What’s Claimable?

Below is a list of the expenses as a sole trader that you are able to claim: 

Purchases (or cost of sales)   #

Goods for resale or direct costs from producing goods or providing a service.

e.g. a boiler that you have bought to supply and fit for a customer.

You can’t claim any goods or materials bought for private use.

Motor  #

There are two methods you can use when claiming your motor expenses, they are as follows:

  1. Full cost
  2. Simplified expenses

Full Cost-

The full cost method is where you can claim through your business a proportion of your actual costs of buying and using your own car. 

These costs include; vehicle, fuel, vehicle insurance, repairs and servicing, vehicle licence fees, breakdown cover etc.

Simplified Expenses – 

Whereas the full cost method uses actual costs, the simplified expenses method instead applies a flat rate to your business mileage to work out your allowable expenses. 

Business mileage is any miles travelled to a temporary work location or location necessary for business purposes i.e. to pick up supplies etc.

The rates are as follows:

Cars and goods vehicles up to 10,000 miles – 45p per mile

Cars and goods vehicles over 10,000 miles –  25p per mile

Motorcycles –       24p per mile

For example, a sole trader records his business mileage throughout the year and has done 15,000 miles. 

The allowable expenditure under the simplified expenses method would be £5,750 (10,000 miles as 45p plus 5,000 miles at 25p)

Please note that once you have decided on a method of calculating your allowable motor expenses you cannot change it until you have changed vehicles.

Travel  #

You are able to claim travel expenses as long as they are wholly and exclusively for business purposes and not in connection with your travel to a regular base of operations e.g. if you rent an office locally to your home.

The types of travel expenses include; train fares, bus fares, air fares, taxi fares, hotel rooms, parking costs and meals (whilst travelling)

You can’t claim for:

  • Parking fines
  • Food and drink not incurred whilst staying away overnight for business or not incurred by an itinerant trader (an itinerant trader is someone who travels from their home to a number of different locations for work on a temporary basis in order to complete their work) i.e. builder who works in different places regularly.

Staff  #

Employee wages, agency fees, subcontractors and training courses relating to your business

Rents and rates #

If you work from a business premises, you can claim the following expenses:

  • Rent for business premises
  • Business and water rates
  • Utility bills (gas and electricity)
  • Property insurance
  • Security
  • Using your home as an office (see below)

If you working from home there are two ways in which to claim expenses:

  1. Proportion of actual costs
  2. Simplified expenses (or flat rate)

Proportion of actual costs – 

This is where you work out your actual costs by calculating the business proportion of the costs incurred in running your home, such as; heating, electricity, council tax, mortgage interest, rent and internet and telephone use.

 How is this calculated?

You have 5 rooms in your home, one of which is used for business purposes. 

Your total costs for your household are £5,000 per year. 

Divide the total costs by the number of rooms in your home which gives you £1,000. 

This means that £1,000 of the costs are associated with the room you use for your business purposes. 

Once you have calculated the cost per room, you then need to work out what proportion of this cost relates to business use. 

You do this by dividing the cost per room by the number of days in a week and times it by the number of days per week this room is used for business purposes.

Let’s say you work 5 days a week, the cost you claim as allowable expenses is £714.29 per year (£1,000 divided by 7 and times by 5), this is the amount you can claim as allowable expenses.

Simplified expenses – 

This method is more commonly used as it avoids any complicated calculations. 

The allowable expenses you can claim are worked out using a flat rate based on the hours your work from each month. 

Using this method means that there is no need to work out the personal proportion. 

Also, the flat rate does not include telephone or internet expenses, so you can claim the business proportion of these expenses using the actual cost method above.

The flat rates for working from home are as follows:

25 to 50    –     £10 per month

51 to 100  –    £18 per month

101 +         –    £26 per month

Heat and light #

Gas and electricity bills. 

Please note: If you work from home and are claiming your actual costs you need to make an adjustment for private use (see the rent and rates section for how to calculate this).

Insurance #

Trade insurance, professional indemnity insurance, cyber insurance etc

Tools, equipment and repairs #

This section relates to the tools and equipment you use in your business along with any repairs to maintain them or your business premises.

Please note: 

Where you have bought substantial equipment which you expect to use in your business for longer than 2 years, capital allowances should be claimed rather than claiming as allowable expense. 

However, if you use cash basis accounting, then this is not the case and you are able claim it as an allowable expense.

Legal, accounting and other professional fees #

If legal, accounting and any other professional fees are associated with your business, then they are allowable business expenses.

What you can claim:

  • Accountancy fees
  • Solicitor fees
  • Surveyor fees 
  • Architect fees

What you can’t claim:

  • Legal costs of buying a property and machinery if you use the traditional accounting method (See FAQ’s for more information regarding methods of accounting), these will get included in the value of the asset.
  • Fines for breaking the law

Interest, bank and credit card charges  #

The following are allowable expenses you can claim:

  • Bank, overdraft and credit card charges
  • Interest on bank and business loans
  • Hire purchase interest
  • Leasing payments
  • Alternative finance payments

Please note: 

The accounts or loans subject to charges typically need to be in the name of the business in order to claim them as expenses.

Also, you cannot claim for repayments of loans, overdrafts or other finance arrangements.

Marketing (or advertising) #

As a business it’s vital that you get your name out there about your products and services. The costs incurred in order to do this are allowable expenses and can be claimed against your income.

The types of costs that can be claimed are as follows:

  • Advertising in newspapers or directories
  • Printed or mail advertising i.e. business cards, mailshots etc
  • Free samples
  • Website costs
  • Event costs i.e. exhibitions (however event hospitality is not allowable)

Phone, fax, stationery and other office costs (including internet) #

The allowable expenses you can claim under this category are as follows:

  • Phone, mobile, fax and internet bills
  • Postage
  • Stationery (pens, paper etc)
  • Printing
  • Printer ink
  • Software

Entertainment #

You cannot claim for entertaining clients, suppliers and customers

Subscriptions  #

Any subscription that relates to your business or is required in order for you to conduct your business is an allowable expense. 

Examples of subscriptions you cannot claim are as follows:

  • Wellbeing memberships i.e. a membership with a gym
  • Charitable donations (however sponsorships may be allowable)

Clothing  #

Uniforms, protective clothing and costumes (if your an actor or entertainer)

Training #

Courses that improve your skills and knowledge you use in your business