Allowable expenses for sole traders
Which business expenses are tax-deductible under HMRC wholly and exclusively rule, with examples for common trades.
Quick answer
Sole traders can deduct expenses that are wholly and exclusively for business purposes. This includes office costs, business travel (not commuting), marketing, professional fees, equipment and staff costs. You cannot deduct client entertainment, personal meals, commuting, work clothes (unless branded uniforms) or personal drawings. Mixed-use items (home office, phone) can be apportioned.1
The wholly and exclusively test
HMRC allows expenses that are "wholly and exclusively for the purposes of the trade".1 This means:
- Wholly: the full cost (or apportioned business part for mixed-use items)
- Exclusively: entirely for business, with no personal benefit
If an expense has dual purpose (business and personal), it fails the test unless you can apportion the business part.
Commonly allowable expenses
Office and premises
- Office rent (business premises only)
- Business rates
- Utilities for business premises
- Office supplies (stationery, printer ink)
- Home office costs (via simplified expenses or actual proportion)
Travel and vehicles
- Business mileage (AMAP rates)
- Public transport for business trips
- Hotel and accommodation (business travel only)
- Parking and tolls (business journeys)
Marketing and advertising
- Website hosting and domain registration
- Online advertising (Google Ads, Facebook Ads)
- Business cards, flyers, brochures
- SEO and copywriting services
Professional fees and insurance
- Accountant and bookkeeper fees
- Legal fees (for business matters)
- Professional indemnity insurance
- Public liability insurance
- Bank charges (business account)
Staff costs
- Employee salaries (must run PAYE)
- Employer National Insurance contributions
- Pension contributions (employer part)
- Subcontractor payments
Not allowable
- Client entertainment (meals, tickets, hospitality) — never allowable even if wholly for business1
- Your own meals unless traveling overnight on business
- Commuting (home to permanent workplace)
- Work clothes (unless branded uniforms not suitable for everyday wear)
- Personal drawings (money you take out is not an expense)
- Fines and penalties
Mixed-use expenses
Some costs are partly business and partly personal. You can claim the business proportion:1
- Home office (via simplified expenses or floor area proportion)
- Phone and internet (business use percentage)
- Vehicle costs (via mileage allowance or actual costs apportioned)
Keep records showing how you calculated the split.
Capital versus revenue expenses
Equipment you keep for multiple years (computers, machinery, vehicles) is a capital expense. Claim capital allowances rather than expensing immediately.2
Day-to-day running costs (stationery, software subscriptions, fuel) are revenue expenses. Deduct immediately.
- Test for allowable expenses
- Wholly and exclusively for business
- Client entertainment allowable
- No
- Personal drawings deductible
- No