Which expenses the self-employed can claim in the UK

If you are a sole trader, you pay tax on profit, not turnover. Profit is your income minus allowable business expenses. Recorded correctly, these costs lawfully reduce the figure your tax is based on, so it pays to know what you can claim.

What counts as an allowable expense?

Allowable costs are those needed to run the business. GOV.UK lists the main categories: office costs such as stationery and phone bills; travel — fuel, parking, train and bus fares; work clothing such as uniforms; staff salaries and subcontractor costs; stock and raw materials; financial and legal costs such as insurance and bank charges; premises costs such as heating, lighting and business rates; advertising and website costs; and professional subscriptions and training related to your business.

Money taken out of the business for personal use is not an allowable expense.

How do you split costs that are part personal, part business?

You can only claim the business share. GOV.UK's example: a £200 phone bill with £70 of business calls means you claim £70. For working from home you need a reasonable method — by rooms or hours. With a £1,120 electricity bill, four equal rooms and one used only as an office, you can claim £280; working from home one day a week, you could claim £40 (£280 divided by 7).

What are simplified expenses?

Instead of working out actual costs, you can use flat rates (simplified expenses). They cover vehicles, working from home and living on your business premises, and avoid complex calculations. Which method is better depends on your situation, so it is worth checking both.

Where and when do you report expenses?

You claim expenses on your annual Self Assessment tax return, totalled by category for the tax year. You do not send receipts with the return, but you must keep them: HMRC can ask for evidence. It helps to record costs through the year — in a spreadsheet or an app — so you are not reconstructing them from memory at the deadline. Commonly missed costs include business bank charges, professional insurance, a share of home internet and phone, stationery and subscription software.

When is the trading allowance easier?

If your side income is small, the £1,000 tax-free trading allowance may suit you. But if you use it, you cannot also claim expenses or capital allowances on that income — it is one or the other. Larger purchases such as equipment usually go through capital allowances rather than ordinary expenses.

Note that a limited company is not self-employed and deducts costs under Corporation Tax rules instead. Keep your receipts and records — they are what evidence your expenses to HMRC.