Claiming Pre-Trading Expenses When Starting a Business 2026/27

You do not lose pre-launch spending

Most new businesses spend money before they make a single sale: domain names, a laptop, professional advice, insurance, samples and travel. The good news is that genuine business costs incurred before you start trading are not wasted for tax. They are simply treated as if you incurred them on your first day of trading.

This applies whether you trade as a sole trader, partnership or limited company.

The seven-year rule

Pre-trading expenses incurred in the seven years before the business starts to trade can be deducted, provided they would have been allowable had the business already been trading at the time. They are treated as incurred on the first day of trade and deducted from the profits of that first period.

The usual rules still apply:

• The cost must be wholly and exclusively for the business.
• It must be revenue in nature, not capital. Capital items like equipment go through capital allowances instead, such as the annual investment allowance.
• It must not be specifically disallowed, for example client entertaining.

A worked example

Before launching as a self-employed designer in 2026/27 you spent, over the previous year:

• Market research and a brand designer: GBP 1,200.
• Business insurance and professional subscriptions: GBP 600.
• Software and website hosting: GBP 400.

That is GBP 2,200 of pre-trading revenue expenses. Treated as incurred on day one, it reduces your first-year taxable profit by GBP 2,200. For a basic-rate sole trader paying 20% income tax plus 6% Class 4 National Insurance, that is worth about GBP 572 off the first tax bill.

A laptop bought beforehand is capital, so it goes through capital allowances rather than as a pre-trading revenue expense, but it is still claimable.

Pre-registration VAT

If you register for VAT, you can also recover some VAT spent before registration:

• VAT on goods bought up to four years before registration, if you still hold them or they were used to make goods you still hold.
• VAT on services bought up to six months before registration.
• The goods or services must relate to your taxable business activity.

This recovered VAT goes on your first VAT return as input tax.

Keep the evidence

• Retain receipts and invoices, even from before you formally started.
• Note the business purpose of each cost.
• Separate revenue costs from capital items.
• For VAT, keep records showing goods are still on hand at registration.

The bottom line

For 2026/27, genuine business costs from the seven years before you start trading, such as GBP 2,200 of research, insurance and software, can be deducted in your first period, and VAT on recent purchases can be reclaimed on your first VAT return. Good records turn pre-launch spending into real tax savings.

Estimate your first-year position with the calchub.uk self-employed tax calculator, and confirm the pre-trading and pre-registration VAT rules on gov.uk before you file.