Sole traders and partnerships
Allowable expenses: what can you claim?
A plain-English guide to 43 common business costs — for your tax return, and for Universal Credit if you claim it.
For sole traders and ordinary partnerships, not limited companies. Rental income? See Ask Martin Sheet C.
Or start from what's happening
Your type of work
43 entries
Nothing matched . Try a different word, browse the categories below, or tell Martin what you were looking for — it helps improve this guide.
New to this? Start with four ideas and the two sets of rules
Most people in business pay for things that help them earn — diesel for the van, a new drill bit, the phone bill, a website. Some of those costs can come off your profit before tax is worked out. Some can't. And if you also claim Universal Credit, the rules for your monthly report are close to HMRC's, but not the same.
Who it's for. Sole traders and people in ordinary partnerships. It's not for limited companies — they follow different rules (a separate guide is planned). If your question is about rental income, see Ask Martin Sheet C: Money from property.
Four ideas that run through everything
1. Wholly and exclusively
A cost counts only if it's for the business. If something is partly personal — your phone, your car, your kitchen table — you claim only the business share.
2. Running costs or things you keep
Day-to-day costs come off profit in the year you pay them. Things you buy and keep — a van, a laptop, machinery — are treated differently.
3. Cash basis
Since April 2024 most sole traders work out profit on the cash basis by default. Under it, most equipment is simply an expense; cars are the main exception.
4. Flat rates or actual costs
For vehicles, working from home and living at your business premises you can use flat rates instead of the real costs — but not both for the same thing.
Two sets of rules: HMRC and Universal Credit. HMRC looks at your profit for the tax year. Universal Credit looks at what you actually paid in and out in each monthly assessment period. Most expenses are treated the same way by both — but not all. Where an entry says Differs for UC, read both. See every difference.
Tap an entry to open it. Yes / Partly / Depends / No is HMRC's answer for a typical sole trader.
Office, property & equipment
#1General office running costsYes
- What it is
- The small, regular costs of running the business side of things — stationery, postage, printing and ink, software subscriptions, phone and internet bills.
- Worth checking if…
- you pay a monthly phone contract that you use for both customers and family, or you've been buying printer ink, envelopes or a bookkeeping app subscription and keeping no receipts.
- HMRC
- These are allowable expenses. If something is used partly for personal reasons — most often a mobile phone or home broadband — you claim only the business share, worked out on a reasonable basis such as itemised calls or time.
- Universal Credit
- The same costs can go in your monthly report when you paid them. UC is clear that you can't include the full bill for a phone or internet connection you also use personally — only the business part.
- Differs for UC?
- No
- Watch out for
- Claiming the whole phone bill "because I need it for work". A cleaner who gets most bookings by text still makes personal calls on the same phone — the business share is what counts.
Official guidance
- HMRC — Expenses if you're self-employed: office, property and equipment
- DWP — Business expenses you can report to UC: office and equipment costs
Full article coming. Link to this entry
#2Rent, rates, utilities, insurance and security for premisesYes
- What it is
- The running costs of a place you use only for the business — a workshop, unit, lock-up, studio or shop — such as rent, business rates, water, power, insurance and security.
- Worth checking if…
- you rent a unit on a trading estate, a lock-up for tools and materials, or a studio space, and pay its bills yourself.
- HMRC
- Allowable. Rent, business and water rates, utility bills, property insurance and security for business premises all count. Buying the building itself doesn't — that's a capital cost, not a running cost.
- Universal Credit
- The same costs can go in your monthly report when you paid them — rent, utilities, business rates or Council Tax, property insurance, security and cleaning. You can't include the cost of buying business premises.
- Differs for UC?
- No
- Watch out for
- Mixing in costs of your own home. A lock-up you rent separately is business premises; your garage at home comes under working from home (#4).
Official guidance
- HMRC — Expenses if you're self-employed: office, property and equipment
- DWP — Business expenses you can report to UC: business premises
Full article coming. Link to this entry
#3Repairs and maintenance vs improvementsPartly
Partly: Repairs yes; improvements are capital.
- What it is
- Work on your business premises or equipment — from fixing what's broken to making it bigger or better.
- Worth checking if…
- you've had the workshop roof fixed, replaced a broken shop window, or are planning a refit or extension.
- HMRC
- Repairs that put something back the way it was — mending a leaking roof, replacing a broken window like for like, servicing a machine — are allowable expenses. Improvements and alterations are capital: they don't come off profit as an expense, though capital allowances (#33) or the Structures and Buildings Allowance (#6) may apply.
- Universal Credit
- DWP lists repairs and maintenance of business premises, and buying, repairing or maintaining business equipment. It doesn't spell out the repair-versus-improvement split, and you can't include buying premises. If you're unsure how to report a bigger job, ask your work coach.
- Differs for UC?
- Not spelled out by DWP
- Watch out for
- Calling everything "maintenance". Replacing like with like is a repair; making it bigger, better or different is usually an improvement. Repairs to a property you let out follow property rules — see Ask Martin Sheet C.
Official guidance
- HMRC — Claim capital allowances: what you can claim on
- HMRC — Expenses if you're self-employed
- DWP — Business expenses you can report to UC: business premises
Full article coming. Link to this entry
#4Working from homePartlyDiffers for UC
Partly: Business share or flat rate — not both.
- What it is
- Part of your household costs — heating, electricity, Council Tax, mortgage interest or rent, internet — when you work from home, claimed either as a business share or as a flat monthly amount.
- Worth checking if…
- you do the books at the kitchen table, see clients in a spare room, or run an online shop from the back bedroom — and you've never claimed anything for the house.
- HMRC
- Two ways. Actual costs: split the bills on a reasonable basis, such as rooms used and time spent. Or a flat rate based on hours worked at home each month: 25 to 50 hours £10, 51 to 100 hours £18, 101 or more £26 — only if you work at least 25 hours a month from home. The flat rate doesn't cover phone or internet; claim the business share of those separately (#1).
- Universal Credit
- The same flat rates £10 / £18 / £26 and 25-hour minimum, or actual costs — not both. But UC only counts some activities: serving customers at home, essential admin such as invoicing and stock-taking, and other business work such as marketing. Storage, doing your HMRC tax return, reporting to UC, being on call or just being available for work don't count. A room means a separate space with a door.
- Differs for UC?
- Yes — UC counts fewer activities as working from home
- Watch out for
- Using the flat rate and also claiming a share of heating and electricity. It's one or the other — whichever you choose for that period.
Official guidance
- HMRC — Simplified expenses: working from home
- HMRC — Expenses if you're self-employed
- DWP — Business expenses you can report to UC: using your home for business
Full article coming. Link to this entry
#5Living at your business premisesPartly
Partly: Business share only — flat-rate deduction for living there.
- What it is
- When you live in a building that's mainly your business — a B&B, guesthouse, pub or small care home — the running costs are shared between the business and your home life.
- Worth checking if…
- you and your family live in the B&B or pub you run, and one set of bills covers the whole building.
- HMRC
- Work out the business and private split yourself, or use simplified expenses: add up the total premises costs, then take off a flat amount each month for private use — 1 person £350/month, 2 people £500/month, 3 or more £650/month. Only count the months people actually live there.
- Universal Credit
- The same approach and figures: take off £350 / £500 / £650 a month from the running costs, depending on how many people live there.
- Differs for UC?
- No
- Watch out for
- Taking off nothing for private use because "the whole building is the business". If you live there, part of the cost is personal.
Official guidance
- HMRC — Simplified expenses: living at your business premises
- DWP — Business expenses you can report to UC: living at your place of business
Full article coming. Link to this entry
#6Structures and Buildings AllowanceDependsDiffers for UC
Depends: Only for qualifying non-residential construction, with an allowance statement.
- What it is
- A tax allowance for the cost of building, renovating or converting non-residential buildings and structures — a new workshop, a converted barn studio, a shop unit.
- Worth checking if…
- you've built a workshop or converted an outbuilding into a studio or shop and paid the builder yourself.
- HMRC
- You can claim 3% of the qualifying construction costs each year, over 33⅓ years, once the building is in business use. Construction contracts must date from 29 October 2018 onwards, the building mustn't be used as a home, and you need a written allowance statement. Only construction costs count — not the land.
- Universal Credit
- No equivalent allowance. DWP says you can't include the cost of buying business premises.
- Differs for UC?
- Yes — no equivalent in UC
- Watch out for
- Forgetting the allowance statement. Without one there's no claim — and if you sell, the buyer needs a copy to carry on claiming.
Official guidance
- HMRC — Claiming capital allowances for structures and buildings
- HMRC — CA91300: SBA amount of allowance
- DWP — Business expenses you can report to UC: business premises
Full article coming. Link to this entry
Vehicles & travel
#7Vehicle running costs and mileageYesDiffers for UC
- What it is
- The cost of using a car, van or motorbike for business journeys — either the actual running costs (fuel, insurance, repairs, servicing, road tax) or a flat rate for each business mile.
- Worth checking if…
- you drive to customers' homes or between sites — a plasterer going job to job, a dog walker collecting dogs, a mobile hairdresser — and you've either kept no mileage log or you've been claiming fuel receipts for a car the family also uses.
- HMRC
- Choose either actual costs (the business share) or simplified mileage for each vehicle. The flat rate for cars and vans is 55p a mile for the first 10,000 business miles in the tax year and 25p after that; motorcycles 24p. The flat rate replaces fuel, insurance, repairs and servicing — but parking and other travel can still go on top. Once you use the flat rate for a vehicle, you must stick with it while you use that vehicle for the business. Ordinary commuting never counts.
- Universal Credit
- UC uses its own monthly flat rate: 45p a mile for the first 833 miles in the month, then 25p; motorbikes 24p. For an ordinary (non-adapted) car you must use the flat rate, and you can't include the cost of buying or leasing it. Vans and other vehicles can only be claimed if they're adapted for business use. The flat rate covers everything — even the car wash.
- Differs for UC?
- Yes — different mileage rates and stricter rules on cars
- Watch out for
- Using HMRC's 55p in your UC report. They're different rates, and from April 2027 HMRC's rate above 10,000 miles rises to 35pannounced while UC's isn't changing.
Official guidance
- HMRC — Simplified expenses: vehicles
- HMRC — Increasing mileage rates (2026/27)
- DWP — Business expenses you can report to UC: vehicle expenses
Full article coming. Link to this entry
#8Business travel and subsistenceYesDiffers for UC
- What it is
- The cost of getting to places for business that aren't your usual base — train and bus fares, taxis, flights, hotels, and meals on overnight trips.
- Worth checking if…
- you're a carpenter staying away overnight for a job across the county, or a photographer catching the train to a wedding fair in Exeter.
- HMRC
- Allowable when the trip is for business: fares, taxis, hotel rooms, meals on overnight business trips and parking. Not allowable: personal travel, and travel between home and your normal place of work (#9).
- Universal Credit
- A similar list: public transport, taxis, flights, hotel rooms, overnight meals, parking, tolls and congestion charges. UC also lets subcontractors who work at two or more sites in a year include travel between home and site.
- Differs for UC?
- Partly — UC adds a rule for subcontractors' site travel
- Watch out for
- Everyday lunches. A sandwich on a normal working day isn't a business expense — DWP says so directly, and HMRC only allows meals on overnight business trips.
Official guidance
- HMRC — Expenses if you're self-employed: car, van and travel expenses
- DWP — Business expenses you can report to UC: other travel expenses
Full article coming. Link to this entry
#9Ordinary commutingNoDiffers for UC
- What it is
- Travel between home and your normal place of work — the daily drive to your workshop, unit or studio.
- Worth checking if…
- you rent a unit and drive there each morning, and that mileage has been going into your business miles.
- HMRC
- Not allowable — HMRC excludes travel between home and work. Trips from your base out to customers or suppliers are business travel (#7, #8). If most of your work is on changing sites, the rules on where your normal place of work is can get detailed, and it's worth checking with an adviser.
- Universal Credit
- Commuting to your normal place of business can't be reported. The exception: subcontractors working at two or more sites in a year can include travel between home and site.
- Differs for UC?
- Partly — UC allows site travel for some subcontractors
- Watch out for
- Assuming the drive to your own unit counts because you need the van there. If the unit is where you normally work, that journey is commuting.
Official guidance
- HMRC — Expenses if you're self-employed: car, van and travel expenses
- DWP — Business expenses you can report to UC: other travel expenses
Full article coming. Link to this entry
#10Fines and penalty chargesNo
- What it is
- Parking tickets, speeding fines, congestion-charge penalties, and other fines for breaking the law — even when they happen while you're working.
- Worth checking if…
- you've ever paid a parking ticket picked up outside a customer's house and put it through the books as a business cost — a window cleaner on a double yellow, say, or an electrician whose van was ticketed while unloading.
- HMRC
- Not allowable, ever. Fines for breaking the law can't be deducted, however closely they're tied to the job.
- Universal Credit
- Not allowable either. DWP lists penalties such as parking fines among the costs you can't report.
- Differs for UC?
- No
- Watch out for
- Confusing a fine with a charge. The parking fee you pay at the meter while visiting a customer can be a business expense; the penalty notice for overstaying it can't.
Official guidance
- HMRC — Expenses if you're self-employed: car, van and travel expenses
- DWP — Business expenses you can report to UC: other travel expenses
Full article coming. Link to this entry
Clothing
#11Uniforms, PPE and protective clothingYes
- What it is
- Clothing you need for the job that isn't everyday wear — uniforms, hi-vis, safety boots, hard hats, overalls, gloves and other protective kit.
- Worth checking if…
- you're a roofer buying safety boots and a harness, a groundworker replacing hi-vis, or a dog groomer with a branded tunic.
- HMRC
- Allowable: uniforms and protective clothing needed for your work.
- Universal Credit
- The same: uniforms and protective clothing needed for work can be reported.
- Differs for UC?
- No
- Watch out for
- Plain workwear you could wear anywhere — jeans, a fleece, ordinary boots — is everyday clothing (#13), even if you mostly wear it for work.
Official guidance
- HMRC — Expenses if you're self-employed: clothing expenses
- DWP — Business expenses you can report to UC: clothing costs
Full article coming. Link to this entry
#12Costumes for actors, entertainers and performersYes
- What it is
- Costumes for actors, entertainers and performers — the outfit that's part of the act, not what you wear to get there.
- Worth checking if…
- you're a children's party entertainer with a character costume, a panto performer buying your own outfit, or a tribute act.
- HMRC
- Allowable: costumes for actors or entertainers.
- Universal Credit
- The same: costumes, for example for actors or entertainers, can be reported.
- Differs for UC?
- No
- Watch out for
- Stage clothes that are also normal clothes. A smart suit or a black dress for gigs is still everyday clothing (#13).
Official guidance
- HMRC — Expenses if you're self-employed: clothing expenses
- DWP — Business expenses you can report to UC: clothing costs
Full article coming. Link to this entry
#13Everyday clothingNo
- What it is
- Normal clothes — even ones you only ever wear for work — such as a suit, jeans, trainers or a waterproof coat.
- Worth checking if…
- you're a consultant who bought a new suit for client meetings, or a gardener whose jeans and coat only ever get worn on the job.
- HMRC
- Not allowable: everyday clothing, even if you wear it for work. Ordinary clothes also keep you warm and decent, so they're never wholly for the business — the "duality of purpose" rule.
- Universal Credit
- Not allowable either: normal clothing, even if worn for work.
- Differs for UC?
- No
- Watch out for
- Claiming because "I'd never wear it otherwise". The test is whether it's ordinary clothing, not how you happen to use it.
Official guidance
- HMRC — Expenses if you're self-employed: clothing expenses
- DWP — Business expenses you can report to UC: clothing costs
Full article coming. Link to this entry
Staff & subcontractors
#14Staff wages, pensions, benefits and subcontractorsYesDiffers for UC
- What it is
- The cost of people who work for your business — employees' wages, bonuses, pensions and benefits, employer's National Insurance, agency fees, and subcontractors.
- Worth checking if…
- you've taken on an apprentice, pay a labourer through PAYE, or use subcontractors under CIS.
- HMRC
- Allowable: salaries, bonuses, pensions, benefits, agency fees, subcontractor costs, employer's National Insurance and related training. If you pay subcontractors under CIS, the full payment is the expense — including the part you withhold and pay to HMRC. Your own drawings aren't wages.
- Universal Credit
- Staff wages, subcontractor costs, employer pension and National Insurance contributions, bonuses, benefits, agency fees and staff training can be reported. UC also lets you include your own salary if it's paid through PAYE. Wages paid to a business partner can't be included.
- Differs for UC?
- Partly — your own PAYE salary and partners' wages are treated differently
- Watch out for
- Treating your own drawings as wages. As a sole trader, money you take out isn't a business expense — it's your profit.
Official guidance
- HMRC — Expenses if you're self-employed: staff costs
- HMRC — BIM42523: National Insurance contributions
- DWP — Business expenses you can report to UC: staff expenses
Full article coming. Link to this entry
#15Trivial benefits — small gifts to staffYes
Yes: Up to £50 per gift, for employees only.
- What it is
- Small gifts to employees — a bottle of wine at Christmas, flowers on a birthday, a box of chocolates — that are tax-free for them.
- Worth checking if…
- you employ someone and like to give them a small seasonal gift.
- HMRC
- A trivial benefit is free of tax and National Insurance for the employee if it costs £50 or less, isn't cash or a cash voucher, isn't part of their contract or salary sacrifice, and isn't a reward for their work. It only applies to employees — as a sole trader you can't give one to yourself.
- Universal Credit
- DWP's guidance doesn't mention trivial benefits. Staff costs and benefits can generally be reported.
- Differs for UC?
- Not covered by DWP
- Watch out for
- Treating £50 as an allowance. It's per gift — a £60 hamper is taxable in full, not just the £10 over.
Official guidance
- HMRC — EIM21864: trivial benefits conditions
- DWP — Business expenses you can report to UC: staff expenses
Full article coming. Link to this entry
#16Staff entertaining and annual functionsYes
Yes: Allowable for the business; £150 a head keeps it tax-free for staff.
- What it is
- Christmas parties, summer barbecues and other events for your staff.
- Worth checking if…
- you employ a couple of people and you're planning a Christmas meal.
- HMRC
- Entertaining your employees is a business expense — unlike entertaining clients (#29). For the staff, an annual event open to all of them is tax-free if the year's events cost £150/head a head or less in total. Go over, and the whole amount becomes a taxable benefit, not just the excess.
- Universal Credit
- DWP's guidance only excludes entertaining clients, suppliers and customers; staff events aren't mentioned.
- Differs for UC?
- Not covered by DWP
- Watch out for
- A "staff" meal that's really just you. With no employees, a meal out isn't staff entertaining — and if customers come along, their share is client entertaining (#29).
Official guidance
- HMRC — Social functions and parties: what's exempt
- HMRC — BIM45033: entertainment of employees
- DWP — Business expenses you can report to UC: entertainment
Full article coming. Link to this entry
#17Carers and domestic helpNo
- What it is
- Childcare, nannies, carers, cleaners for your home or gardeners — help at home that frees you up to work.
- Worth checking if…
- you pay a childminder so you can take on more jobs, or a cleaner so you have time for the business.
- HMRC
- Not allowable: carers or domestic help, such as nannies.
- Universal Credit
- Not allowable either: carers or domestic help, such as nannies or gardeners. UC has a separate childcare costs element — that's claimed differently, not as a business expense.
- Differs for UC?
- No
- Watch out for
- Reasoning that "I couldn't work without it". It still counts as a personal cost.
Official guidance
- HMRC — Expenses if you're self-employed: staff costs
- DWP — Business expenses you can report to UC: staff expenses
Full article coming. Link to this entry
Stock, materials & cost of sales
#18Stock, raw materials and direct costsYes
- What it is
- Goods you buy to sell on, raw materials you turn into products, the direct costs of making what you sell — and the materials you use up on jobs.
- Worth checking if…
- you're an online seller buying stock to resell, a baker buying flour, or a plumber buying copper pipe for a job.
- HMRC
- Allowable: stock, raw materials and direct production costs. Under the cash basis you count them when you pay. Under traditional accounting, stock still unsold at the year end is carried forward.
- Universal Credit
- The same: stock, raw materials and direct costs of producing goods can be reported.
- Differs for UC?
- No
- Watch out for
- Including materials you used at home on the same receipt — that part is private (#19).
Official guidance
- HMRC — Expenses if you're self-employed: reselling goods
- DWP — Business expenses you can report to UC: goods and materials
Full article coming. Link to this entry
#19Goods or materials bought for private useNo
- What it is
- Things bought through the business but used personally — a bag of plaster for your own house, stock taken off the shelf for the family.
- Worth checking if…
- you buy materials for jobs and sometimes use some at home, or take stock for yourself.
- HMRC
- Not allowable: goods or materials bought for private use. If you take stock for yourself, the tax return has a box for goods taken for your own use.
- Universal Credit
- Not allowable either: goods or materials bought for private use.
- Differs for UC?
- No
- Watch out for
- Leaving the whole receipt in the books. Take out the private part — or better, pay for it separately.
Official guidance
- HMRC — Expenses if you're self-employed: reselling goods
- HMRC — SA103F notes 2026
- DWP — Business expenses you can report to UC: goods and materials
Full article coming. Link to this entry
#20DepreciationNo
- What it is
- The accounting write-down of equipment's value over its life.
- Worth checking if…
- your accounts or software show a depreciation line, or you've been told your van "loses value each year, so you can claim that".
- HMRC
- Not allowable. Instead you get capital allowances (#33–#36) — or, under the cash basis, most equipment is simply an expense when you buy it.
- Universal Credit
- Not allowable either. Under UC, the cost of buying equipment or tools is reported when you pay for it.
- Differs for UC?
- No
- Watch out for
- Claiming depreciation and capital allowances. Depreciation is added back; the allowances replace it.
Official guidance
- HMRC — Expenses if you're self-employed
- HMRC — Claim capital allowances
- DWP — Business expenses you can report to UC: office and equipment costs
Full article coming. Link to this entry
Legal & financial
#21Accountancy, legal and professional feesYes
- What it is
- Fees for accountants, bookkeepers, solicitors, surveyors and architects that you pay for business reasons, and professional indemnity insurance.
- Worth checking if…
- you pay a bookkeeper monthly, used a solicitor to check a contract, or had an architect draw up plans for a workshop.
- HMRC
- Allowable when they're for the business — accountants, solicitors, surveyors and architects — and so are professional indemnity premiums. Legal costs of buying property or machinery aren't an expense: they go with the cost of the asset (#33).
- Universal Credit
- Accountancy fees, legal fees and insurance can be reported.
- Differs for UC?
- No
- Watch out for
- Personal legal bills — a house purchase, a will, a divorce — going through the business. They're private.
Official guidance
- HMRC — Expenses if you're self-employed: legal and financial costs
- DWP — Business expenses you can report to UC: legal and financial costs
Full article coming. Link to this entry
#22Business insuranceYes
- What it is
- Insurance the business needs — public liability, employer's liability, professional indemnity, tools and stock, premises and vehicles.
- Worth checking if…
- you pay for public liability as a tradesperson, tool cover for the van, or employer's liability now you've taken someone on.
- HMRC
- Allowable. Two exceptions: your own life, accident or sickness cover isn't a business cost; and vehicle insurance only counts if you claim actual vehicle costs, not the mileage rate (#7).
- Universal Credit
- Insurance can be reported under legal and financial costs.
- Differs for UC?
- No
- Watch out for
- Putting your own income protection or life cover through the business. Those cover you, not the business.
Official guidance
- HMRC — Expenses if you're self-employed: legal and financial costs
- HMRC — BIM45560: own health and life policies
- DWP — Business expenses you can report to UC: legal and financial costs
Full article coming. Link to this entry
#23Bank charges, loan interest and finance costsYesDiffers for UC
- What it is
- Business bank fees, card charges, and the interest on overdrafts, loans and hire purchase for the business.
- Worth checking if…
- you've a business loan for a van, pay monthly business bank fees, or use a card machine.
- HMRC
- Allowable: bank, overdraft and card charges, loan and hire-purchase interest, leasing payments. Since April 2024, cash-basis users no longer face the old £500 limit on interest. Only the interest and charges count — repaying what you borrowed doesn't (#26).
- Universal Credit
- Bank charges can be reported, and business loan interest up to £41 a month. Capital repayments on a business loan can't be.
- Differs for UC?
- Yes — UC caps loan interest at £41 a month
- Watch out for
- Interest on a personal credit card used partly for the business. Only business borrowing counts — and only its business share.
Official guidance
- HMRC — Expenses if you're self-employed: legal and financial costs
- HMRC — Expanding the cash basis (interest restriction removed)
- DWP — Business expenses you can report to UC: legal and financial costs
Full article coming. Link to this entry
#24Bad debtsDepends
Depends: Traditional accounting only.
- What it is
- Money a customer owes you that you'll never get.
- Worth checking if…
- you invoiced a customer who has since gone bust, or who simply won't pay.
- HMRC
- Only under traditional accounting, and only for amounts already included in your turnover that you're sure won't be recovered — no general estimates, such as a percentage of turnover. Under the cash basis (the default), an unpaid invoice was never counted as income, so there's nothing to write off.
- Universal Credit
- DWP's guidance doesn't cover bad debts. UC looks at money actually received each month, so an unpaid invoice generally won't have been reported as income.
- Differs for UC?
- Not covered by DWP
- Watch out for
- Writing off a bad debt under the cash basis. You'd be taking it off twice.
Official guidance
- HMRC — Expenses if you're self-employed: legal and financial costs
- DWP — Report business income and expenses to UC
Full article coming. Link to this entry
#25The cost of preparing your Self Assessment returnPartlyDiffers for UC
Partly: Business part only.
- What it is
- What you pay an accountant or bookkeeper — or for software — to prepare your accounts and tax return.
- Worth checking if…
- you pay someone to do your return each January, or subscribe to Making Tax Digital software.
- HMRC
- Fees for preparing your business accounts and working out your business profit are normally allowable as accountancy costs. Where part of a bill covers personal matters — rental income, a capital gain, other income — that part isn't a business cost. If you're not sure how a bill splits, ask whoever prepares it to show the business part separately.
- Universal Credit
- Accounting fees can be reported. Separately, doing your own tax return at home doesn't count as business use of your home (#4).
- Differs for UC?
- Partly
- Watch out for
- Claiming the whole bill when it also covers rental income — that part belongs with property (see Ask Martin Sheet C).
Official guidance
- HMRC — Expenses if you're self-employed: legal and financial costs
- DWP — Business expenses you can report to UC: legal and financial costs
Full article coming. Link to this entry
#26Repaying loan or overdraft capitalNo
- What it is
- The part of a loan, overdraft or finance payment that pays back what you borrowed.
- Worth checking if…
- you pay £250 a month on a van loan and the whole £250 has been going into the books as an expense.
- HMRC
- Not allowable: repayments of loans, overdrafts or finance arrangements. Only the interest and charges count (#23). What you bought with the money is dealt with separately (#33, #36).
- Universal Credit
- Not allowable either: capital repayments on a business loan.
- Differs for UC?
- No
- Watch out for
- Treating the whole instalment as an expense. Your loan statement shows how much is interest — that's the part you can claim.
Official guidance
- HMRC — Expenses if you're self-employed: legal and financial costs
- DWP — Business expenses you can report to UC: legal and financial costs
Full article coming. Link to this entry
Marketing & subscriptions
#27Advertising and website costsYes
- What it is
- Getting the word out — online ads, a local magazine advert, flyers and business cards, a website with its hosting and domain, free samples.
- Worth checking if…
- you've paid for a website, Facebook ads, signwriting on the van, or a stand at a local show.
- HMRC
- Allowable: newspaper and directory adverts, mailshots, free samples and website costs.
- Universal Credit
- The same: advertising and marketing, free samples and website costs can be reported.
- Differs for UC?
- No
- Watch out for
- Treating gifts to customers as advertising. Gifts follow their own rules (#29) — only small, branded, non-food gifts get through.
Official guidance
- HMRC — Expenses if you're self-employed: marketing, entertainment and subscriptions
- HMRC — BIM45032: promotional gifts and samples
- DWP — Business expenses you can report to UC: marketing and advertising
Full article coming. Link to this entry
#28Trade and professional subscriptionsYesDiffers for UC
- What it is
- Membership of trade bodies and professional organisations, and trade or professional journals.
- Worth checking if…
- you belong to a trade association or professional body, or take a trade magazine for your line of work.
- HMRC
- Allowable when they're related to your business.
- Universal Credit
- The same — trade or professional journals and memberships related to your business — but not union membership.
- Differs for UC?
- Partly — UC excludes union membership
- Watch out for
- Gym, sports club or social memberships. Those aren't trade subscriptions (#30).
Official guidance
- HMRC — Expenses if you're self-employed: marketing, entertainment and subscriptions
- DWP — Business expenses you can report to UC: professional subscriptions
Full article coming. Link to this entry
#29Client, supplier and customer entertaining and giftsNoDiffers for UC
No: Except small branded non-food gifts.
- What it is
- Taking customers or suppliers for a meal or a drink, event hospitality, and gifts to them.
- Worth checking if…
- you bought a client lunch to win a job, or sent your regular customers a bottle at Christmas.
- HMRC
- Not allowable: entertaining clients, suppliers and customers, and event hospitality. Gifts are treated the same way — except small gifts that carry a conspicuous advert for your business, cost £50 or less per person in the year, and aren't food, drink, tobacco or vouchers.
- Universal Credit
- Not allowable: event hospitality, or entertaining clients, suppliers or customers. DWP doesn't mention small branded gifts.
- Differs for UC?
- Partly — DWP doesn't mention small branded gifts
- Watch out for
- A branded bottle of wine or a hamper. Food and drink are out, even with your logo on.
Official guidance
- HMRC — BIM45070: small gifts with an advert
- HMRC — BIM45065: gifts treated as entertainment
- DWP — Business expenses you can report to UC: entertainment
Full article coming. Link to this entry
#30Political donations, gym membership and charity donationsNo
- What it is
- Donations to political parties or charities, and gym membership.
- Worth checking if…
- the business pays for a gym membership "to stay fit for physical work", or you gave to a local charity through the business account.
- HMRC
- Not allowable: payments to political parties, gym membership fees and charity donations. Genuine sponsorship that advertises the business may be different. Personal charity donations can get tax relief through Gift Aid instead.
- Universal Credit
- DWP's guidance doesn't list these.
- Differs for UC?
- Not covered by DWP
- Watch out for
- A roofer's gym membership. However physical the work, fitness is personal.
Official guidance
Full article coming. Link to this entry
Training
#31Training that updates or improves your existing skillsYesDiffers for UC
- What it is
- Courses that keep up or improve the skills you already use — refreshers, new regulations, software, admin skills.
- Worth checking if…
- you're an electrician on a wiring-regulations update, a hairdresser learning a new technique, or anyone on a bookkeeping course for their own business.
- HMRC
- Allowable when the training improves skills you currently use, keeps you up to date with your industry, develops related new skills, or supports the business — admin skills included. Not for starting a new business or expanding into unrelated areas (#32).
- Universal Credit
- Training that improves skills used in your business can be reported. Courses to start a new business, or to expand into new areas — even related ones — can't.
- Differs for UC?
- Partly — UC is stricter on expanding into new areas
- Watch out for
- Assuming HMRC and UC agree. A plumber adding heat pumps might be developing a related skill for HMRC, but it could count as expanding into a new area for UC.
Official guidance
- HMRC — Check if the cost of training could be an allowable business expense
- HMRC — Expenses if you're self-employed: training courses
- DWP — Business expenses you can report to UC: training courses
Full article coming. Link to this entry
#32Training for a new, unrelated tradeNoDiffers for UC
- What it is
- Courses to start a new business or move into work unrelated to what you do now.
- Worth checking if…
- you're a carpet fitter retraining as a photographer, or a cleaner studying to become a nail technician.
- HMRC
- Not allowable: training to start a new business, or to expand into areas not directly related to what you currently do.
- Universal Credit
- Not allowable — and UC goes further, excluding courses to expand into new areas even when they're related to your current business.
- Differs for UC?
- Yes — UC also excludes related expansion
- Watch out for
- Calling a career change "upskilling". The test is whether it builds on what you already do.
Official guidance
- HMRC — Check if the cost of training could be an allowable business expense
- DWP — Business expenses you can report to UC: training courses
Full article coming. Link to this entry
Capital allowances
#33Annual Investment AllowanceYesDiffers for UC
- What it is
- Tax relief for equipment, tools and machinery you buy to keep — a laptop, a drill, a cement mixer, a van.
- Worth checking if…
- you've bought tools, a laptop or a van and use traditional accounting — or you want to know how the cash basis handles it.
- HMRC
- Under the cash basis (the default), most equipment is simply an expense when you pay — capital allowances are only needed for cars. Under traditional accounting, the AIA lets you deduct the full cost of most equipment, up to £1m a year, in the year you buy it. Cars don't qualify (#36). Reduce the claim for personal use — a laptop used half the time personally gets half.
- Universal Credit
- There are no capital allowances in UC. Buying, hiring or repairing equipment or tools is reported when you pay for it.
- Differs for UC?
- Yes — no capital allowances in UC
- Watch out for
- Forgetting what happens when you sell. If you sell something you've claimed the AIA on, you may have tax to pay on the sale.
Official guidance
- HMRC — Claim capital allowances: annual investment allowance
- DWP — Business expenses you can report to UC: office and equipment costs
Full article coming. Link to this entry
#34First-year allowancesDependsDiffers for UC
Depends: Mainly for new zero-emission cars and EV chargers.
- What it is
- Allowances that give tax relief on new equipment in the year you buy it. Most sole traders won't need them — the AIA (#33) covers up to £1m — but they matter for an electric car or an EV charger.
- Worth checking if…
- you're buying a new electric car or fitting an EV chargepoint, or spending more than the AIA.
- HMRC
- New zero-emission cars and EV chargepoints get a 100% first-year allowance if bought before 6 April 2027. New main-rate plant gets a 40% first-year allowance on spending from 1 January 2026, rising to 50% for spending from 1 January 2027 (announced). Second-hand items and cars (other than zero-emission ones) don't qualify. Full expensing is for companies only.
- Universal Credit
- Not applicable — UC has no capital allowances.
- Differs for UC?
- Yes — not applicable in UC
- Watch out for
- Assuming a first-year allowance applies to a second-hand van or a petrol car. It doesn't.
Official guidance
- HMRC — Capital allowances: main rate WDA and FYA changes (Budget 2026)
- HMRC — Claim capital allowances: 100% first-year allowances
Full article coming. Link to this entry
#35Writing-down allowancesDependsDiffers for UC
Depends: Spread over years for items the AIA or FYAs don't cover.
- What it is
- The slower, year-by-year relief for items the AIA or first-year allowances don't cover — most cars, and balances carried from earlier years.
- Worth checking if…
- you bought a car for the business, or your accounts show a capital allowances "pool" carried forward.
- HMRC
- Each year you deduct a percentage of what's left in the pool: main rate 14%, special rate 6%. Cars go into the main or special rate depending on their CO2 emissions. From 6 April 2027 the main rate falls to 12% (announced).
- Universal Credit
- Not applicable — UC has no capital allowances.
- Differs for UC?
- Yes — not applicable in UC
- Watch out for
- Claiming the full cost of a car in one year. Unless it's a new zero-emission car (#34), it's spread over years.
Official guidance
- HMRC — Capital allowances: main rate WDA and FYA changes (Budget 2026)
- HMRC — Claim capital allowances
Full article coming. Link to this entry
#36Business cars and capital allowancesDependsDiffers for UC
Depends: Through capital allowances, not as an expense.
- What it is
- Buying a car for the business, and how you get tax relief on it.
- Worth checking if…
- you're buying a car you'll use for work, or weighing up an electric one.
- HMRC
- Cars don't get the AIA, and even under the cash basis a car purchase goes through capital allowances. New zero-emission cars get a 100% first-year allowance until 5 April 2027; other cars get writing-down allowances (#35). Reduce the claim for private use. And you can't use simplified mileage (#7) for a car you've claimed capital allowances on.
- Universal Credit
- You can't include the cost of buying or leasing an ordinary (non-adapted) car, and you must use the UC mileage rate for it (#7).
- Differs for UC?
- Yes — UC won't let you claim buying or leasing an ordinary car
- Watch out for
- Deciding on mileage rates or capital allowances without comparing. Once you use the mileage rate for a car, you're committed to it for as long as you use that car in the business.
Official guidance
- HMRC — CA23153: first-year allowance for zero-emission cars
- HMRC — Extension of FYAs for zero-emission cars
- DWP — Business expenses you can report to UC: vehicle expenses
Full article coming. Link to this entry
Starting up
#37Pre-trading costs — the seven-year ruleYes
- What it is
- Running costs you paid before you officially started — a website, insurance, advertising, training — while getting ready.
- Worth checking if…
- you spent months setting up before your first customer, paying for things as you went.
- HMRC
- Revenue costs paid up to 7 years before you start trading, that would have been allowable once trading, are treated as paid on your first day of trading.
- Universal Credit
- DWP's guidance doesn't cover costs paid before you started trading.
- Differs for UC?
- Not covered by DWP
- Watch out for
- Throwing away the receipts from the setting-up months. They can count.
Official guidance
Full article coming. Link to this entry
#38Equipment bought before you startedYes
- What it is
- Tools, equipment or a vehicle bought before you started trading — or things you already owned and now use for the business.
- Worth checking if…
- you bought tools before your first job, or started using your own laptop for the business.
- HMRC
- Capital spending before you start is treated as spent on your first day of trading, for capital allowances. Items you already owned for another reason and then bring into the business don't get the AIA — writing-down allowances apply instead (#35).
- Universal Credit
- DWP's guidance doesn't cover this.
- Differs for UC?
- Not covered by DWP
- Watch out for
- Assuming something you already owned gets the full AIA once you start using it for work. It doesn't.
Official guidance
- HMRC — BIM46351: pre-trading expenditure
- HMRC — Claim capital allowances: annual investment allowance
Full article coming. Link to this entry
#39Company formation and incorporation costsNo
- What it is
- The costs of setting up a limited company — the Companies House fee, a formation agent, legal fees.
- Worth checking if…
- you're thinking of moving your business into a limited company.
- HMRC
- These are costs of the company, not of your sole-trader business, so they don't go in your sole-trader books. How the company treats them is a limited-company question — see HMRC's company expenses guidance, or our planned company expenses guide.
- Universal Credit
- Not applicable.
- Differs for UC?
- Not applicable
- Watch out for
- Putting incorporation fees through your sole-trader accounts.
Official guidance
Full article coming. Link to this entry
Structure & cross-cutting
#40Sole trader vs limited company — the same expense, treated differentlyDependsDiffers for UC
Depends: Different rules once you're a company.
- What it is
- Why the same cost can be treated differently once your business is a company.
- Worth checking if…
- you're thinking of incorporating, or a friend with a limited company says "I just put that through the company".
- HMRC
- As a sole trader, allowable expenses reduce your profit. A company deducts its costs before Corporation Tax, but anything the director uses personally may become a taxable benefit — and companies can't use the simplified flat rates or the cash basis.
- Universal Credit
- Directors who own their company report to UC as self-employed and can include expenses from a company they own or control.
- Differs for UC?
- Partly
- Watch out for
- Choosing a structure because of one expense. See our business structures guide for the bigger picture.
Official guidance
- HMRC — Expenses if you're self-employed: overview
- HMRC — Company expenses you can deduct before paying Corporation Tax
- DWP — Business expenses you can report to UC: legal and financial costs
- Business structures guide
Full article coming. Link to this entry
#41Cash basis vs traditional accountingDependsDiffers for UC
Depends: Cash basis is the default; it changes when costs count.
- What it is
- Two ways to work out profit: the cash basis (money in and out when it moves) or traditional accounting (when you invoice or are billed).
- Worth checking if…
- you've never chosen a method, or you invoice customers and get paid months later.
- HMRC
- Since 2024/25 the cash basis is the default for sole traders and partners, with no turnover limit; to use traditional accounting you opt out on your tax return. Under the cash basis most equipment is an expense when you pay (cars excepted, #36), and bad debts don't arise (#24). Some businesses can't use it.
- Universal Credit
- UC always looks at money actually paid in and out of the business in each monthly assessment period.
- Differs for UC?
- Yes — UC always works monthly on money in and out
- Watch out for
- Switching between methods without advice. Moving from one to the other needs adjustments, and it's worth checking with an adviser first.
Official guidance
Full article coming. Link to this entry
#42The trading allowance vs claiming actual expensesDependsDiffers for UC
Depends: Allowance or actual expenses — not both.
- What it is
- A tax-free allowance on trading income that you can use instead of claiming your actual expenses.
- Worth checking if…
- you have a small side income — selling crafts, odd jobs, dog-sitting — and haven't been keeping receipts.
- HMRC
- For 2026/27 the trading allowance is £1,000 of gross trading income. If you use it, you can't claim any expenses or capital allowances. From 6 April 2027 it rises to £3,000 (announced), along with the Self Assessment reporting threshold. If your real expenses are more than the allowance, claiming them is usually better.
- Universal Credit
- There's no trading allowance in UC. All trading income is reported each month, however small.
- Differs for UC?
- Yes — no trading allowance in UC
- Watch out for
- Using the allowance when your expenses are bigger. Compare both before you choose.
Official guidance
- HMRC — Increasing the trading allowance (policy paper)
- HMRC — SA103F notes 2026
- DWP — Report business income and expenses to UC
- Ask Martin Sheet B: side gigs and selling online
Full article coming. Link to this entry
#43VAT and your expensesDependsDiffers for UC
Depends: Depends whether you're VAT-registered.
- What it is
- How VAT on your costs affects what you claim as an expense.
- Worth checking if…
- you've registered for VAT, or your turnover is getting close to the threshold.
- HMRC
- You must register for VAT if your taxable turnover goes over £90,000 in the last 12 months, or is expected to in the next 30 days. In general, if you're VAT-registered and reclaim the VAT on a cost, the expense is the cost without that VAT; if you're not registered, the VAT is simply part of the cost. Schemes such as the Flat Rate Scheme work differently — worth getting advice.
- Universal Credit
- If you report your earnings including VAT, VAT you've paid to HMRC can be reported as an expense.
- Differs for UC?
- Yes
- Watch out for
- Claiming the VAT twice — reclaiming it on your VAT return and including it in the expense as well.
Official guidance
- HMRC — Register for VAT
- HMRC — VAT thresholds
- DWP — Business expenses you can report to UC: tax, National Insurance and pension
Full article coming. Link to this entry
All entries A to Z
- Accountancy, legal and professional fees — Yes
- Advertising and website costs — Yes
- Annual Investment Allowance — Yes
- Bad debts — Depends
- Bank charges, loan interest and finance costs — Yes
- Business cars and capital allowances — Depends
- Business insurance — Yes
- Business travel and subsistence — Yes
- Carers and domestic help — No
- Cash basis vs traditional accounting — Depends
- Client, supplier and customer entertaining and gifts — No
- Company formation and incorporation costs — No
- Costumes for actors, entertainers and performers — Yes
- Depreciation — No
- Equipment bought before you started — Yes
- Everyday clothing — No
- Fines and penalty charges — No
- First-year allowances — Depends
- General office running costs — Yes
- Goods or materials bought for private use — No
- Living at your business premises — Partly
- Ordinary commuting — No
- Political donations, gym membership and charity donations — No
- Pre-trading costs — the seven-year rule — Yes
- Rent, rates, utilities, insurance and security for premises — Yes
- Repairs and maintenance vs improvements — Partly
- Repaying loan or overdraft capital — No
- Sole trader vs limited company — the same expense, treated differently — Depends
- Staff entertaining and annual functions — Yes
- Staff wages, pensions, benefits and subcontractors — Yes
- Stock, raw materials and direct costs — Yes
- Structures and Buildings Allowance — Depends
- The cost of preparing your Self Assessment return — Partly
- The trading allowance vs claiming actual expenses — Depends
- Trade and professional subscriptions — Yes
- Training for a new, unrelated trade — No
- Training that updates or improves your existing skills — Yes
- Trivial benefits — small gifts to staff — Yes
- Uniforms, PPE and protective clothing — Yes
- VAT and your expenses — Depends
- Vehicle running costs and mileage — Yes
- Working from home — Partly
- Writing-down allowances — Depends
General information only. It doesn't replace HMRC or DWP guidance, or advice on your own circumstances. Last checked: 10 November 2026.