Allowable Business Expenses Explained
Claiming the right expenses lowers your taxable profit and the tax you pay. This factsheet explains the rules, what you can and cannot claim, and how to keep records HMRC will accept.
The "wholly and exclusively" rule
An expense is only allowable if it is incurred wholly and exclusively for the purposes of your trade. Costs with a mix of business and private use must be apportioned, with only the business share claimed.
If a cost has a clear personal benefit, expect HMRC to challenge it unless you can split out the business portion.
Common allowable categories
Most day-to-day running costs of a genuine business are deductible. Keep them organised so nothing is missed at year-end.
- Business travel and accommodation (not ordinary commuting)
- Office costs, software, phone and internet
- Marketing, advertising and your website
- Accountancy, legal and other professional fees
- Staff salaries, employer pension contributions and training
Travel, mileage and use of home
If you use your own car for business, you can claim mileage at HMRC's approved rates instead of actual running costs. Working from home can be claimed using simplified flat rates or an actual proportion of household bills.
- Cars: 45p per mile for the first 10,000 miles, 25p after
- Motorcycles 24p, bicycles 20p per mile
- Use of home: simplified flat rates or a fair business proportion of bills
Equipment and capital allowances
Larger or longer-lasting items such as computers, tools and machinery are usually claimed through capital allowances rather than as everyday expenses. Many qualifying purchases can be fully relieved in the year of purchase.
Capital allowances follow different rules to running costs, so flag big purchases to your accountant before year-end.
What is NOT allowable
Some costs feel business-related but are specifically disallowed for tax. Adding these back protects you in an enquiry.
- Entertaining clients or customers
- Ordinary commuting between home and a regular workplace
- Personal items, clothing (unless protective or a uniform) and fines
- The private-use share of any mixed cost
Records and the bigger picture
Keep receipts, invoices and a mileage log; digital bookkeeping makes this far easier and is increasingly required. For sole traders, a £1,000 trading allowance can be claimed instead of actual expenses if your costs are low, and every pound of allowable expense reduces profit taxed at Corporation Tax rates or against your income.
No receipt, no claim. Good records are the difference between a deduction that stands and one that does not.
Common questions
Can I claim expenses I paid before the business started?
Yes. Pre-trading costs incurred wholly and exclusively for the business in the seven years before you start are usually treated as incurred on day one of trading.
Do I need a receipt for every expense?
You should keep evidence for everything you claim. Without a receipt or other record, HMRC can disallow the expense if your return is checked.
Is it better to claim the trading allowance or actual expenses?
If your allowable expenses are below £1,000, claiming the trading allowance is usually simpler and more beneficial. If your costs exceed £1,000, claim actual expenses instead.
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For guidance only — this factsheet does not constitute professional advice and is not a substitute for advice based on your specific circumstances. Whilst every care has been taken in its preparation, it may contain errors for which we cannot be responsible. Figures are for the 2025/26UK tax year (England, Wales & Northern Ireland) and may change. Last reviewed 6 June 2026.