Tax year: 2026/27 | Last reviewed: 2 October 2026
As a sole trader you pay income tax and Class 4 NI on your profit, not your turnover. Every allowable expense you record reduces that profit. For a basic rate taxpayer, £1,000 of expenses saves £260 in tax and NI; for a higher rate taxpayer, £420. Here is what you can claim for 2026/27, and what you cannot.
The rule
An expense is allowable if it is incurred wholly and exclusively for the purposes of your business. If something is used partly for business and partly privately, such as a phone or a car, you can claim the business proportion.
1. Office and admin costs
- Phone, mobile and broadband (business share)
- Stationery, postage and printing
- Software and app subscriptions, including accounting software
- Computers and equipment, with treatment depending on the accounting method and the asset (see below)
2. Travel and vehicle costs
- Business mileage at 55p a mile for the first 10,000 miles and 25p after, or actual running costs. See mileage allowance
- Train, bus and taxi fares for business journeys
- Parking and tolls, but not fines
- Hotels and meals on overnight business trips
You cannot claim your normal commute to a permanent workplace or everyday lunches.
3. Working from home
Claim either the flat rate (£10 to £26 a month depending on hours) or a proportion of heating, electricity, council tax, mortgage interest or rent. See use of home as office.
4. Stock and materials
- Goods bought for resale
- Raw materials and parts used in your work
- Direct costs of producing goods
5. Staff and subcontractors
- Employee wages, employer NI and pension contributions
- Payments to subcontractors and freelancers (CIS rules may apply in construction)
- Agency fees
Your own drawings are not an expense.
6. Professional and financial costs
- Accountancy, bookkeeping and legal fees for the business
- Business insurance, including public liability and professional indemnity
- Bank charges and card processing fees
- Interest and charges on qualifying business borrowing. The former £500 cash-basis interest limit does not apply in 2026/27; private use and other restrictions still need review.
7. Marketing
- Websites, hosting and domain names
- Online advertising and directories
- Printed materials, signage and branded clothing
8. Training and subscriptions
- Courses that update skills you already use in the business
- Trade and professional body subscriptions
- Trade publications
9. Clothing
Only uniforms, protective clothing (PPE) and costumes are allowable. Everyday clothes are not, even if you only wear them for work.
Capital allowances
Equipment, tools, machinery and vans are capital items. Under the cash basis most can be claimed as expenses when paid. Under accruals, the Annual Investment Allowance gives 100% relief on up to £1 million a year. Cars are treated differently: new electric cars get 100% relief until 5 April 2027 for sole traders, while other cars get writing down allowances.
Simplified expenses
Instead of calculating actual costs, you can use flat rates for vehicles (mileage), working from home and living at business premises, such as a B&B owner. They save time but are not always the most generous option.
What you cannot claim
- Personal or private costs
- Commuting to a permanent workplace
- Client entertaining
- Fines and penalties
- Your own income tax and NI
- Non-business portion of shared costs
Records and Making Tax Digital
Keep receipts and invoices for at least five years after the 31 January filing deadline. For April 2026 entry to MTD for Income Tax, check combined qualifying gross self-employment and property income for 2024/25 against the £50,000 threshold, together with eligibility and exemptions. Capturing receipts is useful, but compliance also requires appropriate digital records, compatible software and submissions. See our MTD checklist.
FAQs
Can I claim the £1,000 trading allowance and expenses?
No, you choose one or the other. If your expenses are more than £1,000, claim them instead.
Can I claim for my car?
Yes, the business share, using either mileage rates or actual costs.
Can I claim for food?
Only on genuine business trips away from your normal place of work. See also how much a sole trader should save for tax and our self-employed tax return service.
Talk it through with Digivolve
We set up your bookkeeping so every allowable expense is captured as you go, ready for MTD quarterly updates and your tax return.
This article is general information based on the rules for the 2026/27 tax year as at October 2026. It is not personal tax advice. Rates and thresholds can change, so please speak to us before acting.