Business Expenses: What You Can and Cannot Claim

I once claimed a pair of trainers as a business expense. My reasoning was that I wore them to networking events. My accountant looked at me like I’d suggested we invoice HMRC for my lunch. He was right. But the broader point stands: most self-employed people and company directors don’t claim enough. They leave money on the table because they’re unsure what counts, and they’d rather not risk getting it wrong.

The rules are actually straightforward. Once you understand the basic test and know the common categories, you’ll claim everything you’re entitled to and nothing you’re not.

The basic rule

HMRC’s test for business expenses is simple: the cost must be incurred “wholly and exclusively” for the purposes of the business. If an expense has a dual purpose (part business, part personal), you can only claim the business portion. If it’s entirely personal, you can’t claim it at all.

That phrase, “wholly and exclusively”, is the one your accountant will repeat until you hear it in your sleep. But it’s genuinely the only rule you need to remember. Everything else flows from it.

What you CAN claim

Here are the expense categories that apply to most self-employed people and limited company directors.

Office and workspace costs. Rent for business premises, business rates, utilities for a dedicated office, office furniture, and stationery. If you work from home, you can claim a proportion of your household costs (heating, electricity, broadband, council tax) based on the percentage of your home used for business. HMRC also allows a simplified flat rate: £6 per week (£26 per month) with no receipts needed, or £10 per week if you work 25 to 50 hours a month from home, scaling up from there.

Equipment and tools. Laptops, monitors, printers, software, phones, cameras, anything you use for the business. If an item costs over £1,000, you may need to claim it as a capital allowance rather than a direct expense, but it’s still deductible.

Travel costs. Train tickets, flights, taxis, hotels, and meals while travelling for business. The key distinction: travel to meet clients, attend conferences, or visit suppliers is claimable. Your commute is not (even if you’re going to your own office). I’ll cover this grey area in more detail below.

Vehicle costs. You have two options. You can claim the actual costs (fuel, insurance, servicing, road tax) proportioned for business use. Or you can use HMRC’s simplified mileage rates: 45p per mile for the first 10,000 miles and 25p per mile after that. For most people, the mileage rate is simpler and often more generous. Keep a mileage log.

Professional subscriptions and memberships. Trade associations, professional bodies, industry memberships. If it’s relevant to your business, it’s claimable.

Software and online services. Accounting software like Xero or FreeAgent, project management tools, email marketing platforms, web hosting, domain names. If you use it to run the business, claim it.

Phone and broadband. If you use your personal phone and broadband for business, you can claim the business proportion. If you have a separate business phone, claim 100%.

Insurance. Professional indemnity insurance, public liability insurance, business contents insurance. All claimable.

Training and development. Courses, books, and conferences that maintain or update your existing skills. Note the word “existing”. Training to acquire a new skill (like a career change) is not claimable. Training that improves your current business skills is.

Marketing and advertising. Website costs, social media advertising, business cards, networking event fees, Google Ads. All legitimate business expenses.

Accountancy and legal fees. Your accountant’s fees for preparing your tax return and business accounts are deductible. Legal fees directly related to the business (contract reviews, debt recovery) are too.

Bank charges and interest. Business bank account fees, merchant fees for card payments, and interest on business loans.

What you CANNOT claim

Some expenses feel like they should count but don’t. These are the ones that trip people up.

Commuting costs. Travel between your home and your regular workplace is not a business expense. If you rent an office, your daily trip there is a commute. If you work from home and travel to client sites, those client visits are claimable, but any regular commute is not.

Clothing (unless it’s a uniform or protective). Your suit for a business meeting? Not claimable. Hi-vis jackets, branded workwear, or protective equipment? Claimable. The rule is that everyday clothing you could wear outside of work doesn’t qualify, even if you only wear it for work.

Client entertainment. This is one of the most commonly misunderstood rules. Taking a client for dinner is not a deductible expense for tax purposes. You can record it in your accounts, but it won’t reduce your tax bill. Staff entertainment (like a Christmas party under £150 per head) is different and can be claimed.

Fines and penalties. Parking fines, speeding tickets, HMRC late filing penalties. None of these are deductible, for obvious reasons.

Personal expenses. Gym memberships, personal grooming, childcare, and anything else that isn’t “wholly and exclusively” for the business.

The grey areas

This is where most of the questions come from.

Working from home allowance. If you work from home regularly, you can claim a share of your household costs. The simplified rate (£6/week) is easy but small. If you use a dedicated room exclusively for business, you can calculate the actual proportion: divide your costs by the number of rooms and claim the business share. A four-bedroom house where one room is a full-time office means 25% of heating, electricity, and council tax could be claimable. Be reasonable and you’ll be fine.

Mileage vs actual costs. If you drive a lot for business, run the numbers both ways. The 45p per mile rate is generous for smaller, efficient cars but may not cover costs for larger vehicles. You can only pick one method, and once you’ve chosen, you’re stuck with it for that vehicle. For most people, mileage is simpler and saves more.

Phone bills. HMRC accepts a reasonable split. If you estimate you use your phone 60% for business, claim 60% of the bill. You don’t need to itemise every call, but be realistic. Claiming 100% of a personal phone bill is asking for trouble.

Food and drink. Day-to-day meals are not claimable, even if you eat at your desk. But meals while travelling overnight for business, or subsistence during an unusually long business trip, can be. The test is whether the journey is substantially different from your normal routine.

The time HMRC queried me

In year three of Kaizen, HMRC opened an enquiry into my return. It was random, not triggered by anything suspicious, but that didn’t stop the cold sweat. They queried my travel expenses and my working from home claim. Because I’d kept proper records (mileage log, receipts, a clear calculation for the home office proportion), the enquiry was closed within six weeks with no changes to my return.

The lesson: keep your records clean. Not because you’re doing anything wrong, but because being able to prove your claims quickly makes HMRC go away quickly. If I’d had to reconstruct my mileage from memory, it would have been a very different conversation.

Simplified expenses

If you’re a sole trader and the idea of tracking every receipt sounds like a nightmare, HMRC offers simplified expenses for three categories:

Working from home: Flat rate of £6/week (25-50 hours), £10/week (51-100 hours), £18/week (101+ hours)
Business mileage: 45p/mile for first 10,000 miles, 25p/mile after
Living at your business premises: Monthly flat rate based on the number of occupants

These simplified rates are conservative, so you might save more by claiming actual costs. But they’re much easier to manage and they’re accepted by HMRC without question.

Keep good records

This is the part nobody finds exciting, but it’s the part that saves you money and keeps you out of trouble. Use accounting software. Photograph receipts on your phone. Reconcile your bank account monthly, not in January when you’re trying to file your self-assessment.

Every expense you don’t claim is tax you didn’t need to pay. At basic rate, a missed £1,000 expense costs you £200. At higher rate, it’s £400. Over a year, those missed claims add up fast.

Know the rules. Claim what’s yours. Keep the proof.