Self-employed expenses in 2026/27: what you can claim and what it saves

If you work for yourself, every allowable expense you claim comes off your profit before Income Tax and Class 4 National Insurance are worked out. A £1,000 cost you forget to claim can mean £260 to £620 more tax, depending on your profit. Yet many sole traders under-claim, either because they are unsure what counts or because they never write the small costs down.

This guide sets out what HMRC lets you claim as a sole trader in the 2026/27 tax year (6 April 2026 to 5 April 2027), the flat rates that save you working out the exact cost of using your car or your home, when the £1,000 trading allowance beats your real expenses, and what all of it is worth in tax. Every figure comes from the same engine as our self-employed expenses calculator and sole trader tax calculator. Limited companies follow different rules and are not covered here.

The one rule behind every expense

HMRC’s test is that a cost must be incurred “wholly and exclusively” for the purposes of your business. In plain words: you spent the money because of the business, not for yourself. Where a cost is partly business and partly personal, such as a phone you also use for family calls, you can claim the business share if you can separate it sensibly, for example by the proportion of calls or data used for work.

Three things follow from that rule. You cannot claim personal costs, even if they help you work (lunch on an ordinary working day, for instance). You cannot claim your own wages or the money you take out of the business (drawings), because profit is what you are taxed on. And you cannot claim your own Income Tax or National Insurance as an expense.

What you can claim: the main categories

The Self Assessment self-employment pages group expenses into categories. If your turnover is below the VAT threshold of £90,000, you can use the short pages and enter a single total for expenses, but it still helps to keep your records in these groups:

• Office, property and equipment: stationery, printing, postage, software and subscriptions, phone and broadband (business share), rent and business rates for business premises, small equipment.
• Car, van and travel: fuel, insurance, repairs and road tax for a business vehicle (or the mileage rates instead), train and bus fares, parking, hotel and meals on overnight business trips.
• Clothing: uniforms, protective clothing and costumes for performers; not everyday clothes, even if bought for work.
• Staff: wages, employer National Insurance, employer pension contributions, subcontractor costs, agency fees.
• Stock and materials: goods for resale, raw materials, direct costs of producing what you sell.
• Financial costs: business insurance, bank charges, card fees, interest on business loans (up to £500 under the cash basis).
• Professional fees: accountant, bookkeeper, solicitor and surveyor fees for the business.
• Marketing and subscriptions: advertising, a website, directory listings, trade or professional body subscriptions.
• Training: courses that maintain or update skills you use in your current trade.

What you cannot claim

• Commuting: travel between home and a permanent workplace, such as a shop you rent. Travel to clients, temporary sites and suppliers is allowed.
• Entertaining: taking clients or potential clients for meals or drinks. Staff events can be allowable.
• Everyday clothing: a suit for meetings is not allowable, even if you only wear it for work.
• Fines and penalties: parking and speeding fines, and HMRC penalties.
• Training for a new trade: a course to start a different kind of business is not allowable against your current one.
• The personal share: of anything used partly for private life.

What claiming is worth: your marginal rate

An expense saves tax at your marginal rate: the Income Tax and Class 4 National Insurance on the last slice of profit it removes. In 2026/27 Class 4 is 6% on profit between £12,570 and £50,270 and 2% above that. The table shows the tax and National Insurance on the next £100 of profit for a sole trader with no other income.

So a £1,000 expense you remember to claim saves £260 at a profit of £30,000 and £420 at £60,000. Between £100,000 and £125,140 the Personal Allowance is withdrawn, which pushes the marginal rate to 62% in England, Wales and Northern Ireland. If your profit is below the £12,570 Personal Allowance and you have no other income, expenses save no tax at all that year, though they still matter if your profit later turns into a loss you can carry forward.

Worked example: a freelance designer on £40,000

Sam is a self-employed graphic designer in England with turnover of £40,000 and no other income. Over the year Sam spends £1,500 on software, a laptop accessory, stationery and the business share of a phone; £600 on a website and advertising; £900 on insurance, an accountant and bank fees; and £400 on a course updating design skills. Sam drives 2,000 business miles to clients and works from home 51 to 100 hours a month all year.

The same £4,516 of expenses saves £1,896.72 if Sam’s turnover is £70,000, because the profit sits in the higher-rate band, and £1,219.32 for a designer in Scotland on £40,000. If Sam had claimed only the £1,000 trading allowance instead, the bill would be £6,871.80, £914.16 more than claiming real expenses.

Simplified expenses: the flat rates

Simplified expenses let you use flat rates for a few costs that are awkward to split between business and personal use. They are optional; you can always work out the actual cost instead if it is higher and you have the records.

Vehicles: 45p and 25p a mile

For a car or van, you can claim 45p a mile for the first 10,000 business miles in the year and 25p a mile after that. Motorcycles are 24p a mile. The rate covers fuel, insurance, servicing, road tax and depreciation, so you cannot also claim those. Parking, tolls and congestion charges on business journeys can be claimed on top.

A courier or a tradesperson who drives 12,000 business miles can claim £5,000 (10,000 at 45p plus 2,000 at 25p). On turnover of £50,000, that cuts Income Tax and National Insurance by £1,300. Once you choose the mileage rate for a vehicle, you must keep using it for as long as you use that vehicle in the business. Our business mileage calculator works out the claim.

Working from home

Instead of working out a share of your heating, lighting and electricity, you can claim a flat monthly amount based on the hours you work at home on business:

The flat rate does not cover phone and broadband, which you claim separately for the business share. The amounts are modest: £312 a year saves £81.12 of tax and National Insurance at a profit of about £30,000. If you use a room mainly for work and your bills are high, working out the actual business share (by rooms and hours) can give a bigger figure, but you will need to show how you calculated it.

Living at your business premises

If you run a guest house, bed and breakfast or care home and live there too, you can deduct a flat amount from your total premises costs for private use: £350 a month for one person, £500 for two and £650 for three or more.

The £1,000 trading allowance

The trading allowance lets you deduct a flat £1,000 from your self-employed income instead of your actual expenses. If your total trading income (before expenses) is £1,000 or less, you do not need to tell HMRC about it at all. Above that, you choose each year between the allowance and your real expenses; you cannot claim both.

The choice is simple: use the allowance when your real expenses are below £1,000. Take someone with a £30,000 salary and a side business with turnover of £3,000. With no deduction, the side income would cost £600 in Income Tax. The table shows the result with different levels of real expenses:

There is no Class 4 National Insurance here because the side profit is well below £12,570. The allowance also saves record-keeping, which is useful for small side incomes such as occasional craft sales or tutoring. One catch: if you make a loss, claiming real expenses lets you use it against other income or carry it forward, whereas the allowance cannot create a loss.

Equipment, computers and vans

Since April 2024 the cash basis has been the default for sole traders. Under the cash basis, most equipment you buy for the business, such as a laptop, tools or a printer, is simply an expense in the year you pay for it. Under traditional accounting you claim capital allowances instead, and the Annual Investment Allowance of £1 million means most small businesses can still deduct the full cost in the year of purchase.

Cars are the exception. Under either basis, a car (not a van) is not an expense when you buy it: you either use the mileage rate or claim capital allowances on the car plus the business share of running costs. If you use equipment partly for personal reasons, claim only the business share, and if you later sell it, the sale price may need to be added to your income.

Big incomes: expenses and the 62% band

If your profit is between £100,000 and £125,140, each £1 of expenses gives back 50p of Personal Allowance as well as cutting tax on the £1 itself. A sole trader with turnover of £110,000 who claims £10,000 of genuine expenses brings profit down to £100,000 and saves £6,200 of Income Tax and National Insurance. Personal pension contributions have a similar effect on the Personal Allowance, even though they are not a business expense; the pension tax relief calculator shows how they work for the self-employed.

Student loans: a hidden extra saving

If you are repaying a student loan, your repayments are worked out on your profit through Self Assessment, so expenses cut those too. A sole trader with a Plan 2 loan and turnover of £40,000 pays £8,087.15 in Income Tax, National Insurance and student loan repayments with no expenses. With £5,000 of expenses the total falls to £6,337.15, a saving of £1,750, of which £450 is the lower student loan repayment.

Records: what to keep and for how long

You do not send receipts to HMRC, but you must keep records that support the figures on your tax return, for at least five years after the 31 January filing deadline for that year. Useful habits:

• Keep receipts or invoices for every purchase, digital copies are fine.
• Use a separate bank account for the business, so business spending is easy to spot.
• Keep a mileage log with the date, destination, purpose and miles of each business journey.
• Note how you worked out any business share, for example of your phone or home costs.
• Record small cash purchases as you go; they add up over a year.

Making Tax Digital changes the routine

From 6 April 2026, sole traders and landlords whose qualifying income (turnover from self-employment and property together) was over £50,000 must keep digital records and send quarterly updates to HMRC through compatible software. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028. Quarterly updates do not change what you can claim, but they do mean recording expenses through the year rather than in a rush in January, which tends to catch more of them. If you are getting close to the VAT threshold as well, the VAT threshold calculator tracks your rolling 12-month turnover.

Paying the tax: payments on account

Lower profit also means lower payments on account. If your Self Assessment bill is £1,000 or more and less than 80% of your tax was collected at source, HMRC asks for two advance payments towards next year’s bill, each half of this year’s. Claiming all your expenses reduces this year’s bill and so both advance payments. The payments on account calculator shows the dates and amounts.

Ten commonly missed expenses

1. The business share of your mobile phone and broadband.
2. Accountancy and bookkeeping software subscriptions.
3. Professional body and trade association fees.
4. Business insurance, including professional indemnity and public liability.
5. Bank charges and card processing fees, including online payment platforms.
6. Parking, tolls and congestion charges on business trips, on top of the mileage rate.
7. Train and bus fares to clients and suppliers.
8. Hotel stays and meals when travelling overnight for work.
9. The working from home flat rate, even if you also have an office.
10. Small tools and equipment under the cash basis.

Common mistakes

• Claiming mileage and fuel together: the mileage rate already covers fuel and running costs.
• Claiming the trading allowance and expenses together: it is one or the other.
• Claiming the whole cost of something used privately: claim only the business share.
• Treating drawings as expenses: money you take out for yourself is not a cost of the business.
• Forgetting VAT: if you are VAT-registered under the standard scheme, claim expenses net of the VAT you reclaim. On the Flat Rate Scheme you usually cannot reclaim VAT on purchases, so the full cost is the expense.

Key numbers for 2026/27

The bottom line

Claiming every allowable expense is the simplest legal way for a sole trader to cut a tax bill. For most people the saving is 26p to 42p for each £1 claimed, rising to 62p for profits between £100,000 and £125,140. Use the flat rates for mileage and working from home when they are easier, choose the £1,000 trading allowance only when your real costs are lower, and keep records as you go. To check your own figures, try the self-employed expenses calculator and the sole trader tax calculator. These figures are estimates for 2026/27 and general guidance, not tax advice; an accountant can help with anything unusual.