PayoutMath
Tax guide

UK self-employed allowable expenses

What HMRC lets you claim, what they'll reject, and when simplified expenses beat actual costs.

Last updated 10 May 2026

Allowable expenses reduce your taxable profit on your Self-Assessment return. Get them right and you save real money on Income Tax and Class 4 National Insurance. Get them wrong and you either underclaim (overpaying tax) or overclaim (risking an HMRC enquiry).

This guide walks through what HMRC accepts as allowable, where the gotchas are, and when simplified expenses beat actual costs.

The basic test

An expense is allowable if it's "wholly and exclusively" for the purpose of trade. That phrase comes from ITTOIA 2005 and it's strict. The expense must be for business — not partly for personal benefit.

Two categories:

HMRC's enquiry team looks especially closely at mixed-use claims. Be honest about the percentage.

Allowable expense categories

Office costs

Travel costs

Clothing

Staff costs

Stock and materials

Professional fees

Marketing and advertising

Bank and finance charges

Premises costs

The big "no, you can't"

HMRC explicitly disallows:

Simplified expenses — the shortcut method

HMRC offers flat-rate simplified expenses for three categories. They often beat the actual-cost calculation, and they require zero receipt-keeping.

Vehicle (mileage)

Instead of tracking gas, insurance, MOT, repairs, and depreciation:

Worked example: 8,000 business miles in a year × 45p = £3,600 deduction. No receipts needed beyond a mileage log book.

If you use simplified mileage, you can't also claim actual vehicle costs. It's one or the other for that vehicle.

Use of home as office

Flat rates based on hours worked from home per month:

That's £312/year max for someone working 100+ hours from home each month. Often less than the actual-cost calculation if you have high utility bills, but the simplified version requires zero documentation.

Living at business premises

For pubs, B&Bs, care homes where the owner lives on-site. Flat rate to disallow the personal portion of premises costs based on number of household occupants. Niche but useful if it applies.

When actual costs beat simplified

The actual-cost method usually wins when:

Simplified usually wins when:

Trading allowance — the tiny-business shortcut

If your gross self-employment income is under £1,000 in a tax year, you can ignore expenses entirely and the income is tax-free. See the trading allowance calculator.

If you're between £1,000 and £2,000 in income, you choose: take the £1,000 trading allowance OR claim actual expenses. Whichever is higher. You can't do both.

Above £2,000 in expenses, actual claims beat the allowance every time.

Capital allowances — the bigger purchases

Equipment over £200 typically needs to go through capital allowances rather than being expensed in year one. The Annual Investment Allowance (AIA) lets you claim 100% of qualifying capital purchases up to £1 million per year. So most sole traders effectively expense capital items in year one anyway — but the mechanism is different from a regular allowable expense.

Items that go through capital allowances:

If you're confused about whether something is capital vs revenue, or AIA vs writing-down allowance, get a UK self-assessment tax book or talk to an accountant. Getting this right in year one matters for the lifetime treatment of the asset.

Records you must keep

HMRC requires you to keep records for at least 5 years and 10 months after the end of the tax year. So records from April 2025-April 2026 must be kept until 31 January 2032.

What to keep:

A receipt scanner or app keeps this manageable. A shoebox of receipts becomes useless fast — easy to digitise as they come in.

How this affects your tax bill

Allowable expenses reduce your taxable profit. Lower profit reduces:

So a £3,000 allowable expense at the basic rate saves you £600 in tax + £180 in Class 4 NIC = £780 real money.

At higher rate (over £50,270 profit), the same £3,000 expense saves £1,200 + £60 = £1,260.

Run the full numbers in the side-hustle tax calculator or National Insurance calculator to see your actual position.

One thing HMRC does NOT let you do

You can't carry an unused allowable expense to next year just because this year you didn't have enough income. Unlike capital allowances, allowable expenses must be matched to the trading year they were incurred. If your income was £5,000 and your expenses were £8,000, you have a £3,000 trading loss — which can be set against other income or carried forward, but the mechanism is different from "carrying forward unused expenses."

Trading loss relief is genuinely useful but its own topic. Get it right and a loss-making first year can offset profits in years 2 and 3.

Frequently asked questions

What expenses can I claim as self-employed in the UK?

HMRC allows claims for: office costs (stationery, software, broadband if wholly for business), travel (mileage at 45p/mile for the first 10,000 miles, or actual vehicle costs), clothing (only genuine uniforms or protective gear — not regular clothing), staff costs, stock and materials, financial charges (bank fees, accountant fees), and marketing. Home office costs are claimable under simplified expenses or actual cost method.

Can I claim home office expenses if self-employed?

Yes. HMRC offers two methods: simplified expenses (£10/month for 25-50 hours work/month, £18/month for 51-100 hours, £26/month for 101+ hours), or actual costs (calculate the business proportion of your rent/mortgage interest, utilities, and council tax based on rooms used and hours worked). Simplified is easier; actual costs usually save more if you work from home full-time.

What expenses can't I claim as a UK sole trader?

HMRC will reject: personal clothing not used as a uniform, food and drink for yourself (client entertaining has limited allowances), personal phone calls or personal proportion of a dual-use phone, travel between home and a permanent workplace, fines and penalties, and non-business entertainment. Expenses must be 'wholly and exclusively' for business — personal or dual-use items need apportioning.

How do I claim vehicle expenses as self-employed?

Two options: simplified mileage rate (45p per mile for the first 10,000 business miles per year, then 25p — this covers fuel, depreciation, insurance, MOT), or actual costs (proportion of all vehicle running costs based on business mileage). You must choose one method for the life of the vehicle. Simplified mileage is simpler and often better for smaller mileage.

Do I need receipts for all self-employed expenses?

HMRC recommends keeping records for 5 years after the 31 January Self-Assessment deadline. For most expenses, a receipt, bank statement, or invoice is sufficient. For mileage, keep a mileage log (date, destination, purpose, miles). Digital records (photos of receipts, accounting software exports) are accepted. You don't submit receipts with your Self-Assessment return but must produce them if HMRC investigates.

About this calculator. Written and maintained by Jordan Morley — years of hands-on experience selling online and creating content across multiple platforms (hundreds of products sold, hundreds of videos made). Built to be accurate, mobile-fast, and honest about its limits. Spot a bug? Email hello@payoutmath.co.uk.