Expenses You Didn’t Know You Could Claim (And Why It Matters)

Every year, thousands of self-employed people hand over more tax than they need to — not because the rules are unfair, but because they don’t know what they can claim.

A missed expense doesn’t feel like a cost in the moment. You pay for your broadband, your tools, your training course, your accountant — and you move on. But if those costs are legitimately allowable and you haven’t recorded them, you’re paying income tax on money you already spent running your business. That’s the hidden price of not tracking expenses properly.

The good news: HMRC is not deliberately difficult on this. If a cost is genuinely incurred for your business, there’s usually a way to claim it. The problem isn’t the rules — it’s not knowing they exist. This guide covers the categories that trip people up, the mistakes to avoid, and the ones most commonly missed.

How Expenses Actually Reduce Your Tax Bill

Before the list, it’s worth understanding the mechanism — because it changes how you think about every business cost you incur.

As a sole trader or self-employed person, you pay income tax on your profit, not your income. Profit is what’s left after allowable expenses are deducted from your earnings. So the formula is:

Income − Allowable Expenses = Taxable Profit

You then pay income tax on that taxable profit (above your personal allowance of £12,570 for 2025/26).

Here’s a simple illustration. Say you earn £45,000 in a year, and you have £8,000 of legitimate allowable expenses:

• • Without expenses: taxable income of £32,430 (after personal allowance), income tax roughly £6,486.
• • With £8,000 of expenses: taxable income of £24,430, income tax roughly £4,886.

That’s a difference of £1,600 in take-home pay — from expenses you already spent. The question is whether you recorded them.

The expenses don’t need to be exotic. They’re often the mundane, everyday costs of running a business that people forget to log.

Working From Home

If you work from home — even part of the time — you can claim a portion of your household costs against your business income. This is one of the most commonly underclaimed categories.

HMRC offers two methods:

The simplified flat rate

No receipts needed. You claim a fixed monthly amount based on hours worked at home:

• • 25 to 50 hours per month: £10/month
• • 51 to 100 hours per month: £18/month
• • 101+ hours per month: £26/month

You must work at least 25 hours a month from home to use this method. It’s simple and quick, but often gives a lower figure than the actual cost method for anyone working from home regularly.

The actual cost apportionment

You work out a reasonable proportion of your household bills — rent or mortgage interest, gas, electricity, broadband, council tax — based on how many rooms you have and how much of the time that space is used for business. If you have a five-room house and use one room for work, five days a week, you can apportion accordingly.

There’s no formula HMRC insists on — they expect the calculation to be “fair and reasonable”. Most people with a dedicated home office will find this method gives a larger claim. Keep a simple note of how you’ve worked it out.

Important: mortgage interest is allowable, but capital repayments on a mortgage are not.

Phone and Broadband

If you use your mobile phone for work, you can claim the business proportion of your bill. The same applies to your home broadband.

This sounds obvious, but many people either don’t claim at all, or claim 100% when the phone is also used personally — which HMRC will challenge.

The practical approach: estimate what percentage of your usage is genuinely for business. If you use your phone roughly 50/50, claim 50% of the monthly bill. If you have a separate handset you use only for work, that’s 100% claimable. Keep a short note of how you’ve worked out the proportion.

If you buy a new phone for business use, the handset cost follows the same proportion logic — or, if it’s exclusively for business, can be claimed in full as a capital item via the Annual Investment Allowance.

Mileage and Business Travel

Mileage is one of the most valuable and most under-logged expenses for self-employed people who regularly drive for work.

HMRC’s published mileage rates for cars and vans are:

• • 45p per mile for the first 10,000 business miles in a tax year
• • 25p per mile thereafter

At 45p per mile, if you drive 8,000 business miles in a year, that’s a £3,600 deduction from your taxable profit.

What counts as business mileage?

Travel to meet clients, visit suppliers, attend business events, or travel between different work sites. Crucially, the journey from home to a fixed regular workplace (a site you always work from) is not allowable — that’s commuting, which HMRC treats as personal travel.

If you work from multiple sites or travel to different client locations regularly, keep a mileage log with dates, destinations and distances. A simple spreadsheet or phone app works fine.

Beyond mileage, you can also claim: train, bus and taxi fares for business journeys; parking costs (but not fines); hotel accommodation for overnight business trips; and meals during those overnight stays. A meal grabbed during a standard day trip is generally not allowable.

Training and Professional Development

This is one of the categories people most often assume is off-limits. It isn’t — and HMRC’s rules here are more generous than they used to be.

HMRC updated its guidance in 2024 (BIM35660) to make clear that training which develops new skills within your existing business area is now allowable — not just refreshers on skills you already have. A builder learning new plastering techniques, an electrician doing a new certification relevant to their trade, a self-employed bookkeeper doing a course on the latest accounting software — these are all the kinds of costs that should now qualify.

What you can usually claim

• • Course fees for training relevant to your current trade or business
• • Study materials (textbooks, manuals)
• • Travel and accommodation to attend training
• • Relevant professional membership or subscription fees

What you cannot claim

• • Training to qualify for a completely different profession or trade
• • Courses with no genuine link to your current business activity

The distinction matters. If you’re a self-employed electrician doing a course to refresh your Part P knowledge, that’s allowable. If you’re an electrician doing a course to become a plumber, HMRC is likely to treat that as entering a new trade rather than extending your existing one.

Keep the course outline or description in case HMRC ever asks why it was relevant to your business.

Software, Apps and Subscriptions

Any software or app you use for running your business is allowable — either as an immediate expense or through capital allowances, depending on whether it’s a one-off purchase or a subscription.

Usually allowable

• • Accounting software (Xero, QuickBooks, FreeAgent, 123tax)
• • Project management tools (Trello, Asana, Monday.com)
• • Cloud storage subscriptions (Dropbox, Google Workspace, Microsoft 365)
• • Design software used in the business
• • Industry-specific software or tools
• • Trade journals or professional publications accessed online

If a subscription serves both personal and business purposes, you can only claim the business proportion. A general Netflix subscription is not allowable. An industry platform you use partly for business research is a grey area — be ready to justify the proportion.

Annual subscription costs are generally deducted in full in the year of purchase. Large one-off software licences may need to be treated as capital items.

Tools, Equipment and Repairs

The cost of tools and equipment you buy for your business is allowable — but the method depends on the size and type of purchase.

Day-to-day items (consumables, small tools, stationery, office supplies) are deducted in full as a revenue expense in the year you buy them.

Larger items (machinery, equipment, computers, vehicles) are generally capital expenditure. For most small businesses and sole traders using cash basis accounting, you can still deduct the full cost in year one through the Annual Investment Allowance (AIA) — the current AIA limit is £1 million, which means the vast majority of small business equipment purchases qualify for immediate relief.

Repairs and maintenance on business equipment are allowable. Improvements that fundamentally change an item (rather than restore it) may be treated as capital rather than revenue — but routine maintenance and repairs to tools, vehicles and equipment are generally fine.

Protective Clothing and Uniforms

You can claim for branded clothing and workwear that is genuinely protective or carries your business identity. A high-vis vest, steel-toe boots, waterproofs, hard hat, or gloves worn on a construction site are allowable. A branded polo or T-shirt with your company name on it is allowable.

What is not allowable: ordinary everyday clothing, even if you only wear it for work. A business suit, a shirt and tie, smart shoes — HMRC will not allow these because they are “everyday clothing” that happens to be worn at work, not clothing with a protective or specialist function. This is a firm line in HMRC’s guidance and unlikely to be negotiated.

The practical test: if you could plausibly wear it outside work without it looking like workwear, it probably fails.

Professional Fees

Fees paid to your accountant, bookkeeper or tax adviser for work relating to your business are allowable — including the cost of preparing your Self Assessment return, provided the cost relates to your business income.

Other professional fees that are usually allowable:

• • Solicitor or legal costs for commercial contracts, business lease negotiations or employment disputes
• • Debt collection fees
• • Surveyor fees relating to business premises

Legal fees relating to personal matters, buying a house or purchasing capital assets are generally not allowable.

Insurance

Business insurance premiums are allowable in full where the policy relates to the business. This includes:

• • Public liability insurance
• • Professional indemnity insurance
• • Employers’ liability insurance (if you have staff)
• • Van or vehicle insurance for business vehicles
• • Business contents insurance

If a vehicle is also used personally, you can only claim the business proportion of the insurance premium — consistent with how you’re treating other vehicle costs.

Advertising and Marketing

Any cost of promoting your business is allowable. This is a broad category:

• • Website hosting and domain registration
• • Social media advertising (Facebook, Instagram, TikTok ads)
• • Google Ads or other paid search
• • Leaflets, flyers, business cards
• • Signwriting on a van
• • Costs of promotional events you organise

Purely charitable donations — where you receive nothing in return — are generally not allowable as a business expense. Sponsorship with a genuine marketing purpose and logo visibility is treated differently and usually allowable.

Bank Charges and Payment Processing Fees

If you have a business bank account, the charges on that account are allowable: monthly account fees, overdraft charges, transfer fees, foreign transaction fees. The same applies to payment processing fees — if you take card payments through Square, Stripe, SumUp, PayPal or similar, those transaction fees are a legitimate business expense.

HMRC generally expects bank charges to be on a business account. Using a personal account for all business transactions and then trying to claim the charges is messier — and a good reason to separate business and personal finances regardless of your legal structure.

Stationery, Postage and Office Supplies

Straightforward but often forgotten on the Self Assessment return:

• • Printer ink and paper
• • Envelopes, stamps, postage
• • Stationery (pens, notebooks, files)
• • Small office equipment (calculators, staplers)
• • Printer or scanner ink/toner cartridges

These are small individually but can add up over a year, particularly if you run a business that requires a lot of documentation or correspondence.

Other Costs People Forget

Professional membership and subscriptions

Annual fees to a trade body, professional association or union — where membership is relevant to your business — are allowable. This includes bodies like the Federation of Master Builders, Gas Safe registration costs, the Electrical Contractors’ Association, and similar.

Business gifts

Small business gifts up to £50 per person per year are allowable — provided they carry a lasting business advertisement (your logo, name or website). Gifts of food, drink, tobacco or vouchers are excluded. Client entertainment is explicitly not allowable.

Pre-trading expenses

If you spent money on genuine business costs before you formally started trading — website development, equipment, professional advice — you may be able to claim these as if they were incurred on your first trading day, provided it’s within seven years. Worth checking if you had significant start-up costs.

What People Most Often Get Wrong

1. Commuting vs business travel

The journey from home to your regular place of work is not a business journey — it’s commuting, and HMRC explicitly disallows it. Travelling to a client site, a temporary location, or a meeting is different. The distinction matters particularly for contractors who may work at different sites — keeping a log helps.

2. Dual-purpose spending

HMRC’s “wholly and exclusively” rule is strict. If you buy something that serves a business and personal purpose simultaneously, the entire claim may fail — not just the personal element. A laptop used equally for work and personal use is claimable at 50%, but you need to be consistent and honest about that proportion.

3. Everyday clothing

The suit you wear for client meetings is not allowable. The instinct to claim it is understandable — you wouldn’t wear it otherwise — but HMRC’s position is clear and consistent: the clothing must have a specialist protective or branded function, not just be worn in a work context.

4. Client entertainment and meals

Client entertainment — taking a customer for lunch, buying drinks at an event — is explicitly disallowed by HMRC for Income Tax purposes. A working lunch you buy only for yourself whilst away overnight is different (that’s subsistence on an overnight trip), but day-to-day meals and coffees are not claimable regardless of how many calls you took during them.

5. Claiming 100% on mixed-use items

Claiming 100% of a phone bill that’s clearly used personally as well, or 100% of a broadband connection also used by your household, is the kind of thing that triggers scrutiny if HMRC investigates. A reasonable apportionment is both correct and much safer.

6. Fines

Parking tickets, speeding fines, congestion charge penalties — none of these are allowable, even if incurred while travelling on business. HMRC’s view is that fines are personal costs, not business ones.

Record-Keeping: The Part Most People Underestimate

A legitimate expense you can’t prove is an expense you can’t claim. If HMRC investigates your return, they will ask for evidence — and “I’m pretty sure I spent about that much” is not evidence.

What to keep

• • Receipts or invoices for everything you claim (digital is fine)
• • A mileage log if you claim mileage (date, destination, purpose, miles)
• • A note of how you’ve calculated any apportionment (home working, phone, broadband)
• • Bank statements showing the payments were made
• • Any contracts or agreements relevant to professional fees

How long to keep it

HMRC requires records to be kept for at least 5 years after the 31 January Self Assessment deadline for the relevant tax year. In practice, that’s around six years from the end of the tax year.

From April 2026, those earning over £50,000 from self-employment will need to keep digital records and submit quarterly updates under Making Tax Digital for Income Tax (MTD ITSA). Getting into good digital habits now — whether through accounting software, a receipt-capture app, or a WhatsApp-based tool — avoids a scramble closer to the deadline.

The single best habit: log expenses as they happen. The moment you buy something for the business, note it — even a quick photo of the receipt and a category label. Trying to reconstruct a year’s worth of spending from memory in January rarely goes well.

Practical Example: How It Adds Up

Let’s take a self-employed plumber with a turnover of £55,000. He tracks his expenses properly and claims:

Taxable profit: £55,000 − £15,874 = £39,126. After personal allowance (£12,570): taxable income of £26,556. Income tax at 20%: roughly £5,311. Plus Class 4 NI on profits above £12,570.

If he had only claimed the materials and not tracked the rest, his taxable profit would be £49,000 — and he’d owe significantly more. The difference in tax from properly recording those additional £9,874 of expenses is roughly £2,000 in this example, depending on National Insurance.

That’s not aggressive planning. It’s just claiming what’s legitimately owed.

A Word of Caution

Allowable expenses exist to reflect the genuine cost of running a business. They are not a mechanism for reducing your tax bill by reclassifying personal spending. HMRC’s enquiry process exists precisely to catch overclaiming, and the penalties for careless or deliberate errors can be significant.

The right approach:

• • Only claim costs you genuinely incurred for business purposes.
• • Apportion fairly where there is personal use.
• • Keep records that support every claim.
• • If you’re unsure, ask — a qualified accountant can usually answer a specific question quickly, and the cost is itself allowable.

The goal isn’t to squeeze every possible claim — it’s to make sure you’re not leaving legitimate ones on the table.

Summary

Missing allowable expenses is one of the most common — and most avoidable — ways self-employed people overpay tax. The categories most worth reviewing if you haven’t claimed them before: working from home costs, mileage and travel, training, software subscriptions, and professional fees. The record-keeping habit matters as much as knowing the rules.

123tax is built to make this easier — particularly for tradespeople and CIS subcontractors who are busy on site and have no interest in accounting software. Send a photo of a receipt on WhatsApp, and it’s logged. No spreadsheets, no chasing paperwork in January.

If MTD ITSA applies to you from April 2026, now is the time to start keeping digital records. The quarterly updates required under the new rules are much easier to manage if your expense tracking is already in order.

Frequently Asked Questions

Can I claim expenses if I also have employment income alongside my self-employed income?

Yes. Allowable expenses are deducted from your self-employment income on your Self Assessment return. They don’t affect your PAYE employment income.

Do I need to keep original paper receipts?

No. HMRC accepts digital records — a photo of a receipt, a PDF invoice, or a bank statement is sufficient evidence. You don’t need to keep physical paper, but you do need to keep something.

Can I claim the cost of my mobile phone handset?

If the phone is exclusively for business use, yes — in full, typically via the Annual Investment Allowance. If it’s also your personal phone, only the business proportion of the cost applies.

Can I claim mileage if I use my van for both business and personal trips?

Yes — but only for business miles. Keep a log of each journey with the date, destination, purpose and distance. Personal mileage is not claimable.

What if I started the tax year with no records — can I estimate?

HMRC expects actual records, not estimates. If records are poor, you may be able to reconstruct them using bank statements, diaries and other evidence, but this is much harder and less reliable. Start keeping records now, from today.

Can I claim my accountant’s fee as an expense?

Yes. Accountancy fees for preparing your business accounts and Self Assessment return are allowable expenses — and worth keeping given how much a good accountant can save you.

What’s the difference between the flat-rate mileage method and claiming actual vehicle costs?

The mileage rate (45p/25p) covers all vehicle running costs — fuel, insurance, servicing, tax. If you choose this method, you cannot also claim those costs separately. Alternatively, you can claim actual vehicle running costs with a deduction for private use. For most sole traders with standard cars, the mileage rate is simpler and often gives a reasonable or better result.

When do I need to start keeping digital records?

From April 2026 under MTD ITSA, if your self-employment income is above £50,000. From April 2027 if between £30,000 and £50,000. Even if below those thresholds, digital record-keeping is good practice and makes Self Assessment significantly easier.