What Expenses Can I Claim? (UK Small Business Guide)

If you run a small business – whether as a sole trader, landlord, partnership or limited company director – allowable business expenses can help reduce the amount of profit you pay tax on — as long as the costs are genuinely business-related.

Understanding what you can and can’t claim is important for staying compliant, avoiding problems with HMRC and making sure you’re not paying more tax than necessary.

The Golden rule: “Wholly and exclusively” for business

HMRC’s core rule is that businesses expenses must be incurred wholly and exclusively for business purposes.

In simple terms:

  • If an expense has a clear business part and a separate private part, you are able to claim the business portion only (for example, business use of home or phone costs).

  • If there’s duality of purpose (part business, part private in a way that can’t be split), HMRC may disallow it.

  • A small incidental personal benefit doesn’t automatically make it disallowable if the main purpose was genuinely business related.

If you’re a sole trader or partnership: what expenses can you claim?

If a cost is genuinely for your business, there’s a good chance some or all of it may be allowable for tax purposes.  Common examples include office costs, travel, software, subcontractors, marketing, insurance and work-related training.

Common business costs in this area can include:

  • stationery, printing, postage and office supplies

  • phone, mobile and  internet costs

  • rent, business rates, utilities and premises insurance

  • reasonable home office costs where there’s clear business use

Equipment and technology: Items such as computers, monitors, printers and other business equipment may either be claimed as expenses or through capital allowances, depending on how your business accounts are prepared.  

If you’re unsure which approach applies, we can help you review it properly.

Business travel costs may include:

  • business mileage or vehicle running costs

  • parking, tolls and public transport

  • hotels and meals on overnight business trips

  • taxis and train fares for business journeys

You normally cannot claim:

  • ordinary commuting between home and your regular workplace

  • personal travel costs

  • fines or penalties

Vehicle claims can become more complicated where there’s mixed business and private use, so it’s important to keep accurate records.

HMRC normally allows claims for:

  • uniforms

  • protective clothing needed for work

  • costumes for actors/entertainers

You generally cannot claim everyday clothing – even if you only wear it for work.

If you employ staff or use subcontractors, allowable business costs can often include:

  • employee wages, salaries and bonuses

  • employer National Insurance contributions

  • workplace pension contributions

  • agency staff costs

  • subcontractor payments

  • training related to your existing business activities

Personal or domestic costs – such as household help or childcare – are not normally allowable business expenses.

Common allowable business costs in this area may include:

  • accountancy, bookkeeping and business legal fees

  • professional indemnity and other business insurance policies

  • bank charges, overdraft fees and business credit card charges

  • interest charged on business loans or finance agreements (but not the loan repayment itself)

These costs generally need to relate directly to your business activities rather than personal finances.

Business marketing and promotional costs may include:

  • advertising and online marketing

  • website costs and business branding

  • mailshots, brochures and promotional materials
  • trade journals, professional subscriptions and business memberships
  • software subscriptions used for your business

Costs that are usually not allowable:

  • client entertaining or hospitality

  • most gifts to customers, suppliers or contacts

  • event hospitality and social functions

There are some limited exceptions for certain low-cost promotional items and staff entertainment.  HMRC rules around entertaining and gifts can be stricter than many business owners expect.

Training costs may be allowable where they help you:

  • improve or update skills you already use in your business

  • keep up with changes,  technology or industry requirements

  • maintain or improve knowledge relevant to your current business activities

Training is not usually allowable if it’s:

  • helping you start a completely new business

  • preparing you to move into an unrelated area of work

Simplified expenses (self-employed only): Mileage + Working From Home

HMRC allows some sole traders to use flat-rate simplified expense methods instead of tracking exact business costs for certain areas certain costs instead of calculating actuals.

These simplified methods are generally available to sole traders and partnerships – limited companies usually follow different rules

Simplified mileage rates

  • Cars & goods vehicles: 45p per mile for the first 10,000 business miles, then 25p after that

  • Motorcycles: 24p per mile

Keeping clear mileage records is still important

Simplified working-from-home rates

If you regularly work from home for your business, HMRC allows simplified flat-rate claims based on monthly working hours.  Current rates at time of writing are:

  • 25–50 hours: £10/month

  • 51–100 hours: £18/month

  • 101+ hours: £26/month

In some cases, claiming a proportion of actual household costs may be more beneficial than simplified rates.
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If you run a limited company: what’s different?

Limited companies can usually claim business expenses against Corporation Tax – but the rules still need the cost to be genuinely business-related.

In practice, this usually means the expense should:

  • be incurred for the business (“wholly and exclusively”) 

  • not be specifically disallowed by HMRC (for example, most client entertaining)

  • have a clear business purpose and supporting records

If a cost includes both business and personal use, you may be able to claim the identifiable business portion.

Some expenses may also need different treatment in the accounts or Corporation Tax calculation (for example equipment purchases or director-related costs).

Expenses you usually can’t claim (common mistakes)

  • Personal drawings or money taken for personal use (sole traders)

  • Client entertaining (generally disallowed)

  • Fines and penalty charges

  • Everyday clothing

  • Commuting (home-to-work travel)

  • Mixed personal/business costs without a clear business split

  • If you use the £1,000 trading allowance, you can’t claim expenses on top.

Need help deciding what you can claim - or what records to keep?

We can help you review expenses, mileage claims, home office costs and bookkeeping records so everything is organised, sensible and HMRC compliant.

Good record-keeping makes tax returns, VAT and year-end accounts much easier – and cloud software such as Xero or Sage can simplify the process even further.

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