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Self-employed deep guide · Expenses · 2026/27

Allowable expenses for UK self-employed - 2026/27

Allowable business expenses are the single biggest legal tax-reduction lever for UK self-employed people. Every £1,000 of legitimate expense saves £200-£420 of tax depending on your marginal rate. But HMRC’s "wholly and exclusively" test is strict - personal-use elements must be apportioned, not blanket-claimed. Here is the complete category-by-category guide for 2026/27.

What you need to know: Allowable expenses for UK self-employed - 2026/27

Quick answer: UK self-employed people can deduct any business expense that meets HMRC’s "wholly and exclusively" for the business test. Categories include: office costs (stationery, software, postage), business travel (vehicle, public transport, accommodation), staff costs, professional fees, equipment (often via capital allowances), use of home as office, marketing, financial costs (bank charges, interest), training…

Key points:

UK self-employed people can deduct any business expense that meets HMRC’s "wholly and exclusively" for the business test. Categories include: office costs (stationery, software, postage), business travel (vehicle, public transport, accommodation), staff costs, professional fees, equipment (often via capital allowances), use of home as office, marketing, financial costs (bank charges, interest), training (subject to restrictions). The £1,000 Trading Allowance is an alternative to claiming expenses for small earnings. Most expenses are claimed on the SA103 Self-Employment supplementary page.

The "wholly and exclusively" test

HMRC’s test under ITTOIA 2005 s.34 has two parts:

  1. The expense must be incurred wholly for business purposes
  2. It must be incurred exclusively for business purposes

"Wholly and exclusively" doesn’t mean the expense must be exclusively necessary - it means it must be exclusively for business use. Where an expense has a mix of business and personal use (a phone, a car, a home office), the business portion is deductible if it can be identified separately or fairly apportioned.

The "duality of purpose" trapAn expense that serves both business and personal purposes simultaneously - with no clear apportionment - is not deductible at all. Classic example: business clothing that you would also wear outside work (a suit) is not deductible. A uniform or protective gear is deductible.

Category 1: Office costs

Stationery, printing, postage, telephone, internet (apportioned), business software and subscriptions, business rates, rent for business premises.

Category 2: Business travel

You can deduct travel costs between business locations, to customer sites, or for business meetings. You cannot deduct commuting between home and a regular workplace.

MethodAllowable cost
Vehicle: simplified mileage55p/mile for first 10,000 miles in 2026/27 (45p before 6 April 2026); 25p/mile beyond. Includes all running costs.
Vehicle: actual costsApportioned fuel, insurance, repairs, MOT, depreciation. Requires logging business/personal split.
Public transportFull cost (rail, bus, taxi) for business journeys
FlightsEconomy fares; first/business class only if business-necessary
AccommodationHotels on business trips, reasonable subsistence
Subsistence (food/drink)Allowable when travelling on business away from regular base for more than 5 hours; not lavish

Worked example: vehicle methodology choice

Ravi runs a plumbing business, drives a van. Business miles per year: 18,000. Annual vehicle costs: fuel £3,500, insurance £900, repairs £600, MOT £55, capital allowance £1,200. Total: £6,255.

  • Simplified mileage (2026/27 rates): 10,000 × 55p + 8,000 × 25p = £5,500 + £2,000 = £7,500
  • Actual cost method: £6,255 × (18,000 / 20,000 total miles) = £5,629
  • Better choice: simplified mileage (a deduction £1,871 larger for the year)

Once you’ve chosen a method for a vehicle, you cannot change for that vehicle until you replace it. Choose carefully in year 1.

Category 3: Use of home as office

You can claim a portion of home costs if you work from home regularly. Two methods:

Simplified flat-rate method

Hours/month worked at homeFlat deduction
25-50 hours£10/month (£120/year)
51-100 hours£18/month (£216/year)
101+ hours£26/month (£312/year)

Actual cost method

Calculate proportion of home used for business (typically rooms used × hours used). Apply that proportion to: gas, electricity, water, council tax, mortgage interest (NOT capital repayment), insurance, repairs to the business area.

Don’t claim mortgage capital repayment - only interest.HMRC clearly distinguishes between mortgage interest (deductible apportioned) and capital repayment (not deductible). Also: claiming home as office can trigger Business Rates and CGT on the business portion of your home when you sell - usually small but worth knowing.

Category 4: Equipment - capital allowances

Equipment costing more than ~£200 typically falls under capital allowances rather than ordinary expenses. The Annual Investment Allowance (AIA) provides 100% first-year relief on most plant and machinery purchases up to £1m per year.

Asset typeTreatment
Computer, laptop, monitorAIA - 100% first-year
Office furnitureAIA - 100% first-year
Tools and trade equipmentAIA - 100% first-year
Cars (low emission)First Year Allowance varies
Cars (other)Writing Down Allowance 6%-18% reducing balance
Property fixtures (integral)WDA 6% special rate pool

For most small businesses, AIA covers everything - you simply deduct 100% of the purchase in the year of acquisition.

Category 5: Professional fees

Category 6: Financial costs

The £1,000 Trading Allowance - simpler alternative

For very small earnings, the Trading Allowance can be simplerIf your gross trading income is £1,000 or less, the £1,000 Trading Allowance covers it and you may not have to tell HMRC. If your gross trading income is more than £1,000, you can deduct either the £1,000 allowance or your actual allowable expenses, not both. The allowance gives the lower taxable profit whenever your allowable expenses are under £1,000, whatever your income; once your allowable expenses are more than £1,000, claiming them instead is better. You cannot use the allowance for income from a partnership where you or someone connected to you is a partner, from your employer (or your spouse's or civil partner's employer), or from a company you or someone connected to you owns or controls.

What is NOT allowable

Calculate your self-employed tax bill

The sole trader tax calculator lets you enter income and expenses to see your tax position before and after claiming allowable costs.

Open the sole trader calculator

Sources and references

"Wholly and exclusively" test from gov.uk expenses if self-employed and ITTOIA 2005 s.34. Capital allowances and AIA from gov.uk Capital Allowances. Vehicle simplified mileage rates from gov.uk simplified expenses. Trading Allowance from gov.uk Trading Allowance.

UK Tax Drag is educational and not regulated financial, tax, legal or business advice - see the disclaimer for the full position. Always verify current rates and rules at the original government sources before acting.

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