Sole trader allowable expenses 2026/27: the HMRC list
Every allowable expense reduces your taxable profit. For a basic-rate taxpayer, £100 of expenses saves about £26 in income tax and Class 4 NI. The rule is that a cost must be 'wholly and exclusively' for the business. Here's what that means in practice.
Free calculator: Self-employed tax calculator 2026/27: income tax and Class 4 NI on your profit
The main HMRC expense categories
| Category | Examples you can usually claim |
|---|---|
| Office, property and equipment | Rent and business rates for premises, stationery, printer ink, postage, phone and broadband (business share), software subscriptions, computers and tools |
| Car, van and travel | Fuel, insurance, repairs and servicing (business share) or simplified mileage; train and bus fares, parking, hotel stays on business trips |
| Clothing | Uniforms, protective clothing and costumes for performers. Not everyday clothes, even if you only wear them for work |
| Staff costs | Wages, employer NI, pension contributions, subcontractors, agency fees |
| Things you buy to sell | Stock, raw materials, packaging, direct costs of producing goods |
| Legal and financial costs | Accountant fees, bank charges on a business account, payment processing fees (Stripe, PayPal, SumUp), business insurance, interest on business loans |
| Marketing and subscriptions | Advertising, website hosting and domains, trade or professional body subscriptions, business journals |
| Training | Courses that update skills for your existing business (not training for a new trade) |
Simplified expenses: flat rates instead of receipts
- Vehicle mileage: 45p a mile for the first 10,000 business miles in a car or van, then 25p. Motorcycles are 24p. If you use mileage, you can't also claim fuel, insurance or repairs for that vehicle.
- Working from home: £10 a month for 25–50 hours worked at home, £18 for 51–100 hours, and £26 for 101 hours or more. Alternatively, claim a fair business share of your actual household bills.
- Living at your business premises (for example, a B&B owner): flat-rate deductions for private use.
What you can't claim
- Client entertaining: meals, drinks or events for clients or customers. (Staff parties can qualify.)
- Everyday clothing, haircuts and gym memberships.
- Fines and penalties, including parking and speeding fines.
- Commuting to a permanent workplace.
- The private-use share of anything you also use personally.
- Your own income tax and National Insurance.
Cash basis and equipment
Since 2024/25, the cash basis is the default for sole traders: you record income when it's received and expenses when you pay them. Under the cash basis, most equipment (laptops, tools, machinery) is simply claimed as an expense in the year you buy it, but cars still go through capital allowances. If you opt for traditional accounting, equipment is claimed through capital allowances, usually the Annual Investment Allowance.
The £1,000 trading allowance
If your total self-employed income (turnover) is £1,000 or less in a tax year, you don't need to tell HMRC or file a return for it. If it's more, you can deduct a flat £1,000 instead of your actual expenses. That's better if your real expenses are under £1,000. You can't use both.
Costs before you started trading
Costs from up to 7 years before you started trading can usually be claimed as if you'd paid them on your first day of trading, as long as they'd have been allowable at the time.
Records to keep
Keep receipts, invoices and bank statements for at least 5 years after the 31 January filing deadline for that tax year. Photos of receipts are fine. Log mileage as you go (date, from, to, purpose, miles), because reconstructing a year of journeys in January is painful and less believable if HMRC asks.
Making Tax Digital for Income Tax: from 6 April 2026 it applies if your qualifying income (self-employment plus property) is over £50,000, from April 2027 over £30,000, and from April 2028 over £20,000. It requires digital records and quarterly updates through HMRC-recognised software.
General information for England, Wales and Northern Ireland, not tax advice. Source: GOV.UK: expenses if you're self-employed and simplified expenses.
Income and expenses logs with HMRC categories, mileage, use of home, an estimate of income tax and Class 4 NI, and MTD-style quarterly totals.
See the template →
Profit per item, own items vs resale, per-platform counts against the HMRC reporting thresholds, a £1,000 trading allowance check and a stock list.
See the template →
FAQs
Can I claim my phone bill as a sole trader?
Yes, the business share. If roughly half your calls and data are for work, claim 50% of the bill. A separate business phone can be claimed in full.
Can I claim lunch as a business expense?
Normally no. Your everyday lunch is a personal cost. Meals on a business trip away from your usual place of work can be allowable.
How much tax will I pay as a sole trader?
In 2026/27 you pay income tax on profits above your Personal Allowance (£12,570, shared with any salary) and Class 4 NI of 6% between £12,570 and £50,270. Use our self-employed tax calculator for your figure.
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- Receipt organiser / expense wallet (Amazon)
- Vehicle mileage log book (Amazon)
- Portable receipt & document scanner (Amazon)