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Which sole-trader expenses can I claim?

It’s a minefield, isn’t it? Starting your own business, and then having to get to grips with all this ‘putting it through the books’ jargon. Here’s a (hopefully) simple guide, to send you on your way.

Let’s start with the basics, and look at what expenses you can claim BEFORE you actually start trading.

A business cannot begin to trade unless it’s in the position to actually provide services/goods to it’s customers, so you’ll need to buy stock/software/pay rent for premises etc. You get the idea. And the good news, is that you can claim these within your first years’ accounts, as long as:

  1. They would have been tax-deductible if you’d purchased them on your first day of trading.

  2. You incurred the expense within seven years of commencement of trading.

But what about if they were a capital cost?

If they were a capital cost, and you’re using the cash basis to complete your accounts, then they may be claimed as a business expense. But, if you’re using the accrual basis, then you may claim capital allowances.

Now that we have pre-trade out of the way, let’s look at your run-of-the-mill/common or garden/day to day (can you think of any other phrases???) expenses, because some expenses are simply not allowable.

You may claim the following in full, or adjust for personal use:

  • Wages and salaries

  • Cost of sales

  • Staff entertaining

  • Office costs

  • Hotel accommodation

  • IT Services

  • Advertising

  • Bank interest

  • Bad debts

  • Work clothing (if it’s embroidered)

  • Sub contract labour

  • Motor and travel costs.

  • Telephone expenses

  • Professional subscriptions (HMRC approved bodies)

  • Some home use as office

Simplified expenses

If you’d rather, you can use the simplified expenses method to calculate your use of home as an office if you’re a sole trader.

What can’t I claim?

  • Depreciation is a biggie. Depreciation of your assets is not an allowable expense, even though it sits there on your profit and loss account. It’s added back to your profit for tax purposes, and the adjustment is made on your tax return.

  • Retraining for a new skill. You can’t claim the cost of a training course to learn a new skill, or branch out into a new sector. The training has to relate to the income generated by your business.

  • Regular commute – Nope, if you’re commuting to a regular place of work, you can’t claim for that. An overnight business trip is fine, or an ad hoc visit to a client, but nothing more. Similarly, you can claim for expenses such as tolls, congestion charges etc, when the journey incurred was for the purposes of business.

  • Sole Trader pension contribution. No, this isn’t an expense of running your business, but you can get tax relief from contributions personally made.

  • Accountancy fees. You can claim the cost of your business accountancy fees, but not personal items such as your self assessment tax return.

  • Medical and health insurance. No, not allowable as an expense, it’s personal.

  • Food and drink – This can be confusing to many, but, simply put, you have to satisfy one of three conditions to be able to claim.

    • If you’re staying away from home for business – reasonable costs are allowed. A steak salad is fine, but don’t go mad and order Champagne.

    • If you make a journey that is outside of your usual pattern, for example, a training course or ad hoc client visit.

    • If your business is itinerant. For example, if you’re a gardener, or mobile beautician.

  • Medical expenses - Even if your treatment is due to the demands of your work, you can't claim the cost of medical treatments. HMRC guidance states that they are a personal benefit, and therefore disallowable.

Of course, there are hundreds of other expenses, we've only touched the surface really, but hopefully this gives you a flavour.

And if you're unsure, pick up the phone.

0161 406 8660

Or use the contact form.


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