Self-employed expenses, explained.

ii.

What counts as an allowable expense.

The rule is short and broad: a cost must be incurred wholly and exclusively for the purposes of the trade. Buy a chair only for the office and the chair is allowable. Buy a chair for the office that the family also uses in the evenings and only the business share is allowable.

Personal costs are not allowable, even if having them helps you do the work — a haircut before a pitch, a suit for a client meeting, lunch at your desk. The test is purpose, not benefit.

Capital vs revenue

Day-to-day running costs (revenue) are deducted from profit in the year they're incurred. Things you'll use for more than a year (capital — a laptop, a camera, a van) are usually claimed through capital allowances, most often the Annual Investment Allowance, which lets you write off the full cost in year one up to a generous annual limit. For most sole traders, capital allowances cover the gear and revenue expenses cover everything else.

iii.

Simplified vs actual costs.

HMRC offers flat-rate simplified expenses for three things: vehicles, working from home, and living in your business premises. You can mix and match: simplified for vehicles, actual for home, for example. You can't mix on a single category in a single year.

Simplified is easier; actual is sometimes worth more. The honest answer is to do the sums both ways for a typical month and pick. Most people doing a lot of business miles find HMRC's per-mile rates beat working out the running cost of the car.

iv.

The main categories.

Office costs

Stationery, printing, postage, software subscriptions, hosting, accounting tools. Anything you use to run the admin side of the work.

Travel

Train, bus, taxi, parking and tolls when travelling to a client, supplier, temporary workplace or event. Not the ordinary commute to a usual workplace. Keep tickets or card receipts.

Vehicle

Either claim the business proportion of actual running costs (fuel, insurance, servicing, depreciation) or use HMRC's per-mile rates — 45p for the first 10,000 business miles in the tax year and 25p thereafter for cars and vans, 24p for motorcycles, 20p for bicycles. The per-mile method is usually simpler and very often better. See the section below.

Subsistence

Reasonable food and drink when you're on a business trip outside your normal pattern of work — an overnight stay, a long site visit. Lunch at your desk doesn't count. Neither does entertaining clients.

Professional fees

Accountants, solicitors, professional bodies, indemnity insurance, business bank charges. Fines and penalties for breaking the law are never allowable.

Marketing

Website costs, advertising, business cards, photography for your own marketing. Sponsorship is allowable if you can show a business return; donations to charity usually aren't.

Phone and internet

Claim the business share. If a phone or line is used for both, keep a reasonable estimate of the split and apply it consistently. Dedicated business lines and contracts in the business name are the cleanest.

Home as office

Two routes. The simplified flat rate is a monthly figure based on hours worked from home — straightforward for most people. The actual-cost method splits a share of rent or mortgage interest, council tax, utilities, insurance and broadband based on the rooms used and the time used for business. The flat rate is usually adequate unless you genuinely have a dedicated office room and high bills.

Training

Training to keep existing skills sharp is allowable. Training that's a step into a new trade is treated as capital and usually isn't. A photographer paying for a colour-grading course — fine. A photographer retraining as a plumber — not deductible from the photography profits.

v.

Mileage, briefly.

Most self-employed people are better off using HMRC's per-mile rates for cars and vans than working out actual running costs. The rate is 45p for the first 10,000 business miles in the tax year, 25p after that. Motorcycles are 24p, bicycles 20p, and you can add 5p per business passenger per mile in a car.

Use the mileage calculator to sanity-check a journey or a year.

vi.

Records you must keep.

HMRC doesn't tell you which format, only that records must be accurate, complete, and readable. In practice that means, for each expense: the date, the supplier, the amount, the VAT (if applicable), what it was for, and proof — a receipt, an invoice, a bank statement line, an email confirmation.

For mileage: date, start, end, business purpose, miles. For home-as-office actuals: bills and a written note of how you arrived at the split.

Keep all of it for at least five years after the 31 January submission deadline of the relevant tax year. Companies must keep records for six years. Digital copies are fine — and easier to find when someone asks.

vii.

Common mistakes.

• — Claiming the ordinary commute as business travel. It isn't.
• — Claiming 100% of a phone or car that's used personally too.
• — Forgetting the 10,000-mile threshold drops the rate to 25p mid-year.
• — Treating client entertaining as a marketing cost. It isn't deductible.
• — Losing the receipt. A bank line alone isn't a receipt.
• — Mixing personal and business spending on one card and reconciling once a year from memory.

viii.

Making Tax Digital.

Making Tax Digital for Income Tax Self Assessment is rolling out for sole traders and landlords by income band. The practical change: instead of one tax return a year, you keep digital records and submit quarterly updates through compatible software. The categories are the same. What changes is the cadence and the need for those records to be digital from the start, not reconstructed from a shoebox in January.

If you're not yet in scope, getting into the habit of digital records now is the cheap version of preparing.

ix.

Questions.