UK self-employed individuals and landlords can deduct allowable expenses from their income before calculating tax. To be deductible, an expense must be "wholly and exclusively" for business purposes. Claiming all legitimate expenses is one of the most effective ways to reduce your tax bill.
This guide covers what you can claim, HMRC mileage rates, home office deductions, capital allowances, and common expenses people miss.
The Golden Rule: Wholly and Exclusively
HMRC allows you to deduct expenses that are wholly and exclusively for business purposes. This doesn't mean you can't claim items with some personal use—it means you can only claim the business proportion.
Example: Your mobile phone is 70% business, 30% personal. You can claim 70% of the cost.
Mixed-use items require honest apportionment. Keep records showing how you calculated the business proportion.
Categories of Allowable Expenses
Office and Premises Costs
Fully Deductible:
- Business rent and rates
- Utilities for business premises
- Office cleaning
- Security costs
- Business insurance
Business proportion deductible:
- Phone and broadband (business calls/usage)
- Equipment used for business
Working From Home
If you work from home, you can claim either simplified expenses or actual costs.
Option 1: Simplified Expenses (Flat Rate)
| Hours worked from home per month | Monthly flat rate | |----------------------------------|-------------------| | 25–50 hours | £10 | | 51–100 hours | £18 | | 101+ hours | £26 |
Simplified expenses are easy to calculate but may undervalue your claim if you have a dedicated home office.
Option 2: Actual Costs (Proportional)
Calculate the business proportion of:
- Mortgage interest or rent
- Council tax
- Electricity and gas
- Water rates
- Home insurance
- Repairs and maintenance (to the whole property)
Methods to calculate the proportion:
- Room count: 1 room out of 6 = 16.7%
- Square footage: 10m² of 100m² = 10%
- Time-based: 8 hours of 24 = 33%
Actual costs often give a higher deduction if you have a dedicated office space.
Travel and Transport
Mileage Allowance (Personal Vehicle)
If you use your personal vehicle for business, claim mileage at HMRC's approved rates:
| Miles per tax year | Rate per mile | |--------------------|---------------| | First 10,000 | 45p | | Over 10,000 | 25p |
This covers fuel, insurance, servicing, and depreciation—you cannot claim these separately if using mileage rates.
Motorcycles: 24p per mile (no threshold) Bicycles: 20p per mile
Other Travel Costs (Fully Deductible):
- Public transport (train, bus, tube, taxi)
- Parking fees for business trips
- Congestion and toll charges
- Accommodation for business trips
- Subsistence when travelling overnight
Not Deductible:
- Ordinary commuting to a regular workplace
- Travel that's primarily personal
- Fines and penalties (parking tickets, speeding fines)
Equipment and Technology
Revenue Expenses (Deduct in Full):
- Software subscriptions (monthly/annual)
- Low-value equipment
- Replacement of existing items (like-for-like)
Capital Allowances (See Below):
- Computers and laptops
- Office furniture
- Machinery and tools
- Vehicles (restricted rules for cars)
Professional Services
Fully Deductible:
- Accountant and bookkeeper fees
- Legal fees for business matters
- Consultant and contractor costs
- Professional body memberships (RICS, CIMA, ACCA)
- Industry subscriptions and journals
Not Deductible:
- Legal fees for buying property (capital cost, affects CGT)
- Fines for breaking the law
- Political donations
Marketing and Advertising
Fully Deductible:
- Website design and hosting
- Domain name registration
- Online advertising (Google Ads, Facebook Ads)
- Print advertising
- Business cards and brochures
- PR and marketing agency fees
- Trade show attendance
- Promotional merchandise
Staff Costs
If you employ people:
- Salaries and wages
- Employer's National Insurance contributions
- Employer pension contributions
- Staff training
- Recruitment costs
- Staff entertainment (£150/head annual exemption for parties)
Financial Costs
Deductible:
- Bank charges and fees
- Interest on business loans
- Credit card fees for business transactions
- Finance lease payments
- Bad debts written off
- Currency exchange losses
Not Deductible:
- Repayment of loan capital (only interest is deductible)
- Personal credit card interest
- Fines for late payment
Insurance
Fully Deductible:
- Public liability insurance
- Professional indemnity insurance
- Employer's liability insurance (required if you have staff)
- Business contents insurance
- Vehicle insurance (business proportion)
- Key person insurance
- Business interruption insurance
Training and Development
Deductible:
- Training that updates existing skills
- Conferences and seminars
- Professional certifications related to current business
- Industry books and courses
Not Deductible:
- Training for a completely new skill or trade
- General education (degrees unrelated to current business)
- Personal development unrelated to business
Clothing
Very Limited:
- Protective clothing required for work (hard hats, safety boots, hi-vis)
- Uniforms with permanent business branding
- Costumes for performers
Not Deductible:
- Ordinary business clothes (suits, shirts)
- Clothes that could be worn outside work
- Smart casual attire
Food and Entertainment
Generally Not Deductible:
- Your own meals during the workday
- Client entertainment (meals, tickets, hospitality)
- Business meals with clients
Exception—Subsistence:
When travelling overnight for business, you can claim reasonable costs for:
- Breakfast, lunch, dinner
- Non-alcoholic drinks
Keep receipts and be reasonable. HMRC benchmark rates for subsistence:
- Breakfast: £5-10
- Lunch: £10-15
- Dinner: £15-25
Capital Allowances
Capital allowances let you deduct the cost of business assets that last several years.
Annual Investment Allowance (AIA)
The AIA allows you to deduct 100% of qualifying expenditure in the year of purchase, up to £1 million per year.
Qualifying items:
- Computers and laptops
- Office furniture
- Machinery and tools
- Commercial vehicles (vans)
- Equipment for your trade
Writing Down Allowance
For items not covered by AIA or exceeding the limit:
- Main pool: 18% per year
- Special rate pool: 6% per year (integral features, high-emission cars)
Cars
Cars have separate rules based on CO2 emissions:
| CO2 Emissions | Allowance | |---------------|-----------| | 0g/km (electric) | 100% first-year allowance | | 1-50g/km | 18% writing down allowance | | Over 50g/km | 6% writing down allowance |
Only the business-use proportion is allowable.
Common Expenses People Miss
Many self-employed people under-claim. Review your records for:
- Bank fees — Monthly charges, transaction fees, foreign exchange fees
- Software subscriptions — Often forgotten small monthly amounts
- Phone bills — Business proportion of personal phone
- Home office — Heating, lighting, broadband, council tax (proportion)
- Mileage — Short trips to the post office, bank, suppliers, clients
- Professional subscriptions — Industry bodies, journals, magazines
- Training — Webinars, online courses, books
- Insurance — Professional indemnity, public liability
- Parking — When visiting clients or suppliers
- Stationery — Printer ink, paper, envelopes, postage
Record-Keeping Requirements
HMRC requires you to keep evidence for all expense claims:
- Receipts for all purchases
- Invoices you've issued and received
- Bank statements showing transactions
- Mileage logs for vehicle claims
Records must be kept for 6 years after the relevant tax year.
Tips for Good Record-Keeping
- Photograph receipts immediately — paper fades and gets lost
- Use accounting software — automatic categorisation and storage
- Separate bank accounts — don't mix personal and business
- Review monthly — don't leave it until year-end
- Back up digitally — cloud storage for safety
Expenses and Making Tax Digital
From April 2026 (income over £50,000) or April 2027 (income over £30,000), you must:
- Keep digital records of all expenses
- Submit quarterly summaries to HMRC
- Use MTD-compatible software
TaxFolio categorises expenses automatically and keeps you MTD-ready.
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