Receipts pile up fast when you run your own business. A train ticket here. A software subscription there. A new laptop because the old one finally gave up.
Then tax season arrives — and the question hits:
What expenses can I claim as a sole trader?
Claim too little and you overpay tax. Claim incorrectly, and you risk questions from HM Revenue and Customs. This 2026 guide goes deeper than a standard expense list. You’ll learn the core rule that determines what’s claimable, often-missed deductions including pre-trading costs, the training grey area most people misunderstand, electric vehicle tax treatment in 2026, how Making Tax Digital changes record-keeping, and common mistakes that trigger compliance checks.
If you want to legally and confidently reduce your taxable profit, this is the reference guide.
The Golden Rule: “Wholly and Exclusively”
HMRC allows you to deduct expenses that are wholly and exclusively for the purpose of running your business. That phrase determines everything.
To qualify, the expense must be necessary for business and must not primarily benefit you personally. If there’s mixed use, you can only claim the business portion.
As GOV.UK’s official self-employed expenses guidance confirms that if you use something for both business and personal purposes, you can only claim the business proportion — and HMRC expects you to be able to evidence how you arrived at that split.
Example: Your mobile phone bill is £80 per month. If 65% of usage is business-related, you can claim £52. This proportional approach is where many sole traders go wrong. HMRC doesn’t expect perfection — but it does expect reasonable estimates backed by evidence.
Understanding how income tax bands apply to your trading profit puts the value of legitimate expense claims in perspective — every £1,000 you reduce from taxable profit directly reduces the tax you owe at your marginal rate.
What Business Expenses Can I Claim as a Sole Trader?
Below is a comprehensive breakdown of allowable expenses in the UK, verified for the April 2026 tax year.
1. Office & Working From Home Expenses
If you work from home, you can claim a portion of rent or mortgage interest, utility bills (electricity, gas, water), council tax, internet, business phone line, office furniture, and stationery.
Two Methods: Simplified vs Actual Costs
| Method | How It Works | Who It Suits |
|---|---|---|
| Simplified expenses | Flat monthly rate based on hours worked | Low admin, small setups |
| Actual costs | Calculate % of home used for business | Higher utility spend |
Simplified expense rates as per HMRC guidance:
- 25–50 hours/month → £10
- 51–100 hours → £18
- 101+ hours → £26
An important 2026 note: the £6 per week flat-rate working from home relief for employees has been scrapped from April 2026. However, this does not affect sole traders — self-employed individuals retain the right to claim home working costs using either the simplified rate or the actual costs method. For a full breakdown of what you can claim and how the rules apply to your specific situation, see our working from home tax relief guide. If your actual household costs are significant, actual apportionment may be more beneficial than the flat rate.
2. Travel & Car Expenses
You can claim business travel — but not commuting to a permanent workplace.
Allowable travel includes fuel, insurance, repairs and servicing, road tax, parking (not fines), train/taxi/bus fares, overnight accommodation, and subsistence on overnight trips.
Mileage vs Actual Costs
| Method | 2026 Rate | Best For |
|---|---|---|
| Simplified mileage | 45p per mile (first 10,000 miles), 25p after | Lower admin |
| Actual costs | % of total vehicle expenses | Higher business use |
Once you choose simplified mileage for a vehicle, you must continue using it for that vehicle. GOV.UK’s simplified expenses checker can help you decide which method produces the better outcome for your circumstances.
3. Equipment & Capital Allowances (AIA Explained)
Small purchases such as laptops, printers, and tools are often deducted directly. Larger purchases may fall under capital allowances.
Annual Investment Allowance (AIA)
The AIA currently allows up to £1 million of qualifying plant and machinery to be deducted in full in the year of purchase, subject to current limits confirmed by HMRC. For most sole traders, this effectively means 100% first-year relief on machinery, specialist tools, IT systems, and certain vehicles.
4. Pre-Trading Expenses (The 7-Year Rule)
This is frequently overlooked. If you incurred expenses before officially starting your business, you may still claim them if they were purchased within 7 years before trading began, you still use them in your business, and they would have been allowable had you been trading.
Examples include domain registration before launch, software purchased pre-trading, and equipment bought during setup. These are treated as if incurred on your first trading day — a rule that rewards those who invested in their business before officially launching.
5. Insurance & Professional Fees
You can claim professional indemnity insurance, public liability insurance, accountant fees, legal fees (business-related), trade subscriptions, business bank charges, and credit card charges on business accounts. These are fully deductible.
6. Training & The “New Skill vs Upgrade” Test
This is a common HMRC grey area.
You can claim training if it maintains or improves skills within your existing trade. You usually cannot claim if it prepares you for a new trade.
| Scenario | Claimable? | Reason |
|---|---|---|
| A graphic designer takes an advanced Adobe course | Yes | Skill improvement |
| Plumber renews certification | Yes | Maintains trade |
| Designer studies property investing | No | New trade |
When in doubt, ask: “Does this help me continue my current business — or start a different one?”
7. Interest & Finance Costs
If you use finance, you can claim interest on business loans, Hire Purchase interest, business credit card interest, and loan arrangement fees. You cannot claim capital repayments.
Under cash basis accounting, interest deductions may be capped — check current thresholds with HMRC or your accountant.
8. Electric Vehicles (EVs) in 2026
EVs are increasingly relevant for sole traders. You can claim either mileage allowance or the business proportion of actual costs (charging, insurance, maintenance). Home charging must be apportioned — public charging for business travel is fully claimable. Capital allowances may also apply to EV purchases.
With sustainability incentives evolving, EV treatment is a growing planning consideration for sole traders who drive significant business mileage.
Quick Eligibility Table
| Expense Category | Claimable? | Business % Required? |
|---|---|---|
| Home Broadband | Partial | Yes |
| Gym Membership | No | N/A |
| Protective Clothing | Yes | 100% |
| Everyday Clothing | No | N/A |
| Professional Coaching | Yes | If related to current trade |
| Commuting Travel | No | N/A |
| Overnight Hotel | Yes | 100% |
| EV Charging | Yes | Business miles only |
The 2026 Digital Shift: Making Tax Digital (MTD)
Making Tax Digital for Income Tax (MTD for ITSA) now affects many sole traders. According to GOV.UK’s MTD for ITSA eligibility guidance mandates sole traders earning over £50,000 from April 2026, with the threshold dropping to £30,000 from April 2027. Quarterly digital submissions are required — the “shoebox of receipts” is effectively dead.
Modern compliance involves digital record-keeping, receipt scanning via OCR, bank feed integration, and mileage tracking apps. Software platforms such as QuickBooks and FreeAgent are built around MTD-compliant expense capture. Those already using HMRC’s self-assessment system will find the transition to MTD software the most operationally significant change — particularly around how quarterly updates feed into the final year-end declaration.
Common Sole Trader Expense Mistakes
From reviewing freelance returns, common errors include claiming personal clothing, claiming 100% of phone/internet without apportionment, forgetting small recurring subscriptions, claiming commuting costs, keeping poor mileage records, and mixing personal and business accounts.
Most investigations aren’t triggered by large-scale fraud — but by sloppy record-keeping. An incorrect tax code can also compound the problem: if HMRC has been collecting the wrong amount through your tax code, an outstanding underpayment may surface when your self-assessment return is submitted and cross-referenced.
Mini Case Study
Sarah, a freelance consultant earning £48,000, initially claimed only her laptop and software subscriptions.
After reviewing properly, she added:
- £18/month home working flat rate
- 60% of her broadband bill
- Business mileage at HMRC approved rates
- Professional indemnity insurance
- Accountant fees
Result: £3,800 reduction in taxable profit. At 20% income tax, that’s £760 saved — without a single aggressive or borderline claim. An after-tax calculator can help you model the real difference accurate expense claims make to your take-home figure before you file.
FAQs
Q. What expenses can a sole trader claim back?
Sole traders can claim business costs that are wholly and exclusively for business use, including office expenses, travel, insurance, marketing, equipment, and professional fees. The full list of allowable categories is outlined in GOV.UK’s self-employed expenses guidance. Knowing how much you can earn before tax becomes due helps you understand why reducing taxable profit through legitimate expenses has a direct, measurable impact on your bill.
Q. What car expenses can I claim as a sole trader?
You can claim mileage at HMRC-approved rates — 45p per mile for the first 10,000 business miles, 25p thereafter — or the business proportion of actual costs, including fuel, repairs, insurance, and servicing. You cannot claim commuting costs.
Q. Can I claim working from home expenses?
Yes. Sole traders can use the simplified flat rates based on hours worked or calculate actual household costs proportionate to business use. For a detailed breakdown of both methods and which produces the better result for your circumstances, our working from home tax relief guide covers the full picture — including the important distinction between sole trader rules and the employee relief changes introduced in April 2026.
Q. Can I claim food as a sole trader?
Only for business travel or overnight trips — not everyday meals at your desk.
Q. Can I claim training courses?
Yes, if they improve skills in your existing trade. No, if they prepare you for a new business. The distinction matters — HMRC applies the test consistently.
Q. Can I claim expenses before I started trading?
Yes, if incurred within 7 years prior and still used in your business. These are treated as if they arose on your first day of trading — a valuable rule that many new sole traders never discover until they’ve already filed their first return.
Conclusion
Knowing what expenses you can claim as a sole trader isn’t about being aggressive — it’s about being accurate.
Three things matter most: follow the “wholly and exclusively” rule, claim reasonable business proportions, and keep digital records, especially under MTD.
Tax efficiency isn’t about pushing boundaries — it’s about understanding them. Use the new tax year as a prompt to review your expense categories, update your record-keeping software, and check whether your income now brings you within MTD’s scope for 2026 or 2027.
UK tax law changes fast. Pure Magazine keeps pace — so your financial decisions are always based on what’s current, not what was true two years ago.
