If you are self-employed, knowing which everyday costs you can legitimately claim can make a real difference to how much tax you end up paying.

The question of which costs you can claim against your self-employed business is a common one. If you are self-employed it is important to be aware if an expense is allowable or not. Any allowable costs can be used to reduce your taxable profit.

HMRC lists the following office expenses as being allowable:

• office costs, for example stationery or phone bills
• travel costs, for example fuel, parking, train or bus fares
• clothing expenses, for example uniforms
• staff costs, for example salaries or subcontractor costs
• things you buy to sell on, for example stock or raw materials
• financial costs, for example insurance or bank charges
• costs of your business premises, for example heating, lighting, business rates
• advertising or marketing, for example website costs
• training courses related to your business, for example refresher courses

If you work from home, you may also be able to claim a proportion of your costs for things including heating, electricity, Council Tax, mortgage interest or rent and internet and telephone use. You will need to adopt a fair and reasonable approach to apportioning your costs, such as by reference to the number of rooms used for business purposes or the proportion of time you work from home.

Starting a new business can be expensive, but many of your pre-trading costs may qualify for tax relief if they meet the right conditions.

There are special tax reliefs for pre-trading expenses that are incurred before a business starts trading. This could include expenses that are required to help a business prepare for trading such as buying stock and equipment, renting premises, getting insurance and initial advertising expenditure. 

A deduction may be allowed where the following conditions are met: 

• The expenditure is incurred within a period of seven years before the date the trade, profession or vocation commenced, and
• the expenditure is not otherwise allowable as a deduction in computing the profits of the trade, profession or vocation but would have been so allowable if incurred after the trade had commenced.

To be allowable, the pre-trading expenditure must be incurred wholly and exclusively for the purposes of the relief. To be clear, this means that no relief would be allowed where pre-trading expenses would not have been tax deductible if they had been incurred when the business was trading. The business should keep accurate records relating to pre-trading expenditure to be able to demonstrate that the expenses are qualifying.

The qualifying pre-trading expenditure is treated as incurred on the day on which the trade, profession or vocation is first carried on. 

Capital expenditure does not qualify for this relief but there are other special provisions for capital allowances. 

HMRC is currently contacting certain sole traders by email to reiterate the importance of adjusting business expenses for personal use.

The email explains:

• why personal use must be adjusted on your self-assessment tax return; and
• what you need to do if your business expenses cover business and personal use.

The email also includes links to GOV.UK for more detailed information on personal use adjustments and allowable expenses. This is a genuine email that HMRC recently sent (from 20 October 2025 up to and including 7 November 2025).

This is an important reminder for sole traders. In general, if sole traders use something for both business and personal reasons, they can only claim allowable expenses for the business costs.

However, there are simplified arrangements available to sole traders for claiming a fixed rate deduction for certain expenses where there is a mix of business and private use. The simplified expenses regime is not available to limited companies or business partnerships involving a limited company.

Simplified flat rates can be used for working from home and for the business costs of vehicles. This method saves having to calculate the proportion of personal and business use.

The current monthly flat rates are based on the amount of business use of the home:

• 25 to 50 hours worked per month can claim – £10
• 51 to 100 hours worked per month can claim – £18
• 101 or more hours worked per month can claim – £26

Under simplified expenses, there are the following flat rates per mile available. These rates can be used instead of working out the actual costs of buying and running your vehicle, e.g. insurance, repairs, servicing, fuel.

• Cars and goods vehicles first 10,000 miles – 45p
• Cars and goods vehicles after 10,000 miles – 25p
• Motorcycles – 24p

Whilst using the flat rates is not compulsory, once a decision is made to use the simplification for a specific vehicle this must continue to be used for a vehicle as long as that vehicle is used for business purposes.

We would be happy to help you ascertain whether using simplified expenses or claiming based on actual costs incurred is more beneficial for your business.

For many small business owners, the focus is on day-to-day operations. However, building long-term value is just as important, whether your aim is to sell in the future, attract investors, or secure better financing.

Focus on profitability and cash flow
Strong profits are essential, but reliable cash flow is often more important to potential buyers or lenders. Keep tight control over expenses, reduce debtor days, and ensure pricing reflects the value you provide.

Develop recurring revenue
Income that is predictable and repeatable, such as subscription models or service contracts, increases business stability and value. It also makes forecasting more accurate and planning easier.

Strengthen your customer base
Avoid over-reliance on one or two major customers. A broad, loyal client base reduces risk and makes your business more attractive to others.

Build a strong management team
A business that depends too heavily on its owner can be harder to sell and less valuable. Train and empower staff so that the business can operate smoothly without you.

Protect your brand and processes
Invest in your reputation, intellectual property, and efficient systems. Documenting processes and having clear contracts with suppliers and customers adds professionalism and reduces uncertainty.

Plan ahead
Value is built over years, not months. Regularly review your strategy and financial performance and seek advice from your accountant to ensure every decision supports long-term growth.

Many business gifts and hospitality costs are not tax-deductible under current rules.

Entertainment expenses including providing hospitality and business gifts are common, but the taxation of these expenses is strictly governed by HMRC.

For businesses carrying on a trade, HMRC legislation generally prohibits tax deductions for client entertainment. If an employee receives a dedicated allowance or is reimbursed specifically for entertaining clients, the expense is generally disallowed when calculating the employer's tax liability.

Meals consumed by the employee during valid entertaining occasions are typically not taxed separately. But if entertainment is deemed personal or social in nature for instance, entertaining personal friends or business acquaintances then the reimbursement becomes taxable income for the employee. Reciprocal business entertaining between business acquaintances that lacks a clear commercial purpose also falls into this category even if some business topics happen to be discussed.

Where an employer provides a round sum allowance not explicitly for entertaining, and the employee uses it for such purposes, tax liability may instead fall on the employee. This includes not only the direct cost of entertaining but also any incidental expenses such as transport or venue hire.

Entertainment includes hospitality and business gifts, except for free samples used to advertise to the general public. Gifts that clearly display an advertisement for the donor may qualify for a limited exemption. However, this exemption does not apply to gifts of food, drink, tobacco, or vouchers, and the total cost per recipient must not exceed £50 per year.

Anyone claiming an exemption for entertaining expenses should keep clear records detailing the amount spent, who was entertained and the business reason behind the expense to support any claim.