What Business Expenses Can I Actually Claim? A Plain-English Guide for Sole Traders

What Business Expenses Can I Actually Claim as a Sole Trader?

One of the most common questions I get asked by sole traders is:

"Can I put this through the business?"

The answer isn't always as straightforward as you might think.

Some expenses are clearly business-related and can normally be claimed in full. Others have both a personal and business element, which means only part of the cost may be allowable. And some expenses cannot be claimed at all, even when they seem connected to your business.

Understanding the difference can help you reduce your taxable profit correctly without claiming expenses that HMRC may challenge.

The Golden Rule: Wholly and Exclusively

The basic rule is that an expense must generally be incurred "wholly and exclusively" for the purposes of your trade.

In plain English, there needs to be a genuine business reason for spending the money.

For example, buying stock, paying for business software or renting a workshop would normally have a clear business purpose.

However, if something is partly for business and partly for your personal use, you may need to separate the two.

What Expenses Can I Normally Claim?

There are many everyday costs that sole traders can normally claim when they genuinely relate to the business.

These can include:

•Stock and raw materials

•Wages and subcontractor costs

•Rent for business premises

•Business insurance

•Advertising and marketing

•Business software and subscriptions

•Website costs

•Stationery, printing and office supplies

•Certain business travel costs

For example, if you're a beautician and spend £500 on products used to provide treatments to your clients, this would normally be a business expense.

Similarly, if you pay £30 per month for booking software used to manage your appointments and customers, this would generally be a business cost.

What If Something Is Partly Personal and Partly Business?

This is where many sole traders get confused.

Having some personal use doesn't necessarily mean you cannot claim anything. If the business element can genuinely be identified, you can generally claim the business proportion.

The important thing is to use a reasonable and consistent method and keep evidence supporting your calculation.

Example: Your Mobile Phone

Let's say your mobile phone costs £60 per month and you estimate that 60% of its use relates to your business.

You wouldn't claim the full £60.

Instead:

£60 × 60% = £36 per month

The £36 business element may be claimed, while the personal proportion is excluded.

You should also be able to explain how you arrived at that percentage if HMRC asks.

Can I Claim for Working From Home?

If you run your business from home, you may be able to claim an appropriate proportion of certain household costs.

Depending on your circumstances, this can include costs such as:

•Heating and electricity

•Rent

•Mortgage interest

•Council Tax

•Insurance

•Cleaning

The calculation can take into account how much of your home is used for business and how much time it is used for business rather than privately.

For example, if you use a room as an office during the day but your family uses the same room in the evening, you would need to make a reasonable apportionment rather than claiming all the costs associated with that room.

Be careful about using part of your home exclusively for business, as this can potentially affect Capital Gains Tax treatment when you eventually sell your home.

What About My Car?

If you use your car for both business and personal journeys, you cannot automatically claim all your motoring costs.

You need to identify the business element.

For example:

Total annual mileage: 14,000 miles

Business mileage: 8,000 miles

The business-use proportion would be:

8,000 ÷ 14,000 = 57.14%

If you're claiming based on actual running costs, the appropriate business percentage would then be applied, subject to the relevant tax rules.

Keeping an accurate mileage log is particularly important when claiming vehicle expenses.

Business Travel or Commuting?

This is another area where mistakes are common.

Travelling to visit a customer, supplier or qualifying business location may be an allowable business journey.

However, travelling from home to a regular, fixed place of business is generally treated as ordinary commuting and isn't an allowable business expense.

For example:

You travel from your business base to visit a client → potentially allowable.

You travel from home to the same shop where you normally work every day → generally commuting and not allowable.

Can I Claim Food and Meals?

Not every coffee or lunch becomes a business expense just because you're self-employed.

Normal everyday meals are generally considered personal expenditure.

However, reasonable meals and accommodation associated with qualifying business travel may be allowable depending on the circumstances.

Can I Claim Entertaining Clients?

This is a common misunderstanding.

Business entertaining is generally not an allowable deduction for tax purposes, even when there is a genuine business reason for entertaining the customer.

For example, you take a potential client for dinner and spend £150 hoping to secure a £5,000 contract.

There may be a very clear commercial reason for the dinner, but that doesn't automatically make the £150 tax deductible.

Why Good Records Matter

Claiming an expense is only part of the job. You also need to be able to support your figures.

Keep invoices, receipts and relevant bank records.

For expenses with both business and private use, keep a record of how you calculated the business proportion.

For example, keep a mileage log for your car and notes explaining how you calculated the business percentage of your telephone, broadband or household costs.

A Simple Question to Ask Yourself

Before claiming an expense, ask yourself:

"Did I incur this cost for my business, and can I demonstrate the business purpose?"

If the answer is yes, it may be allowable.

If it's partly business and partly personal, you may need to apportion it.

If it's entirely personal, it normally shouldn't reduce your taxable business profit.

And remember: just because something was paid from your business bank account doesn't automatically make it a tax-deductible business expense.

Not Sure If You're Claiming Everything You're Entitled To?

Missing legitimate business expenses could mean paying more tax than necessary. On the other hand, incorrectly claiming personal or non-allowable expenses could cause problems if HMRC reviews your return.

If you're a sole trader and you're unsure whether you're claiming your expenses correctly, I can help.

Book a free 30-minute review with AD Accounting & Business Solutions.

We'll discuss your business, look at the types of expenses you're currently claiming and identify areas that may need further attention.

Book your free 30-minute review today and make sure you're not missing legitimate business expenses or claiming costs incorrectly.