HMRC Allowable Expenses for Self-Employed: Complete 2026 Guide

Claiming every allowable expense reduces your taxable profit and therefore your tax bill. Yet many self-employed people either under-claim (leaving money on the table) or over-claim (risking an HMRC enquiry). This guide covers every major category for 2026/27 with the actual rules, not just the headline.

The Golden Rule: Wholly and Exclusively

Every allowable expense must be incurred "wholly and exclusively for the purposes of the trade." This comes from Section 34 of the Income Tax (Trading and Other Income) Act 2005 and it is the lens through which HMRC examines every deduction.

Key implication: if an expense has a dual purpose — partly business, partly personal — you can only claim the business portion. In some cases where the dual-purpose cannot be separated, HMRC disallows the entire expense.

Office Costs

Actual Costs

If you rent office space, you can claim:

• Rent in full
• Business rates
• Heating, lighting, cleaning
• Repairs and maintenance
• Security

If you work from a serviced office or co-working space, the membership or desk fee is fully deductible.

Use of Home as Office

If you work from home, you have two options:

Option 1 — Simplified flat rate (HMRC approved):

This is easy to apply — simply multiply the appropriate rate by the number of months and deduct from profits.

Option 2 — Actual cost basis:

Calculate the proportion of your home used for business (number of rooms, proportion of time) and apply that fraction to your actual household costs: mortgage interest or rent, council tax, utilities, broadband. More complex but often yields a higher deduction for full-time home workers.

Note: if you claim the actual cost method and have mortgage interest in the calculation, be aware this could trigger a Capital Gains Tax issue on part of your home when you sell. The flat rate avoids this entirely.

Travel Expenses

Mileage — The Simplified Rate

For business journeys in your own vehicle, HMRC's Approved Mileage Allowance Payments (AMAP) are:

• Cars and vans: 45p/mile for the first 10,000 miles, 25p/mile above
• Motorcycles: 24p/mile
• Bicycles: 20p/mile

These rates are unchanged since 2011/12 but remain the default for most self-employed people. Keep a contemporaneous mileage log: date, destination, business purpose, miles.

Important: journeys between your home and a permanent place of work are not allowable — these are "ordinary commuting." Journeys to clients, suppliers, or temporary workplaces are allowable.

Actual Vehicle Costs

Instead of mileage rates, you can claim the actual costs of running the vehicle (fuel, insurance, road tax, servicing, finance costs) apportioned by business use percentage. This can be higher than the mileage rate for high-mileage drivers with expensive vehicles, but requires much more record-keeping.

You cannot switch between mileage rates and actual costs during the ownership of a vehicle — choose at the outset.

Public Transport and Other Travel

Train fares, bus fares, Tubes, taxis taken for business purposes are all fully deductible. Retain receipts. Hotel costs for genuine business overnight stays are allowable. Meals while travelling are allowable only if you are away from your normal place of work and the trip requires you to work for five or more hours (the "five-hour rule").

Equipment and Capital Expenditure

Tools, computers, cameras, machinery — these are capital expenditure (not revenue). You claim them via capital allowances rather than directly as expenses. However, the Annual Investment Allowance (AIA) lets you deduct the full cost of most plant and machinery in the year of purchase.

The AIA limit for 2026/27 is £1,000,000 — effectively unlimited for sole traders. You will only hit the AIA cap if you are buying very expensive equipment.

Items covered by AIA:

• Computer equipment, tablets, phones
• Office furniture
• Tools and machinery
• Vehicles (except cars — cars have separate rules)

For cars, you use Writing Down Allowances:

• New/zero-emission cars: 100% First Year Allowance
• Low-emission cars (up to 50g/km CO₂): 18% WDA per year
• Higher emission cars: 6% WDA per year

Professional Fees

The following are allowable:

• Accountancy and bookkeeping fees
• Solicitor fees relating to the trade (e.g., contract review, debt collection)
• Trade and professional body memberships (where mandatory or directly relevant)
• Professional indemnity and public liability insurance
• Banking fees on business accounts

Not allowable: legal fees relating to capital transactions (e.g., buying a business), personal legal matters, fines.

Marketing and Advertising

Fully allowable:

• Website design and hosting
• Online advertising (Google Ads, Meta Ads, LinkedIn)
• Business cards, leaflets, brochures
• Networking membership and event costs
• Sponsorship where there is genuine advertising value

Not allowable: charitable donations (these are not business expenses, though they may attract Gift Aid relief personally).

Staff Costs

If you employ staff or use subcontractors:

• Wages, salaries, and employer NI are fully deductible
• Subcontractor costs are deductible (but check IR35 if relevant)
• Staff training directly related to the trade
• Pension contributions you make for employees

You cannot pay yourself a salary as a sole trader — drawings are not an expense. Your own National Insurance (Class 2 and Class 4) is not deductible from trade profits either.

Phone and Internet

• Dedicated business phone line: 100% deductible
• Personal mobile used for business: deduct business proportion only (e.g., 70% if you estimate 70% business use)
• Broadband: deduct business proportion
• Keep a record of how you calculated the proportion

Clothing

Clothing is one of the most commonly mis-claimed categories. The rule is strict:

Allowable: specialist protective clothing, safety equipment (hard hat, high-vis jacket), uniforms that display the business name and would not be worn off the job.

Not allowable: everyday clothing worn partly for work (suits, smart trousers), even if you would not buy them "but for" the job. The landmark case Mallalieu v Drummond [1983] confirmed that clothing serving a dual purpose (warmth, decency, and work) is not wholly and exclusively for business.

Food and Drink

Generally not allowable. Exceptions:

• Food purchased while travelling away from base on a business trip where you are working for five or more hours away from your normal workplace
• Reasonable subsistence in those circumstances

Business entertainment (taking clients for lunch or dinner) is explicitly not allowable under ITTOIA 2005 s 45 — regardless of what your accountant tells you about "relationship building."

What You Cannot Claim

A summary of common non-allowable items:

Record-Keeping Requirements

HMRC requires you to keep records for five years after the 31 January filing deadline for the relevant tax year. In practice, keep:

• Receipts or invoices for every expense
• Bank statements
• Mileage log (date, from/to, purpose, miles)
• Records of home-use calculations if using actual costs

Digital records are fine — scanning paper receipts with a phone app is acceptable. HMRC's Making Tax Digital (MTD) for income tax (expected from April 2026 for those with income above £50,000) will require digital record-keeping in compatible software.

A Note on HMRC Enquiries

HMRC selects returns for enquiry using a risk-based system. Returns that show very high expenses relative to income, or unusual expense patterns compared to similar businesses, are more likely to be selected. This does not mean you should under-claim — legitimate expenses should always be claimed. But it does mean:

• Keep good records
• Be prepared to justify any unusual items
• If in doubt about whether something is allowable, ask your accountant before claiming, not after

Use our calculator to estimate your tax after deducting allowable expenses.