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Mastering allowable expenses for sole traders and partnerships

Understanding allowable expenses is key to reducing your tax bill as a sole trader or partner. This guide breaks down everything you need to know, with practical examples and clear explanations to help you stay compliant while maximising savings.

What qualifies as business expenses?

Business expenses refer to the costs you incur while operating your business, provided they are directly and solely related to its activities. These expenses are a crucial part of calculating your taxable profit, as they are deducted from your overall income before tax is applied. Essentially, they help lower your tax liability by accounting for the money spent on running your business.

To qualify as a business expense, the cost must meet the “wholly and exclusively” rule. This means the expense must serve a business purpose and cannot be partly for personal use unless the personal and business portions can be clearly separated.

Key categories of allowable expenses

Categories	Expense	Allowable?	Details
Office and administrative costs	Office supplies	✅ Yes	Includes pens, paper, ink, and other consumables.
	Equipment purchases	✅ Yes	Computers, printers, and desks (if used mainly for business).
	Internet and phone	✅ Partial	Only the business-use proportion is deductible.
	Software subscriptions	✅ Yes	Accounting tools, CRM software, or design programs used for your business.
	Postage & printing costs	✅ Yes	For sending business correspondence, cost of printing marketing materials or documents.
Travel and transportation costs	Public transport (e.g., trains, buses, taxi)	✅ Yes	Travel to meet clients or attend work-related events.
	Parking fees	✅ Yes	If incurred for business purposes.
	Fines (e.g., speeding tickets)	❌ No	HMRC disallows penalty-related costs.
	Daily commuting	❌ No	Travel between home and a regular place of work is not deductible.
	Hotel stays	✅ Yes	Deductible for overnight work-related travel.
Business premises and utilities	Rent & cleaning services	✅ Yes	Fully claimable if used exclusively for business.
	Utilities (electricity, water)	✅ Partial	Proportional claim for home-based businesses.
	Maintenance/repairs	✅ Yes	For business premises only.
	Mortgage payments	❌ No	Not claimable, but interest payments may qualify.
	Council tax	✅ Partial	Claimable for the business portion in home-based setups.
Marketing and advertising	Digital advertising	✅ Yes	Google Ads, Facebook campaigns, and other online promotions.
	Printed materials	✅ Yes	Business cards, brochures, and flyers.
	Website development	✅ Yes	Costs for hosting, domains, and design services.
	Client gifts	❌ No	Unless they are branded promotional items. (maximum allowed £50 per recipient per year)
	Sponsorships	✅ Yes	If used to promote your business (e.g., event sponsorships).
Professional services and subscriptions	Accountant or bookkeeper fees	✅ Yes	Claimable if related to managing business finances.
	Legal fees	✅ Yes	For contracts, disputes, or business-related advice.
	Professional subscriptions	✅ Yes	Memberships in trade bodies or professional organisations.
	Business insurance	✅ Yes	Includes public liability or professional indemnity policies.
	Advisory services	✅ Yes	Includes consultancy services tied to business strategy.
Training and development	Business-related courses	✅ Yes	Skills directly tied to your business activities.
	General interest courses	❌ No	Training not directly relevant to your trade or profession.
	Online learning platforms	✅ Yes	Subscriptions to platforms like LinkedIn Learning or Coursera.
	Industry conferences	✅ Yes	Attending seminars or expos relevant to your field.
Employee and staff costs	Salaries, wages and Employer’s NI	✅ Yes	Gross pay, including bonuses, employer contribution to NI for employees.
	Recruitment fees	✅ Yes	Costs for job ads or agency fees.
	Staff training	✅ Yes	Courses to upskill employees.
	Staff welfare	✅ Partial	Includes tea, coffee, and similar perks, but not extravagant benefits.
Financial costs	Loan interest & overdraft fees	✅ Partial	Only for business-related costs are claimable.
	Credit card fees	✅ Yes	If used for business transactions.
	Currency exchange fees	✅ Yes	For international business transactions.

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