What counts as an allowable business expense?

One of the most common questions from sole traders is a simple one: can I claim this? Getting it right matters — claim too little and you pay more tax than you need to; claim too much (or claim the wrong things) and you risk trouble if HMRC asks questions. Here's a plain-English rundown of the main categories.

The general rule

HMRC's test for an allowable expense is that it must be "wholly and exclusively" for the purposes of your business. In practice, that means the cost has to be genuinely necessary for running your business, not something you'd have paid for anyway. Where something is used for both business and personal purposes — a phone, or working from home — you can usually claim the business proportion.

Common allowable expenses

Office costs. Stationery, printing, postage, software subscriptions, and other costs of running your day-to-day admin.

Travel. Fuel, parking, train and bus fares, and hotel stays for business trips. Ordinary commuting to a fixed workplace doesn't count, but travel between jobs or to client sites usually does. Many sole traders find it simpler to use HMRC's simplified mileage rate for vehicles rather than tracking every fuel receipt.

Stock and materials. Goods you buy to sell on, and raw materials used to make what you sell.

Staff costs. Salaries, subcontractor payments, employer's National Insurance, and pension contributions for anyone you employ.

Financial costs. Bank charges, interest on business loans, and the cost of business insurance.

Marketing. Advertising, your website, and the cost of a business phone line or a proportion of your mobile bill.

Use of home as an office. If you work from home, you can claim a reasonable proportion of costs like heating, electricity, and internet — either calculated from actual costs and the proportion of your home used for work, or using HMRC's simplified flat rate based on hours worked from home each month.

What you generally can't claim

Some costs feel like they should be allowable but aren't:

• Your own wages or drawings — you're taxed on business profit, not on what you claim as a "salary" from yourself.
• Client entertainment, such as meals or gifts for customers.
• Fines and penalties, including parking tickets.
• The personal-use portion of anything used for both business and personal purposes.
• Clothing, unless it's genuine protective wear or a uniform — a suit for client meetings doesn't qualify, even though it feels like a business cost.

Keep the evidence, not just the total

Whichever expenses you claim, HMRC expects you to be able to show what they were for, not just a total figure. That means keeping a receipt or invoice for each cost, and a note of the business purpose where it isn't obvious. Under Making Tax Digital, this record-keeping isn't optional — you're required to keep digital records throughout the year, not just reconstruct them at Self Assessment time.

The good news is that this doesn't need to be complicated. Photograph or forward a receipt as you get it, categorise it as you go, and by the time your quarterly update or tax return is due, the work is already done.

StrideBooks lets you log expenses by category as they happen and attach the evidence straight away, so you always have a clear, HMRC-ready record of exactly what you've claimed and why.