Allowable Expenses for the Self-Employed: What You Can Claim in 2026/27

Last updated: 20 June 2026

7 min read

If you are self-employed, you can deduct any cost that is wholly and exclusively for your business before working out the tax you owe, which directly lowers your bill. For the 2026/27 tax year the claims that matter most for sole traders are the £1,000 trading allowance, simplified mileage at 55p a mile for the first 10,000 business miles, and a flat rate of £10 to £26 a month for working from home. This guide explains what counts as an allowable expense, what HMRC will not let you claim, and how to keep it all clean so the deduction sticks.

What "allowable expense" actually means

An allowable expense is a cost you run up purely to do business. HMRC uses the phrase "wholly and exclusively", and those two words do a lot of work. If a cost is purely for the business, you can deduct the whole amount. If it is part business and part personal, you can usually claim only the business share, and you need a sensible way to split it.

A quick example. Say your annual turnover is £40,000 and you have £9,000 of allowable expenses. You pay tax on your profit of £31,000, not on the full £40,000. Every genuine pound you claim is a pound that is not taxed, so missed expenses are simply money left on the table.

The £1,000 trading allowance

Every self-employed person gets a £1,000 tax-free trading allowance. If your gross self-employed income for the year is £1,000 or less, you usually do not need to tell HMRC or file a return for it at all. If you earn more than that, you have a choice. You can either claim the £1,000 allowance and pay tax on the rest, or you can claim your actual expenses. You cannot do both.

The rule of thumb is simple. If your real costs for the year come to less than £1,000, claim the allowance. If they come to more, claim the actual expenses instead. Most established sole traders spend well over £1,000 a year running their business, so the actual expenses route wins. The allowance tends to suit people with a small side trade and very few costs.

Common costs you can claim

If you go down the actual expenses route, here are the everyday costs HMRC accepts for most self-employed businesses:

• Office and admin: stationery, printing, postage, phone and broadband (business share), and software subscriptions.
• Stock and materials: goods you buy to resell, and raw materials used in the work you sell.
• Staff and subcontractors: wages, subcontractor payments, employer National Insurance, and pension contributions for staff.
• Premises: rent, business rates, utilities, and insurance on a business premises.
• Professional costs: accountancy and bookkeeping fees, professional indemnity insurance, and bank or payment processing charges.
• Marketing: website costs, advertising, and listing fees on platforms you sell through.

Protective clothing and genuine uniforms are allowable too, along with the cost of cleaning or replacing them. An everyday outfit you wear to meet clients is not, even if you only ever wear it for work.

Travel and your vehicle

You can claim the cost of business travel, including train, bus and taxi fares, parking, and hotel rooms and meals on overnight business trips. What you cannot claim is the journey between your home and a regular place of work, because HMRC treats that as ordinary commuting.

For your own car or van you have two options. You can work out the actual running costs and claim the business share, or you can use HMRC’s simplified mileage rate, which rolls fuel, insurance, servicing and wear into a single figure. For 2026/27 the simplified rate is 55p a mile for the first 10,000 business miles and 25p a mile after that. Motorcycles are 24p a mile. The 55p band is a recent increase, up from 45p in earlier years, so it is worth checking you are using the current rate. Once you choose the mileage method for a particular vehicle, you have to stick with it for as long as you use that vehicle in the business.

Working from home

If you run your business from home, you can claim a share of your household running costs. Again there are two routes. The detailed method means working out the business proportion of your rent or mortgage interest, council tax, heating, lighting and so on, usually based on rooms used and hours worked.

The simpler route is HMRC’s flat rate, which only needs the number of hours you work from home each month. The rates are £10 a month for 25 to 50 hours, £18 a month for 51 to 100 hours, and £26 a month for 101 hours or more. You can only use it if you work at least 25 hours a month from home. The flat rate does not cover phone and internet, so you claim the business share of those separately.

Equipment and larger purchases

Tools, computers, machinery and other equipment are claimable, but how you claim depends on which accounting method you use. Since April 2024 the cash basis is the default for sole traders, and under it most equipment is simply treated as a normal expense in the year you pay for it. Cars are the exception and are dealt with separately.

If you use traditional accruals accounting instead, equipment is claimed through capital allowances, and the Annual Investment Allowance lets you write off up to £1 million of qualifying purchases in a single year. For most small sole traders the practical effect is the same, which is that a genuine business purchase reduces your taxable profit. The paperwork is just slightly different.

What you cannot claim

Some costs feel like business costs but are firmly off limits. The main ones are:

• Client entertaining, such as taking a customer out for lunch.
• Fines and penalties, including parking tickets picked up while working.
• Ordinary everyday clothing, even if you bought it specifically for work.
• The cost of getting from home to a regular workplace.
• Anything personal, or the personal share of a mixed cost.

Keep the records to back it up

A claim is only as strong as the evidence behind it. Keep receipts, invoices and bank statements, and hold on to them for at least five years after the 31 January filing deadline for that tax year. A tidy record through the year also makes a real difference once Making Tax Digital for Income Tax applies to you, because quarterly updates are far less painful when the numbers are already in order. If you want the detail on the deadlines that sit alongside all this, our Self Assessment guide walks through the full year.

Frequently asked questions

This article is general information, not personal tax advice. The figures quoted are for the 2026/27 tax year and are taken from gov.uk. For advice on your own situation, please get in touch.

Written by Yoni Finke FCCA

Founder of YF Accounting — a fixed-fee, fully digital accountancy practice in Manchester serving SMEs, sole traders and landlords across the UK. One point of contact, unlimited support, no surprise bills.

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This article is part of our Self Assessment guide. See the full topic for related reads.