As a sole trader in the UK, you can reduce your tax bill by claiming allowable business expenses. These are costs incurred wholly and exclusively for running your business. Knowing what you can and cannot claim is essential for staying HMRC-compliant and ensuring you do not pay more tax than necessary.
Taxcan, an online accounting firm with AAT and ACCA-qualified professionals, helps sole traders navigate tax deductions efficiently. Our expert accountants ensure you claim all eligible expenses while maintaining accurate records, reducing your tax liability, and staying compliant with HMRC regulations.
Understanding Allowable Business Expenses
The expenses you claim must be necessary for your business and not for personal use. If a cost has both personal and business elements, you can only claim the business proportion.
For example, if you use your mobile phone for both work and personal use, you can only deduct the percentage that relates to business calls.
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Below is a breakdown of common allowable expenses for sole traders.
Office and Work Premises Expenses
If you rent office space or work from home, you can claim costs related to running your business premises.
What you can claim:
- Rent for office or workspace
- Utility bills (electricity, heating, water)
- Business rates (if applicable)
- Property repairs and maintenance
- Office cleaning services
Sarah, a graphic designer, rents a small studio for her business. She includes rent, electricity, and internet costs in her tax return, reducing her taxable income.
Taxcan simplifies the process by ensuring all office-related expenses are correctly accounted for.
Working from Home Expenses
If you run your business from home, you can claim a portion of household bills. HMRC allows two ways to do this: the simplified flat rate or actual expenses based on usage.
Flat Rate Method (HMRC Simplified Expenses):
- £10/month if you work 25-50 hours per month
- £18/month for 51-100 hours
- £26/month for 101+ hours
Actual Cost Method:
- A percentage of rent/mortgage interest
- Utility bills (electricity, heating)
- Council tax
- Internet and telephone
Alex, an online tutor, works from home 40 hours a week. Instead of calculating actual usage, he claims £18 per month using the simplified expenses method.
Taxcan helps sole traders determine the most tax-efficient method for claiming home office expenses.
Equipment, Tools, and Technology
If you purchase items necessary for running your business, you can claim them as expenses.
What you can claim:
- Laptops, printers, and office furniture
- Business-related software (e.g., Adobe Suite, Microsoft Office)
- Machinery and tools
- Repair and maintenance of equipment
Tom, a carpenter, buys a £1,500 saw for his workshop. He claims the full cost as a capital allowance under the Annual Investment Allowance (AIA).
Taxcan ensures that high-value purchases are correctly classified for tax relief.
Travel and Transport Costs
You can claim expenses for business-related travel, but not for regular commuting between home and work.
What you can claim:
- Train, bus, and taxi fares
- Mileage allowance (45p per mile for the first 10,000 miles, then 25p per mile)
- Parking fees and tolls
- Hotel accommodation for business trips
- Meals during overnight stays (reasonable costs)
Emma, a freelance photographer, drives to multiple client locations each month. She tracks her business mileage and claims 45p per mile, saving hundreds on her tax bill.
Taxcan helps sole traders track mileage and travel expenses correctly.
Vehicle Costs
If you use a vehicle for business purposes, you can claim costs in two ways:
- Simplified mileage rate (as above)
- Actual vehicle expenses (business proportion of fuel, insurance, repairs, MOT, and road tax)
James, an IT consultant, uses his personal car for both work and personal use. Since 60% of his trips are business-related, he claims 60% of his fuel and insurance costs instead of using the flat rate.
Taxcan helps determine whether the mileage rate or actual costs will save you more tax.
Marketing and Advertising
Promoting your business is a valid expense. You can claim costs for:
- Website development and hosting
- Social media ads (Facebook, Google Ads)
- Business cards and flyers
- Branding and logo design
Lisa, a self-employed baker, spends £500 on Instagram and Facebook ads to promote her business. She claims this as a marketing expense, lowering her taxable income.
Taxcan ensures digital marketing and website expenses are fully utilized for tax deductions.
Professional Fees and Subscriptions
Certain fees related to running your business are tax-deductible.
What you can claim:
- Accountant and tax adviser fees
- Business insurance (public liability, professional indemnity)
- Membership fees for professional bodies (ACCA, AAT, trade unions)
- Legal fees related to contracts or disputes
David, a consultant, pays an accountant £800 per year to handle his tax returns. Since this is a business expense, he deducts it from his taxable income.
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At Taxcan, we provide affordable accounting solutions tailored to sole traders, ensuring you maximize deductions.
Training and Development
You can claim expenses for courses, training, and materials that improve your business skills.
What you can claim:
- Online courses and certifications
- Business-related books and journals
- Workshop and conference fees
Jane, a personal trainer, attends a £400 nutrition course to expand her services. Since this enhances her existing skills, she claims the full amount as a business expense.
Taxcan advises on training expenses that qualify for tax relief.
Stock and Raw Materials
If you sell physical products, you can deduct the cost of goods sold, including:
- Raw materials
- Stock purchases
- Packaging and shipping costs
Andrew runs an eCommerce business selling handmade candles. He deducts the cost of wax, fragrance oils, and packaging materials from his taxable profit.
Taxcan helps eCommerce businesses track stock expenses efficiently.
Bank and Financial Charges
Business-related bank charges and transaction fees are tax-deductible.
What you can claim:
- Business bank account fees
- Payment processing fees (PayPal, Stripe)
- Loan interest for business borrowing
Mike, a freelance writer, pays a £5 monthly fee for a business bank account. He includes this cost in his tax return.
Taxcan helps track banking expenses and ensure all financial fees are accounted for.
Conclusion
Claiming allowable expenses is a key strategy for reducing your tax bill as a sole trader. Keeping accurate records and understanding what you can claim ensures you stay compliant with HMRC while maximizing your savings.
At Taxcan, our expert accountants help sole traders track expenses, file accurate tax returns, and claim every deduction possible. We ensure you get the maximum tax relief legally available, so you keep more of your hard-earned money.
If you need help with your tax deductions, contact Taxcan today and let us take the stress out of your accounting.
