What Expenses Can You Claim as a UK Small Business? (HMRC Approved List)

One of the most straightforward ways to reduce your tax bill as a UK small business owner is to claim every allowable expense you are legally entitled to. Yet most sole traders and limited company directors either under-claim because they are not sure what qualifies, or over-claim and attract unwanted attention from HMRC. This guide covers the complete list of HMRC-approved allowable expenses for 2025/26, what you can claim, what you cannot, the rates that apply, and the most common mistakes that trigger HMRC queries.

The golden rule: wholly and exclusively

Before diving into the categories, there is one principle that underpins everything. HMRC will only allow an expense if it was incurred wholly and exclusively for business purposes.

This does not mean the expense needs to have zero personal benefit, it means the primary purpose must be business-related. If an expense has both a personal and a business element, you can sometimes claim the business portion only. You just need to be able to justify the split with records.

Expenses that reduce your taxable profit do not reduce your tax bill pound for pound. They reduce the profit on which tax is calculated. So for a basic-rate taxpayer, every £1,000 in allowable expenses saves approximately £200 in Income Tax. For a higher-rate taxpayer, it saves £400. For a limited company, every £1,000 in allowable expenses saves £190 to £250 in Corporation Tax, depending on your profit level.

1. Office costs and supplies

What you can claim:

• Stationery, printer ink, and paper
• Postage and courier costs
• Computer software and subscriptions (including accounting software, design tools, project management tools)
• Office furniture, desks, chairs, filing cabinets
• Printer, scanner, and office equipment
• Business telephone line and calls
• Broadband, the business proportion is shared with personal use

What you cannot claim:

• Personal phone calls or the personal portion of a shared phone contract

Practical tip: Cloud-based software subscriptions like accounting tools, design software, or project management platforms are fully allowable if used wholly for business. If you use the same software personally, too, claim only the business proportion and document your reasoning.

2. Working from home

If you work from home — whether as a sole trader or a limited company director, you can claim a portion of your household costs.

Option 1 — HMRC simplified flat rate (sole traders):

You must work at least 25 hours per month from home to use this method. No receipts required, HMRC rarely challenges these amounts.

Option 2 — Actual costs (sole traders and limited companies):

Calculate the business proportion of your household bills, rent or mortgage interest, utilities, council tax, and broadband, based on the number of rooms used for business and the hours used per week. For example, if you use one room in a five-room house for business 40 hours per week out of 168 hours total, you can claim roughly 5% of your household costs.

Limited company directors can claim £6 per week (£312 per year) as a flat rate without receipts, or claim a licence fee for use of a home office at a fair market rate with a written agreement.

One caution: If you own your home and dedicate a room exclusively to business, you may create a Capital Gains Tax liability when you sell. For most people, the simplified flat rate is the safer option.

3. Travel and transport

What you can claim:

• Business mileage at HMRC-approved rates (see below)
• Train, bus, taxi, and tube fares for business journeys
• Parking costs for business visits
• Congestion charge for business trips
• Accommodation when working away from your regular base overnight
• Meals when working at a temporary location away from your normal workplace (not your everyday lunch)

HMRC approved mileage rates 2025/26:

The mileage rate covers fuel, insurance, servicing, MOT, and depreciation, you cannot claim these separately if you are using the mileage rate for a vehicle.

What you cannot claim:

• Commuting from home to your regular workplace — this is never allowable
• Speeding fines or parking fines — even if incurred on a business trip
• The private proportion of any vehicle costs

Keep a mileage log with date, destination, purpose, and miles for every business journey. HMRC audits mileage claims regularly.

4. Marketing and advertising

What you can claim:

• Website design, hosting, and domain registration
• Social media advertising (Facebook Ads, Google Ads, LinkedIn)
• Business cards, flyers, and printed marketing materials
• Advertising in directories, newspapers, or online platforms
• PR and content marketing costs
• Photography for business use
• SEO and digital marketing agency fees
• Samples are given free to potential customers

What you cannot claim:

• Entertaining clients, even if the meal or event was entirely for business development purposes (see Section 9 on entertainment)

5. Professional fees and subscriptions

What you can claim:

• Accountant and bookkeeper fees
• Solicitor fees for business contracts and commercial matters
• Business insurance, public liability, professional indemnity, and employer's liability
• Trade or professional association membership fees
• Relevant professional publications and subscriptions
• HR and employment law advice

What you cannot claim:

• Legal costs related to personal matters
• Fines and penalties (including HMRC late payment penalties)
• Payments that are capital in nature, for example, the cost of acquiring a lease

6. Staff costs

What you can claim:

• Employee salaries and wages
• Employer National Insurance contributions
• Pension contributions (employer contributions to a registered pension scheme)
• Staff training, which maintains or improves existing skills relevant to the current trade
• Subcontractor costs where the work is wholly for business
• Benefits in kind, some are allowable, subject to employer NIC at 15% for 2025/26
• Recruitment costs
• Uniforms and protective clothing (but not ordinary work clothing)

What you cannot claim:

• Training that introduces a completely new trade or qualification unrelated to the existing business
• Paying a salary to a family member who does not genuinely work in the business, HMRC scrutinises this closely

Limited company directors: Your own salary is an allowable expense for the company. Many directors pay themselves a salary at or near the National Insurance threshold (£12,570 for 2025/26) and take the remainder as dividends, which are not an expense but are taxed at a lower rate.

7. Stock, materials, and cost of goods

What you can claim:

• Raw materials and components are purchased to make products
• Stock bought for resale
• Packaging materials
• Delivery costs associated with purchasing stock

What you cannot claim:

• Items for personal use, even if purchased through the business
• Capital equipment, this is claimed separately via capital allowances (see Section 11)

8. Financial costs

What you can claim:

• Bank charges for a business bank account
• Interest on a business loan or overdraft
• Business credit card charges
• Merchant service charges and payment processing fees (including Stripe fees)
• Hire purchase interest on business equipment

What you cannot claim:

• Personal loan interest, even if the money was used for the business
• Dividends paid to shareholders, these are distributions of profit, not expenses
• Capital repayments on loans

9. Client entertainment the one that catches everyone

Client entertainment is rarely allowable as a business expense in the UK. Taking a client to lunch, dinner, or a sporting event is not tax-deductible, regardless of how much business was discussed.

The strict rule: entertaining clients, customers, or suppliers is a disallowable expense for both sole traders and limited companies.

The exception that does apply is staff entertainment:

Staff entertainment is allowable up to £150 per person per year. This covers Christmas parties, team days out, and staff lunches. The £150 is a per-person limit, if you go over it, the entire amount for that event becomes a taxable benefit, not just the excess.

Trivial benefits for limited company directors:

Limited companies can provide trivial benefits to directors, small perks such as a birthday gift or flowers, up to £50 per benefit and £300 per tax year for directors, without triggering a benefit-in-kind charge. These are not expenses as such but are a tax-efficient way to extract value from the company.

10. Clothing

This is one of the most misunderstood expense categories.

What you can claim:

• Uniforms with the company name or logo that cannot reasonably be worn outside work
• Protective clothing required by the nature of the work, such as hats, safety boots, and high-visibility vests
• Costumes for performers where the clothing could not be worn in everyday life

What you cannot claim:

• Ordinary clothing, even if you only wear it for work. HMRC's position is that clothing is dual-purpose, you could wear it outside of work, so it fails the wholly and exclusively test.
• Suits, smart casual wear, or any clothing that could be worn in a personal context

11. Equipment and capital allowances

Larger purchases that provide a long-term benefit to the business, such as computers, machinery, vehicles, and commercial property improvements, are not treated as day-to-day expenses. They are capital expenditure and claimed through capital allowances instead.

Annual Investment Allowance (AIA): The AIA allows businesses to deduct 100% of the cost of qualifying plant and machinery in the year of purchase, up to £1 million per year. This covers most equipment a small business would typically buy: computers, printers, machinery, and office furniture.

First Year Allowances: New electric cars qualify for 100% First Year Allowance, the full cost can be deducted against profits in the year of purchase.

What qualifies:

• Computers, laptops, tablets, and phones purchased by the business
• Office furniture
• Machinery and specialist equipment
• Commercial vehicles

What does not qualify for AIA:

• Cars (claimed at 18% or 6% per year, depending on CO2 emissions, except electric cars, which qualify for 100% First Year Allowance)
• Land
• Buildings (though some structural improvements qualify for Structures and Buildings Allowance)

12. Making Tax Digital: what's changing for expenses from April 2026

From April 2026, sole traders and partnerships with an annual turnover above £50,000 must keep digital records ofincome and expensesand submit quarterly updates to HMRC under Making Tax Digital for Income Tax. The threshold drops to £30,000 from April 2027.

This means the days of keeping paper receipts in a shoebox and reconciling everything in January are ending for most UK self-employed people. Digital record-keeping for every expense, with receipts attached, becomes a legal requirement, not just good practice.

BFSB's expense tracking tool lets you categorise and record expenses digitally with receipt attachments and export your records when your accountant needs them. It is free for UK businesses.

How to record expenses properly

HMRC requires you to keep records for at least 6 years after the end of the tax year or accounting period. In the event of an enquiry, you need to be able to show:

• What was purchased
• Who it was purchased from
• When it was purchased
• How much does it cost
• Why was it for business use

Bank statements alone are not sufficient, they show money left in your account, but they do not prove what was bought or why. Always keep the original receipt or invoice, whether physical or digital.

Digital copies are perfectly acceptable. Photograph paper receipts immediately, they fade, and store them tagged to the relevant expense category.

The most common mistakes that trigger HMRC queries

Claiming client entertainment. Consistently one of the most common disallowable expenses claimed, HMRC knows to look for it.

Very round numbers. Expenses claimed in suspiciously round numbers (£500 every month for "miscellaneous") signal to HMRC that estimates are being used rather than actual records.

Overclaiming home office costs. Claiming more than 30% of household costs as business use regularly triggers a review unless there is a clear and documented justification.

Paying a family member an unreasonably high salary. If a spouse or family member is on the payroll, their salary must reflect the work they actually do. HMRC scrutinises family payroll arrangements carefully.

Claiming personal travel as business. Commuting is never allowable. Personal errands made alongside a business journey are not allowable for the personal portion.

FAQ: What Expenses Can You Claim UK Small Business

What is the golden rule for claiming business expenses?
The expense must be incurred wholly and exclusively for business purposes. If it has both personal and business elements, you can only claim the business portion.

Can I claim my mobile phone as a business expense?
If the phone is used exclusively for business, yes, the full cost is allowable. If it is shared for personal use, you can only claim the business proportion. A company-contracted phone provided to an employee or director with one per person creates no benefit-in-kind charge.

Can I claim my home broadband as a business expense?
Yes, the business proportion. If you use broadband 50% for business and 50% personally, you can claim 50% of the cost.

Can I claim a laptop as a business expense?
Yes, through the Annual Investment Allowance if purchased by the business. If it is also used personally, claim the business proportion only.

Can I claim meals as a business expense?
Only in specific circumstances, when working at a temporary location away from your normal workplace for less than 24 months. Your everyday lunch is not claimable. Client meals are not claimable.

What is the mileage rate for 2025/26?
45p per mile for the first 10,000 business miles, then 25p per mile above that, for cars and goods vehicles.

Can I claim client entertainment?
No, client entertainment is rarely allowable as a business expense in the UK, regardless of the business purpose.

How long do I need to keep expense records?
At least 6 years after the end of the relevant tax year or accounting period.

What is the working from home allowance for 2025/26?
Sole traders can claim £10–£26 per month, depending on hours worked. Limited company directors can claim £6 per week (£312 per year) flat rate without receipts.

Can I claim clothing as a business expense?
Only if it is a uniform with company branding, protective clothing required by the job, or a costume that cannot be worn in everyday life. Ordinary work clothing is not allowable.

What happens if I over-claim expenses?
HMRC can issue penalties, interest charges, and in serious cases open a full enquiry into your tax affairs going back up to 6 years. It is always better to claim conservatively and accurately than aggressively and incorrectly.

Do I need an accountant to claim expenses?
Not legally, sole traders can manage their own Self Assessment. However, a good accountant will often identify allowable expenses you are missing, and their fee is itself an allowable expense.

This article is for informational purposes only and does not constitute tax or accounting advice. Tax rules and rates are based on current HMRC guidance for 2025/26 and may change. Always consult a qualified accountant for advice specific to your circumstances.

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