Some of the most common questions we receive from our clients are: Can you claim your phone bill? What about lunch while you’re out meeting a client? Does a laptop count as an expense? Can you put work clothes through the business? And if you work from home, how much of your household bills can you actually claim?
There is also a tendency to err in one of two directions.
Some business owners are so worried about claiming something they should not that they miss perfectly legitimate expenses and end up paying tax on more profit than necessary.
Others assume that if something has some connection to their business, it can automatically be put through the books.
Neither approach is particularly helpful.
The rules around business expenses are designed to distinguish between genuine business costs and personal spending. Understanding where that line sits makes it much easier to keep accurate records, make sensible decisions and avoid a nasty surprise when your accounts or tax return are prepared.
So, what can a UK business legally claim as an expense?
Firstly, what is an allowable expense?
An allowable business expense reduces the profit on which your business is taxed.
For example, imagine a sole trader has:
- £60,000 of business income
- £15,000 of allowable business expenses
Their taxable business profit would broadly be £45,000 rather than £60,000.
That does not mean HMRC gives them the £15,000 back.
It means the allowable costs are deducted before the taxable profit is calculated.
Spending £1,000 to save some tax still means spending £1,000.
A legitimate expense can reduce your tax bill, but that does not make buying something you do not need a good financial decision.
The rules are different for sole traders and limited companies
Before getting into individual expenses, there is an important distinction to make.
A sole trader and a limited company are not taxed in exactly the same way.
If you are a sole trader, HMRC allows you to deduct allowable business expenses from your income when working out your taxable profit. Personal spending and money you take out of the business for yourself are not allowable expenses.
If you run a limited company, the company is a separate legal entity. It can deduct qualifying costs of running the business when calculating its taxable profit for Corporation Tax, but revenue expenses generally need to have a business purpose and certain costs are specifically disallowed.
This distinction becomes particularly important where directors use company money for something that has a personal element. Depending on the circumstances, it may need to be treated differently in the accounts or could create a taxable benefit.
That is why a list on the internet saying “yes, you can claim this” should never be treated as universally applicable and you should seek advice from a qualified, experienced accountant.
Your business structure, the reason for the purchase, how it is used and sometimes the accounting method you use can all affect the answer.
The starting point: is it genuinely a business cost?
For most everyday expenses, the first question is simple:
Why did the business incur this cost?
A purchase should not become a business expense simply because you paid for it using your business card.
Equally, something does not necessarily become a personal expense simply because you also gain some benefit from it.
Some costs can be divided between business and personal use.
For example, if you use the same mobile phone for work and personal calls, a sole trader can normally claim the proportion relating to the business. HMRC specifically recognises that where an expense has both business and personal use, only the business element should be claimed.
This is where accurate bookkeeping becomes particularly important. Good records tell you not only what you spent but also why you spent it.
Common business expenses you may be able to claim
There is no single list that covers every business, but these are some of the most common areas.
1. Office costs, software and administration
The everyday things you need to run your business will often be allowable.
For a sole trader, this can include costs such as:
- stationery
- printing and printer ink
- postage
- business telephone costs
- internet costs relating to the business
- certain software costs
- recurring software subscriptions
HMRC specifically includes items such as phone bills, internet, stationery, postage and certain software within its guidance on allowable office expenses.
That means many of the digital tools modern businesses rely on may also form part of their legitimate running costs when they are being used for the business.
Think accounting software, project management systems, design software, cloud storage, email marketing platforms or other specialist software.
Where a subscription is partly personal, however, the position may be different. The business use still needs to be identifiable.
2. Business premises
If you rent an office, shop, studio, workshop or other premises specifically for your business, many of the associated running costs can usually be included in your business expenses.
These may include:
- rent
- heating and electricity
- business rates
- insurance
- maintenance and other qualifying running costs
Again, the important distinction is between genuine business premises costs and personal living costs.
Things become more complicated when your home is also your workplace.
3. Working from home
You do not necessarily need a separate office before you can claim expenses relating to where you work.
For sole traders, HMRC allows a reasonable proportion of certain household costs to be claimed when the home is genuinely used for business. These can include costs such as heating, electricity, Council Tax, mortgage interest or rent, internet and telephone use.
The calculation needs to reasonably reflect the amount attributable to the business.
For example, this could take account of:
- how many rooms there are in the property
- how many are used for business
- how much of the time they are used for business
Alternatively, eligible sole traders can use HMRC’s simplified expenses for working from home.
For the 2026/27 tax year, the monthly flat rates remain:
- £10 per month for 25 to 50 hours of business use
- £18 per month for 51 to 100 hours
- £26 per month for 101 hours or more
These simplified rates are available to sole traders and eligible partnerships, not limited companies.
Limited company directors fall under different rules because they are employees of their company.
Where the relevant conditions are met, a company can currently reimburse an employee or director for additional household costs arising from regular homeworking at up to £6 per week or £26 per month without supporting evidence. Higher amounts can potentially be reimbursed where the actual additional costs can be evidenced.
It is a good example of why the words “I work from home, so I can claim X” are not quite enough. How you claim depends on the business structure.
4. Business travel and mileage
Travel is another area where people frequently either miss expenses or claim the wrong ones.
Qualifying business travel can include costs such as:
- train fares
- bus fares
- taxis
- flights
- parking
- hotel accommodation
- certain meals during qualifying overnight business travel
For sole traders, HMRC also allows qualifying vehicle costs such as fuel, insurance, servicing and repairs to be claimed where the vehicle is being used for business, subject to the relevant rules and adjustment for personal use.
Alternatively, simplified mileage can be used in eligible circumstances.
From 6 April 2026, HMRC’s simplified mileage rate for cars and goods vehicles is:
- 55p per mile for the first 10,000 business miles
- 25p per mile after 10,000 miles
The rate for motorcycles is 24p per business mile.
The same 55p and 25p rates are used for approved mileage payments where employees or directors use their own cars or vans for qualifying business journeys.
One very important exclusion is ordinary commuting.
Travelling between your home and your normal permanent workplace is generally not suddenly a business expense because you own a business.
Keep records of your actual business journeys rather than simply estimating your annual mileage at the end of the year.
5. Marketing and advertising
Promoting the business is another common allowable cost.
HMRC lists expenses including:
- advertising
- mailshots
- free samples
- website costs
as potential allowable marketing expenses for self-employed businesses.
Depending on the business, your marketing expenditure could therefore include things such as website hosting, online advertising, printed promotional materials, graphic design and other genuine promotional activity.
There is, however, an important distinction between marketing and entertaining.
Taking a client out for an expensive meal may help maintain the relationship, but that does not automatically make it tax deductible.
Client entertainment is generally specifically disallowed. HMRC includes entertaining clients, suppliers and customers and event hospitality among the expenses a self-employed person cannot claim. Client entertaining is also specifically identified as a disallowed cost for Corporation Tax.
So:
Paying to advertise to a potential client? Potentially allowable.
Taking that potential client out for dinner? Usually not deductible for tax.
Both might have a genuine commercial purpose. They are not treated the same way for tax.
6. Accountancy, legal and professional fees
Yes, paying someone to help look after your business finances can itself be a business expense.
For sole traders, qualifying costs can include:
- accountancy fees relating to the business
- solicitors’ fees for business matters
- surveyors
- other professional advisers
- professional indemnity insurance
There are exceptions.
For example, HMRC states that the cost of preparing and submitting a sole trader’s personal Self Assessment tax return is not an allowable business expense. Certain legal costs connected with purchasing capital assets are also treated differently.
For a limited company, paying an accountant to prepare the company’s accounts is an example HMRC gives of a revenue expense relating to running the business.
The precise treatment can therefore depend on exactly what professional work you are paying for.
7. Banking, finance and insurance
Businesses often overlook some of the less obvious costs associated with managing their money.
Depending on the circumstances, allowable costs for a self-employed business can include:
- business bank charges
- credit card charges
- overdraft charges
- interest on business loans
- hire purchase interest
- leasing payments
- qualifying business insurance
However, repaying the capital of a loan is not the same as paying loan interest.
If your business borrows £10,000, you cannot simply claim the £10,000 repayment as an expense. HMRC distinguishes between allowable financing costs such as interest and the repayment of the underlying borrowing.
This is another reason accurate categorisation matters.
8. Employees, freelancers and subcontractors
The cost of getting other people to help deliver the work of the business can also be deductible.
For self-employed businesses, qualifying staff costs can include:
- wages and salaries
- bonuses
- employer pension contributions
- employer National Insurance
- agency fees
- subcontractors
- relevant staff training
There are additional payroll and employment obligations where someone is actually an employee, so the tax deductibility of the cost is only one part of the picture.
Calling somebody a “freelancer” does not automatically make them self-employed for tax purposes.
9. Stock, materials and costs directly related to what you sell
If you sell physical products, manufacture goods or use materials to provide your service, the direct costs of producing what you sell will often be relevant.
For sole traders this can include:
- stock purchased for resale
- raw materials
- direct production costs
You cannot, however, include goods or materials purchased for your own private use.
Keeping these costs properly recorded is particularly important for product-based and ecommerce businesses because understanding the cost of what you sell is about much more than tax.
It also affects margins, pricing, stock management and your understanding of whether the business is actually profitable.
10. Training and professional development
Training is another area where the reason for the expense matters.
For self-employed people, HMRC allows training costs where the training helps you:
- improve skills and knowledge you already use within your business
- keep up to date with developments in your industry
- develop skills associated with changes in your existing industry
- develop relevant skills that support running the business
However, training undertaken to start an entirely new business or move into a new, unrelated area generally does not qualify under the same rule.
For example, a photographer taking a course to improve their existing photo-editing skills is very different from somebody running an accountancy practice paying for training to qualify in an entirely unrelated profession.
Both may be sensible investments personally.
They do not necessarily receive the same tax treatment.
11. Professional subscriptions and memberships
Some subscriptions associated with your profession or industry may also be allowable.
HMRC gives examples including:
- trade or professional journals
- membership of trade bodies
- membership of professional organisations relating to the business
Personal memberships are different. HMRC specifically excludes costs such as gym memberships from the self-employed professional subscription rules.
Once again, the fact that something is beneficial to you as a business owner does not automatically make it a business expense.
12. Work clothing
This is probably one of the best-known expense traps.
You may be able to claim for clothing such as:
- uniforms
- protective clothing required for your work
- costumes used by actors or entertainers
But you generally cannot claim ordinary everyday clothes, even if you bought them specifically because you needed to look smart for work and never intend to wear them socially.
A suit for client meetings is still capable of being worn as ordinary clothing.
Steel-toe-capped safety boots required for a job are rather different.
The purpose of buying something matters, but so does the nature of what you have bought.
What about laptops, phones, machinery and other equipment?
Larger purchases can be more complicated because there is a distinction between everyday running expenses and capital expenditure.
For limited companies, an asset the business will use for a longer period, such as machinery, certain vehicles or substantial equipment, may be treated as capital expenditure rather than simply deducted as an ordinary revenue expense. The company may instead be able to claim capital allowances.
For sole traders, the treatment can also depend on whether you use cash basis or traditional accounting.
Under cash basis, many pieces of equipment used by the business can be treated as allowable expenses, although cars are subject to separate rules. Under traditional accounting, equipment and machinery may instead fall within the capital allowances regime.
This means a purchase can still qualify for tax relief without necessarily appearing in your accounts in exactly the way you expected.
It is one of the areas where speaking to your accountant before making a substantial purchase can be far more useful than asking how to record it afterwards.
Common things you cannot simply claim as a business expense
Although every situation needs to be considered properly, there are several common areas where businesses get caught out.
Everyday personal spending
Buying something from the business bank account does not make it an expense.
Personal groceries, household spending, holidays and other private purchases do not become tax deductible because the business paid for them.
Your drawings as a sole trader
If you are a sole trader and transfer £2,000 from your business account to your personal account, that £2,000 is not a business expense.
It is simply money you have taken out of your business.
You are taxed on the profit of the business, not on whatever amount you happen to withdraw.
Dividends from a limited company
Dividends are not a business expense when calculating Corporation Tax.
They are distributions to shareholders from available company profits and are subject to their own rules.
Client entertaining
As we’ve already covered, taking clients, suppliers or prospects out for food, drinks or hospitality is generally not tax deductible simply because you discussed business.
Fines and penalties
Breaking the law is not transformed into a tax deduction because you did it while running your business.
HMRC specifically excludes fines for breaking the law from allowable legal and financial expenses for the self-employed.
Everyday clothing
Even when you only bought the clothes because of work, ordinary clothing generally remains private expenditure rather than an allowable business cost.
Ordinary commuting
The normal journey between home and a permanent workplace is not generally business travel.
The grey areas are usually where bookkeeping matters most
Most businesses do not get confused about whether their office rent is a business cost.
The difficulty comes from the smaller transactions.
The mobile phone contract used for work and home.
The Amazon order containing both stationery and something personal.
The hotel booked for a conference but extended for an extra night.
The car used for client visits as well as family journeys.
The software subscription that started as a business tool but is now used personally as well.
The piece of equipment that will remain in the business for several years.
These are not necessarily expenses you have to avoid.
They are expenses that need to be treated correctly.
Waiting until your year end and then trying to remember why you spent £84.72 ten months ago makes that much harder.
Keep the evidence while you still know what the purchase was for
HMRC requires self-employed businesses to keep records of their expenses as evidence of their costs. You do not normally submit all those receipts with your Self Assessment return, but you need to retain appropriate records in case HMRC asks for them.
Good expense records might include:
- receipts
- invoices
- mileage logs
- notes explaining unusual transactions
- records showing how mixed personal/business costs were apportioned
- supporting information for homeworking calculations
The goal is not to create administration for the sake of administration.
It is to make the numbers in your accounts explainable.
If somebody asks, “Why did the business claim this?”, there should be an answer.
Why getting expenses right is about more than reducing tax
It is easy to think of expense management purely as a tax exercise.
It isn’t.
Accurate expenses give you a much better picture of what it actually costs to run your business.
If costs are missing from your bookkeeping, your profit can look healthier than it really is.
If personal spending is incorrectly mixed into the business, the opposite can happen.
Either way, the figures become less useful.
And those figures influence decisions about:
- how much you can afford to pay yourself
- whether prices need to increase
- which services or products are profitable
- whether cash flow is strong enough to invest
- whether costs are creeping upwards
- how much tax you should be putting aside
Your accounts should help you understand the business, not simply satisfy HMRC at the end of the year.
Don’t wait until year end to ask what you could have claimed
One of the biggest advantages of keeping your bookkeeping up to date is that questions can be dealt with while they are still relevant.
Instead of handing over twelve months of transactions and hoping everything has been captured, you can identify:
- expenses that are regularly being missed
- transactions that have been categorised incorrectly
- personal and business costs that need separating
- recurring costs that are no longer necessary
- significant purchases that need different accounting treatment
- areas where tax planning could be considered before decisions are made
There is an important difference between recording what has already happened and planning what makes financial sense next.
Both matter.
Accurate bookkeeping gives you reliable information.
Good year-end accounts make sure that information is treated correctly.
Proactive tax planning helps you use it before opportunities and deadlines have already passed.
Unsure whether something is a business expense? Ask before guessing
Business expenses should not feel like a game of trying to sneak as much as possible past HMRC.
Nor should fear of getting something wrong mean paying more tax than you legitimately need to.
The aim is simply to make sure genuine business costs are identified, recorded and treated correctly.
And sometimes the right answer genuinely is: it depends.
It may depend on whether you’re a sole trader or limited company, whether there is personal use, whether the cost is capital or revenue, the nature of the business or exactly why the expense was incurred.
That is where good accounting support becomes valuable.
At Brush Up Accounting, we help businesses keep accurate records, understand the numbers behind their business and make sure tax and accounting are dealt with proactively rather than becoming a once-a-year scramble.
If you’re unsure whether your bookkeeping is capturing everything it should, or you want more useful financial information from your accounts, get in touch with Brush Up Accounting and let’s make sure your numbers are working for your business.
This article provides general information only and should not be treated as individual tax advice. Tax treatment depends on your circumstances and rules can change. HMRC guidance referenced in this article has been checked against the rules applying in the 2026/27 tax year.
