What expenses can a sole trader claim?

As a sole trader, recording certain costs as expenses will reduce your tax bill when it comes to doing your self-assessment, and no-one wants to pay more tax than necessary on their hard earned cash. 

But what items are you able to claim for? If you don’t have time to read HMRC’s 136 page guide (you run your own business, of course you don’t have time!) then we’re here to help. This article will clarify what expenses you can claim as a sole trader.

Unless you have a vehicle that is solely dedicated to your business use, then you will only be able to claim a portion of the cost as expenses. If you are using your car for your personal errands and family life as well as for business travel, then you need to work out the proportion of your car’s running costs that are directly related to your business activities. You can do this by either claiming on the mileage or by working out the total costs of the vehicle upkeep. Keeping good records of both your mileage and receipts for petrol and insurance will allow you to calculate the expenditure you can claim.

You can claim 45p per mile for the first 10,000 miles you travel with any miles after that at 25p.

Or you can calculate the total annual cost of running the car: such as repairs, fuel cost, servicing, parking, insurance and breakdown cover. Then find out the percentage of miles that you drive for business purposes each year, and apply this percentage to the total cost. You are able to expense the final total you are left with.

If you aren’t using your own car already, then you may be wondering if you can claim the cost of buying a vehicle, exclusively for business use. If you do purchase a vehicle, whether it be a van or a car, it then becomes listed as a fixed asset for the company that you can claim on – allowing you to reduce your taxable profit.

You can also claim for business travel, such as hotel stays, parking, meals, flights and even your oyster card for the Underground. Whether you are going abroad or just into the city, most business travel costs will be covered when you claim. 

Be wary of any parking tickets or speeding fines you incur, as these will not be covered, even if one occurred on a business trip.

If your business operates from your home then you are able to claim a portion of any household bills as part of your expenses. Even if you only use your house one day a week for business purposes, it’s still acceptable in HMRC’s eyes.

• Rent or mortgage interest (only interest, not the bulk capital you are repaying) 
• Council Tax
• Utilities such as water, electricity and heating
• Repairs, if they impact the running of the business
• Cleaning costs

To claim household expenses like the options listed above, you need to first decide how many rooms you use for business purposes and how long you spend in those room(s), so that your final claim will reflect the business use of the area.

Here’s an example: You work Monday to Friday, in one room of your four bedroom house. Determine what a quarter of your mortgage interest/rent and bills amounts to, then divide by seven (days of the week). You would then multiply this by five (for each working day) so that your claim reflects only the business time used in this room. You will need to provide bills and contracts for this type of claim but HMRC provide guidelines too.

If you have a designated business premises, then you can claim for office supplies and equipment, as well as utilities and repairs, but are not able to claim for the purchase of the premises itself.

If you require special equipment to do your work, such as machinery or power tools, then you absolutely can claim these as necessary business expenditure – as well as for repairs or upkeep. Be mindful when purchasing your work ‘toolkit’, as even though you won’t be paying tax on the purchase, the cost is still eating into your profit.

To be in business, people need to know who you are and what you do. If you employ an agency or freelancer to support you with your marketing you can expense their fee, as it may be classed as a business expenditure.

If you want to invest in a course that will further your expertise in your field, then you are in luck – HMRC deem this as acceptable to expense. If the training allows you to improve your knowledge and skills, and therefore drive your business forward, then by all means go ahead. However, if it’s a course that does not apply to your current market niche, or one that is not directly connected to your business needs, then this is not allowable. 

The same rules apply to magazine, or journal subscriptions. These are tax deductible as long as they are for the purpose of improving your professional skill set.

HMRC will allow you to expense clothing that is needed for your work – such as a uniform or protective gear. If you are in the entertainment industry you can also include costumes in this remit.  Items of clothing that can be classed as ‘everyday wear’, even if you do wear it to work, cannot be listed as a business expense. 

A good rule of thumb to remember is that sole trader expenses must be ‘wholly and exclusively for the purpose of your business’ according to HMRC. If an item is used outside of your business as well, you should reconsider before submitting anything.

To save yourself time  you can use an app like Countingup, the business current account and accounting software all in one. It takes care of the time consuming parts of bookkeeping admin and can even calculate your tax for you. As well being able to make payments, it also gives you a nudge to photograph your receipt – so no purchase goes unrecorded, and saves you from muddling through your paper expenses receipts during tax season. 

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