our accountants prepare and file Self Assessment returns for a fixed fee from £199 + VAT — contact our team today.