What Expenses Can a Sole Trader Claim?

As a sole trader, claiming the right expenses is one of the most effective ways to reduce your tax bill. Understanding which costs are allowable helps you manage cash flow, plan ahead, and avoid paying more tax than necessary. Managing expenses properly is important for any business, but for sole traders it is especially significant because there is no employer to handle payroll or pension contributions; the responsibility falls entirely on you.

If you are working through your Self Assessment for the first time, or simply want to make sure you are not missing anything, this guide covers what you can and cannot claim, plus advice on keeping accurate records throughout the year.

Why Does Claiming Expenses Matter for Sole Traders?

Every allowable expense you claim reduces your taxable profit. That means you only pay Income Tax and National Insurance on what is left after your expenses have been deducted. For many sole traders, this makes a significant difference to the final tax bill.

Claiming correctly also supports better financial planning, frees up cash to reinvest into the business, and builds longer-term financial resilience. Equally, claiming incorrectly, or missing out on legitimate claims, both carry costs: one in potential HMRC penalties, the other in an unnecessarily high tax bill.

The Core Rule: Wholly and Exclusively

HMRC’s rule is that an expense must be incurred “wholly and exclusively” for your trade to be allowable. Every expense you claim must be supported by a receipt or invoice. Keep these for at least five years after the 31 January deadline of the relevant tax year.

What Expenses Can Sole Traders Claim?

The following categories are commonly allowable, provided the costs meet HMRC’s business-use test:

Office costs — rent, equipment, stationery, and software used for business purposes.

Travel and vehicle expenses — costs incurred travelling for business, excluding your normal commute between home and a regular workplace. You can claim HMRC’s approved mileage rate (55p per mile for the first 10,000 business miles, dropping to 25p per mile after that), or a proportion of actual vehicle running costs.

Financial and banking charges — accountancy fees, business account costs, and loan interest (note: capital repayments are not allowable, only the interest element).

Marketing and advertising — website costs, domain names, online advertising, print materials, and trade event costs.

Professional services, insurance, and subscriptions — professional indemnity insurance, public liability insurance, trade body memberships, and subscriptions to professional journals relevant to your work.

Staff and subcontractor costs — wages, freelancer fees, and outsourced support, provided these relate directly to your business activities.

Working from home — if you use part of your home for business, you can claim a proportion of household bills including heating, electricity, broadband, and council tax. Alternatively, HMRC’s simplified flat-rate method allows a fixed monthly deduction based on hours worked from home (at least 25 hours per month required).

Can You Claim 100% of Every Cost?

If a cost is entirely for business use, 100% can generally be claimed. However, many expenses fall into mixed-use territory, where only the business proportion is allowable. Common examples include mobile phone bills, internet costs, and vehicle fuel. HMRC expects the split to be fair and reasonable, and you should keep a record of how you have calculated it.

What Cannot Be Claimed?

Some costs that feel business-related are specifically disallowed by HMRC:

• Everyday clothing, even if worn only for work. Protective clothing (such as hi-vis jackets or safety boots) and branded uniforms displaying a permanent company logo are exceptions.
• Client entertaining — taking a client for lunch or to a sporting event is not allowable, though staff entertaining such as a Christmas party can be.
• Eye tests and glasses for general use. Eye tests required specifically because of screen-based work may be allowable in some cases, but standard prescriptions used outside of work are unlikely to qualify.
• Fines and penalties — parking tickets and HMRC penalties cannot be claimed.
• Personal commuting from home to a regular workplace.

A Note on Making Tax Digital

As of April 2026, sole traders with qualifying income above certain thresholds are required to keep digital records and submit quarterly updates to HMRC under Making Tax Digital for Income Tax (MTD for IT). The rules on what you can claim do not change, but the process for recording and reporting expenses will. Getting into good habits now, using accounting software and capturing receipts digitally, will make the transition straightforward.

Manage Sole Trader Finances With Hysons

There is a lot to keep track of as a sole trader, and the rules around allowable expenses are not always straightforward. Working with an accountant ensures that all legitimate deductions are correctly applied and that you are not missing opportunities to reduce your tax bill.

At Hysons, we have extensive experience supporting sole traders with their Self Assessment returns and year-round tax planning. For more information, get in touch with our team.

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