What expenses can I claim against tax as a self-employed sole trader?

Full answer

Allowable expenses are costs incurred wholly and exclusively for your trade. Common ones include stock and raw materials, office and equipment costs, business travel and mileage, a fair proportion of home working costs, phone and internet, accountancy and legal fees, business insurance, advertising, bank charges and software subscriptions. Capital items like equipment may instead qualify for capital allowances. Personal spending and anything with significant private use is not deductible, and entertaining clients is generally disallowed. Why it pays: every allowable pound of expense reduces taxable profit, saving tax at your marginal rate plus Class 4 NI. Worked example: a sole trader has GBP 60,000 income and identifies GBP 12,000 of allowable expenses, leaving GBP 48,000 profit. Without claiming them, profit would be GBP 60,000: income tax after the GBP 12,570 allowance would be 20% on GBP 37,700 (GBP 7,540) plus 40% on GBP 9,730 (GBP 3,892), and Class 4 NI of GBP 2,456.60. By claiming the GBP 12,000, profit falls to GBP 48,000, all within the basic band: income tax is 20% on GBP 35,430 = GBP 7,086, and Class 4 NI is 6% on GBP 35,430 = GBP 2,125.80. The expenses also pull profit below GBP 50,270, escaping the 40% rate entirely, so the GBP 12,000 claim saves several thousand pounds. Keep receipts and records; under the cash basis you claim expenses when paid. Use the self-employed-tax calculator to see the effect on your bill, and check what is and is not allowable at gov.uk.

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