Business Expenditure 101
Are You Claiming Everything You’re Entitled To?
A guide for UK small business owners and sole traders
Most small business owners and sole traders know they can claim expenses. But in practice, plenty of people end up paying more tax than they need to, simply because they’re not claiming everything they’re allowed to.
This article runs through the core principles and some of the most commonly missed categories.
The Golden Rule: Wholly and Exclusively
HMRC’s test for an allowable expense is that the cost must be incurred “wholly and exclusively” for the purposes of your trade. In plain English: if you spent the money because of your business, you can generally claim it.
There’s a grey area where costs have both a personal and business element. In those cases, you may still be able to claim the business portion, but you need to be able to justify the split. The key is keeping good records and being consistent.
Expenses People Commonly Miss
1. Use of Home as Office
If you work from home, even part of the time, you can claim a contribution towards your household costs. HMRC offers a flat-rate simplified option (currently £10 per month for 25 hours per month, rising to £18 per month and £26 per month for higher hours), which requires no detailed records. Alternatively, you can calculate the actual proportion of costs such as heating, electricity, and broadband attributable to business use, which is often higher.
2. Mileage and Vehicle Costs
If you use your own car for business journeys, you can claim the HMRC approved mileage rate, currently 45p per mile for the first 10,000 miles and 25p thereafter. This covers fuel, wear and tear, and insurance. You cannot also claim fuel on top. Many people forget to log journeys consistently, meaning they undercount their mileage by the time they do their return.
3. Phone and Broadband
The business proportion of your mobile phone bill and home broadband can be claimed. If you have a dedicated business phone contract, you can claim the full cost.
4. Professional Subscriptions and Memberships
Membership fees for professional bodies relevant to your work are allowable. So are trade association fees, and subscriptions to industry publications or software tools you use for the business.
5. Training and Development
Courses, books, and training that maintain or update your existing skills in your current trade are allowable. Note that HMRC draws a distinction here: training that enables you to enter a new trade or profession is not. A bookkeeper doing a refresher on accounting software is fine. The same bookkeeper doing a photography course is not.
6. Bank Charges and Interest
Business bank charges and interest on business loans or overdrafts are claimable. If you use a personal bank account for business (not ideal, but common), you can still apportion the relevant charges.
7. Accountancy and Professional Fees
Your accountant’s fees for the business are fully allowable. So are legal fees incurred for business purposes, for example, having a contract reviewed or taking advice on a commercial dispute.
8. Marketing and Advertising
Website costs, social media advertising, business cards, flyers, and other promotional spend are all allowable. If you pay for a tool like Canva or run paid ads on LinkedIn or Google, those costs count.
9. Software and Subscriptions
Monthly or annual costs for software you use in your business, from your accounting package to project management tools to cloud storage, are allowable. This includes Microsoft 365, Xero, Slack, or whatever your setup looks like.
10. Equipment and Capital Allowances
If you buy equipment for the business, laptops, phones, cameras, tools, you can usually claim the full cost in the year of purchase using the Annual Investment Allowance, rather than spreading the deduction over several years.
What About Pre-Trading Expenses?
If you spent money before you formally started trading, those costs may still be claimable, provided they would have been allowable had the business already been running at the time. This can catch people out: start-up costs are not automatically excluded.
A Note on Record-Keeping
HMRC can ask you to evidence any claim you make. Keeping receipts, bank statements, and mileage logs means you can stand behind your return if questioned. You do not need to send records in with your return, but you need to have them.
Not Sure What You’re Missing?
If you’re doing your own return and want a sense check, or you’ve been in business for a few years without ever having a proper review of what you’re claiming, it’s worth speaking to an accountant. A short conversation can often identify costs that have been sitting unclaimed for years.
Sources: HMRC guidance on BIM37000 (business expenditure), EIM32815 (homeworking), and the Self Assessment helpsheet HS222. All figures correct as at June 2026. Tax rules can change and this article does not constitute personal tax advice.
