What expenses can you deduct if you are self employed

As a self-employed individual, understanding which business expenses you can deduct is one of the most important aspects of managing your tax bill effectively. HMRC allows you to claim relief on expenses that are “wholly and exclusively” incurred for business purposes, but knowing what qualifies can be confusing. Getting it right means you’ll pay less tax and keep more of what you earn. Getting it wrong could lead to penalties or challenges from HMRC. In this guide, we’ll walk through the main expense categories that self-employed people can legitimately claim, helping you make the most of your Self Assessment tax return.

Common Business Expenses You Can Claim

The golden rule is simple: if you’ve spent money wholly and exclusively for your business, you can usually claim it. This covers a wide range of everyday costs. Office supplies, software subscriptions, professional fees (including accountancy fees), and insurance premiums are all standard deductions. If you use your home as an office, you can claim a proportion of your rent or mortgage interest, Council Tax, utilities, and even internet costs—though HMRC expects these to be realistic figures based on the space you actually use for work.

Equipment and tools are claimable too, though there are important rules about capital allowances. If you buy items costing under £500 that you use for work, you can usually claim them as expenses in the year you purchase them. For more expensive items—like a laptop, camera, or specialist equipment—you’ll need to claim capital allowances over several years instead. The Annual Investment Allowance (AIA) lets you claim up to £1,000,000 of qualifying plant and machinery against profits in the year you buy it, which is generous for most small businesses.

Travel costs for business purposes are claimable: mileage to client meetings, train fares, or car parking. However, commuting to your regular workplace doesn’t count. If you work from home and travel to meet a client, that’s a business expense. Vehicle costs—fuel, maintenance, repairs, and insurance—can be claimed, or you can use the simplified mileage allowance of 45 pence per mile for the first 10,000 miles and 25 pence thereafter in the current tax year.

What You Cannot Claim

HMRC draws a clear line between business and personal expenses. Your own salary, dividends, or drawings are not deductible. Expenses for items that have a personal benefit—like entertaining yourself, your own meals when you’re working from home, or personal clothing—cannot be claimed, even if you wear them while working. The phrase “wholly and exclusively” is crucial here: if an expense has any personal element, it’s disallowed.

Entertaining clients is a contentious area. You cannot claim general entertainment costs, including meals and hospitality, as a business expense. The only exception is when you hold a staff party open to all employees (if you have them) where the annual cost per head is less than £150. Alcohol, for example, is almost never deductible, and nor are gym memberships or wellness activities for personal use.

Fines and penalties cannot be claimed, and neither can bribes or illegal payments. Charitable donations are handled separately—they don’t reduce your taxable profit but may have other tax benefits. Finally, expenses relating to income that’s not taxable (like certain grants or benefits) cannot be deducted against other business income.

Record-Keeping and Supporting Evidence

HMRC expects you to keep evidence of all the expenses you claim. This means receipts, invoices, or bank statements showing the payment. For mileage claims, keeping a logbook of journeys is essential. Digital records are fine—many accountants now recommend cloud-based systems—and you should retain records for at least six years. Poor record-keeping is one of the most common reasons Self Assessment returns are queried.

When you file your Self Assessment tax return (deadline 31 January following the tax year end), you’ll declare your total turnover and then deduct your allowable expenses to calculate your taxable profit. This is your profit figure that gets taxed at the basic rate of 20% (or higher rates if you earn more). Getting your expenses right directly reduces your tax liability.

Conclusion

Claiming the right expenses is a legitimate way to reduce your tax bill and improve your cash flow. However, HMRC rules are detailed, and grey areas do exist. If you’re unsure whether a particular expense qualifies, it’s worth checking before you claim. Mistakes can be costly, especially if they trigger a tax investigation.

For tailored advice, contact Severn Accounting — we’re here to help.