Allowable Expenses Self Employed UK

Allowable Expenses for the Self-Employed: What You Can Claim to Reduce Your Tax Bill

Knowing which allowable expenses self-employed people can claim is one of the most effective ways to reduce your tax bill legally. Every pound you claim as a legitimate business expense reduces your taxable profit, which means you pay less Income Tax and less National Insurance. This guide covers exactly what you can and cannot claim, including the current HMRC flat rates for simplified expenses, so you can be confident you are not paying more tax than you need to.

The Basic Rule: What Counts as an Allowable Expense

The fundamental rule is straightforward: to qualify as an allowable expense, a cost must be incurred wholly and exclusively for business purposes. If an expense is partly personal and partly business, you can only claim the business proportion.

For example, if you use your mobile phone 60% for business and 40% for personal use, you can claim 60% of the cost as a business expense. You must be able to justify the split if HMRC asks, so keep records of how you arrived at the proportion.

You cannot claim expenses that are primarily personal, even if they have some benefit to your business. And you must keep receipts or records for everything you claim, for at least five years after the 31 January filing deadline for the relevant tax year.

Home Office Costs for the Self-Employed

If you work from home, you can claim a proportion of your household running costs as business expenses. You have two options: calculate the actual costs or use HMRC’s simplified flat rates.

Option 1: Actual costs method

You work out the proportion of your home used for business and claim that percentage of your household bills. Costs you can include are:

• Heating and lighting
• Council Tax
• Mortgage interest or rent
• Water rates
• Building and contents insurance
• Repairs and maintenance of the property

The proportion is usually based on the number of rooms used for business divided by the total number of rooms, adjusted for how many hours the space is used for work versus personal use.

Option 2: HMRC simplified expenses flat rates

The simpler option is to use HMRC’s flat rate deduction based on the hours you work from home each month. You can only use this method if you work 25 hours or more from home per month. The current rates are:

• 25 to 50 hours per month: £10 per month
• 51 to 100 hours per month: £18 per month
• 101 or more hours per month: £26 per month

For example, if you work from home for 40 hours per month for 10 months and 60 hours per month for 2 months, you would claim (10 x £10) + (2 x £18) = £136 for the year.

The flat rate does not include telephone or internet costs. You can claim the business proportion of your phone and broadband bills separately, on top of the flat rate. Many self-employed people find the flat rate easier to manage, but if your actual costs are significantly higher, the actual costs method may give you a larger deduction.

Vehicle Expenses: What Self-Employed Drivers Can Claim

If you use a vehicle for business, you can claim either the actual costs or use HMRC’s simplified mileage rates. Once you choose a method for a particular vehicle, you must stick with it for as long as you use that vehicle.

HMRC mileage rates for 2026/27

The current approved mileage rates for the 2026/27 tax year are:

• Cars and goods vehicles: 55p per mile for the first 10,000 business miles, then 25p per mile after that
• Motorcycles: 24p per mile
• Bicycles: 20p per mile

These rates cover fuel, insurance, road tax, servicing, and depreciation. You cannot claim these costs separately if you use the mileage method. You can still claim parking fees, congestion charges, and toll charges on top of the mileage allowance.

Actual costs method for vehicles

Alternatively, you can claim the actual costs of running your vehicle. This includes fuel, insurance, road tax, MOT, servicing, repairs, breakdown cover, and finance payments or lease costs. You must then calculate the business proportion based on your business mileage versus total mileage. You can also claim capital allowances on the cost of the vehicle itself.

Keep a mileage log recording every business journey, including the date, destination, purpose, and miles driven. HMRC may ask to see this at any time.

Office Equipment and Technology

You can claim the cost of equipment and technology you use for your business as allowable expenses deducted from taxable profit. This includes:

• Computers, laptops, and tablets
• Printers, scanners, and other peripherals
• Software subscriptions
• Office furniture (desks, chairs, storage)
• Stationery and postage

If you use an item for both business and personal purposes, you can only claim the business proportion. For expensive items (typically over £1,000), you may need to claim capital allowances rather than deducting the full cost in one year.

Professional Services and Training

The following professional costs count as allowable expenses for the self-employed:

• Accountancy and bookkeeping fees
• Legal fees directly related to your business
• Professional subscriptions and membership fees
• Trade journal subscriptions
• Training courses that update or maintain existing skills (but not courses that teach entirely new skills unrelated to your current business)

The training rule catches many people out. A freelance web developer can claim the cost of a course on a new programming language because it updates their existing skills. But a web developer who takes a plumbing course cannot claim it because it is an entirely new trade. However, if you then start a plumbing business, the course costs become pre-trading expenses that you can claim once you begin trading.

Marketing and Advertising

All marketing costs directly related to your business are allowable, including:

• Website hosting and domain names
• Online advertising (search ads, social media ads)
• Business cards and printed materials
• Photography for your business
• Trade show and exhibition fees
• Email marketing and CRM software subscriptions

Travel and Accommodation

Business travel costs are allowable, but commuting between your home and a regular place of work is not. Allowable travel expenses include:

• Train, bus, and taxi fares for business journeys
• Flights for business trips
• Hotel accommodation when travelling for business
• Meals during overnight business trips (reasonable amounts only)
• Parking and toll charges

You cannot claim the cost of food during a normal working day at your usual place of business. The expense must involve travel away from your normal base.

Clothing and Uniforms

Clothing is one of the areas where expense claims are most often rejected by HMRC. You can claim for:

• Protective clothing required for your work (safety boots, hard hats, hi-vis jackets)
• Uniforms with your business logo that you would not wear outside work
• Costumes for performers

You cannot claim for everyday clothing, even if you only wear it for work. A suit, smart dress, or business casual outfit is not an allowable expense because HMRC considers it suitable for everyday wear.

Financial Costs

The following financial costs are allowable for the self-employed:

• Bank charges and credit card fees on business accounts
• Interest on business loans
• Hire purchase interest
• Leasing payments for business equipment
• Bad debts (money owed to you that you have genuinely written off as unrecoverable)

Insurance Premiums

Business insurance premiums are allowable, including:

• Public liability insurance
• Professional indemnity insurance
• Business contents insurance
• Employers’ liability insurance

Personal insurance (life insurance, private health insurance) is not an allowable expense even if you consider it important for your ability to work.

What You Cannot Claim

To avoid problems with HMRC, be clear about what does not count as an allowable expense:

• Personal spending of any kind
• Everyday clothing
• Fines and penalties (including parking tickets and speeding fines)
• Entertainment of clients (the cost of taking a client to dinner is not allowable)
• Your own wages or salary (your profit is your income)
• Donations to political parties
• The cost of buying business premises (this is a capital expense, claimed through capital allowances)

Keeping Records of Your Allowable Expenses

You must keep evidence of every expense you claim. This means receipts, invoices, bank statements, and mileage logs. Digital records are acceptable. HMRC can ask to see your records at any time, and you must keep them for at least five years after the 31 January filing deadline for the relevant tax year.

Using accounting software or even a simple spreadsheet to categorise your expenses throughout the year makes your Self Assessment tax return much easier to complete. Do not leave it until January to sort through a year’s worth of receipts.

For more on managing your self-employed finances, read our guides to calculating taxes on self-employment income, tech tools for managing expenses, and managing money when self-employed.