Allowable expenses reduce your taxable profit before tax is calculated. Getting this right is one of the most direct ways to manage your tax bill legitimately. The key is understanding which costs genuinely qualify and how to handle mixed-use items without overclaiming.
Updated 2026/27 · SoleTraderTaxCalculator.co.uk · Editorial standards · Methodology
HMRC's test for an allowable business expense is that it must have been incurred wholly and exclusively for the purposes of the trade. This sounds simple but creates friction in practice. The word 'exclusively' does real work here — it rules out costs that have any significant personal element, even if they also have a genuine business purpose.
The dual-purpose rule is where most people fall foul. If a purchase serves both a business and a personal need simultaneously — a suit that is worn to client meetings but also to weddings, a phone used for business calls and family WhatsApp, a meal taken at a client lunch but also enjoyed as a social occasion — HMRC will typically deny the entire cost unless the business portion can be clearly separated. The rule is not 'mainly for business'; it is 'wholly and exclusively for business or a quantifiable business proportion of a divisible cost'.
Where an expense has a quantifiable business element and a quantifiable personal element that can be separated — like a phone bill where your business usage is 60% of total calls — you can claim the business proportion. This is how home working and vehicle costs are handled in practice. But where the dual purpose is inherent to the item itself and the two uses cannot be genuinely split, the claim is disallowed in full.
If you work from home, you can claim a proportion of your household running costs — heating, electricity, broadband, and a proportion of rent or mortgage interest (interest only, not capital repayment). The proportion is typically based on the number of rooms in the property that are used exclusively for business, the hours worked, or a combination. If you use one room out of six exclusively for work, 1/6 of applicable household costs is a common basis.
Alternatively, HMRC's simplified flat-rate method lets you claim £6 per week (£312 per year) for working from home without needing to calculate actual costs. This avoids recordkeeping of utility bills and is worth using if your actual additional costs are modest. If you work from home extensively and have higher costs, calculating the actual proportionate amount will produce a larger deduction — but you will need to keep records.
If you rent a separate office or workspace entirely for business use, the full cost is allowable — rent, service charges, business rates, and associated running costs. One thing sole traders cannot claim is the capital repayment element of a mortgage on a property used as a business premises. Interest is allowable; repayment of the principal is a capital item.
HMRC's approved mileage allowance is the simplest method for vehicle costs: 45p per mile for the first 10,000 business miles in the tax year, then 25p per mile above that. This single rate covers fuel, wear and tear, insurance and all other running costs — you claim nothing separately. Keep a mileage log recording dates, destinations and business purpose. Without it, you have no evidence to support the claim.
The alternative is the actual costs method: you claim the actual running costs of the vehicle — fuel, insurance, servicing, road tax — and apportion them between business and private use based on mileage. For most sole traders with ordinary vehicles, the mileage allowance is simpler and produces a comparable or better result without the administrative burden of tracking every running cost.
The key definition of business travel is travel to a temporary or client location for business purposes. It does not include the regular commute between home and a fixed, permanent workplace. Sole traders working from home and visiting clients directly from home have no commuting issue — all client visits are business travel from the point of departure. But if you maintain a regular fixed workplace, travel to that location is commuting and is not allowable.
Equipment used wholly for business — a laptop, camera, specialist tools — qualifies for the Annual Investment Allowance (AIA), which allows 100% of the cost to be deducted in the year of purchase for qualifying capital items. For most sole traders, this means the full cost of equipment purchased is deducted immediately rather than spread over multiple years. The AIA limit is currently £1 million per year, which is well above the typical sole trader spend.
Software subscriptions used entirely for business are straightforward running costs — fully allowable in the year paid. The same applies to cloud storage, project management tools, design software, and online platforms used exclusively in the business. Where you have a subscription that mixes personal and professional use, only the business proportion can be claimed — and you need a reasonable basis for the split.
Mobile phone costs require care. If you have a dedicated business phone used entirely for business, the full cost is allowable. If you use a single phone for both personal and business, you can claim the business-use proportion of your bill. Many sole traders estimate this at 50–70% without keeping detailed records — HMRC can challenge this if it seems unreasonable for your type of work, so have a credible basis for the percentage you use.
You can claim the business proportion of your broadband bill if you use it for work. If your broadband is also used personally, apply a reasonable split based on usage. Using the £6/week flat rate for home working already accounts for broadband proportionately, so do not double-claim.
Only if it is specialist protective or uniform clothing that cannot be worn outside of work — overalls, safety equipment, a nurse's uniform. Ordinary business attire — suits, smart shoes — is not allowable because it can also be worn socially. The dual-purpose rule applies.
Yes. Accountancy fees, bookkeeping software and tax return preparation costs are allowable expenses for a sole trader, provided they relate to the business rather than personal tax affairs.
The AIA allows 100% of the cost of qualifying plant and machinery — computers, equipment, vehicles in some cases — to be deducted in the year of purchase. The limit is currently £1 million per year, far exceeding typical sole trader spend.
Yes, for meals and non-alcoholic drinks consumed when working away from your normal base on business. The cost must be reasonable and the travel must be for a genuine business purpose. There is no fixed per-diem limit for sole traders, but HMRC expects reasonable amounts consistent with your industry.
The sole trader tax calculator turns this guidance into a concrete monthly take-home and tax reserve estimate, based on 2026/27 HMRC rates. Enter taxable profit — not turnover.