What Expenses Can a Self-Employed Person Include in Their Tax Return?
If you’re self-employed or a sole trader, you can deduct business-related expenses from your income to reduce your tax bill. This guide from M A Accounting explains HMRC rules, allowable costs, examples, and record-keeping tips for your next Self Assessment.
1. Understanding Allowable Expenses
HMRC allows you to deduct “allowable business expenses”: costs that are wholly and exclusively for your trade, profession or vocation. These reduce your taxable profit, lowering your income tax and National Insurance.
2. Common Self-Employed Expenses You Can Claim
- Office costs: stationery, printing, postage, and small office equipment.
- Phone, mobile and broadband: business portion only.
- Travel expenses: fuel, parking, train, and bus fares for business journeys (not commuting).
- Motor expenses: mileage allowance (45p per mile for first 10,000 miles, then 25p) or actual costs such as insurance and repairs.
- Advertising and marketing: website hosting, domain names, business cards, online ads, social media promotion.
- Professional fees: accountancy, legal advice, business insurance, bank charges.
- Training: courses and professional development directly related to your trade.
- Stock and materials: goods for resale, raw materials, packaging.
- Business premises: rent, utilities, and maintenance if you have a separate workspace.
- Working from home: proportion of household bills or HMRC flat-rate claim.
3. Simplified vs Actual Expenses
Option 1: Simplified Expenses (Flat Rate)
You can use HMRC’s simplified expenses method to calculate vehicle, home-working, or living-on-business-premises costs without detailed records.
| Type of Expense | Simplified Rate |
|---|---|
| Car or van mileage | 45p per mile (first 10,000), 25p after |
| Motorbike mileage | 24p per mile |
| Working from home | £10–£26 per month (based on hours) |
Option 2: Actual Costs
Alternatively, you can claim the precise business share of each expense category by keeping detailed records. For example, apportion electricity or rent by space and time used for business.
4. Expenses You Cannot Claim
- Personal living costs (food, clothing, entertainment).
- Drawings or money you pay yourself.
- Fines or penalties.
- Depreciation (use capital allowances instead).
- Client gifts over £50 or non-business entertainment.
5. Capital Allowances for Equipment
Larger items such as computers, machinery, or vehicles are claimed as capital allowances instead of day-to-day expenses. Most small businesses can deduct the full cost under the Annual Investment Allowance (AIA) up to £1 million per year.
6. Record-Keeping Requirements
Keep receipts, invoices, and mileage logs for at least six years. HMRC may request them to verify your Self Assessment entries. Cloud systems like Xero simplify expense tracking and digital storage.
7. Related Topics
- Self Assessment Accounts & SA100 Filing
- Working from Home Expenses
- Capital Gains Tax for Individuals
- Knowledge Hub
Frequently Asked Questions
Can I claim my mobile phone bill?
Yes, but only the business portion. If you use the phone 60% for business, you can claim 60% of the cost.
Can I claim clothing expenses?
Only protective or branded workwear. Everyday clothing, even for work use, is not allowable.
Do I need receipts for every expense?
Yes, digital or paper receipts should be kept for at least six years to support your Self Assessment return.