What are allowable business expenses? - Sole trader

Sarah Hiraki

 · June 03, 2020  · 06/03/2020

Business expenses are what your spend on the products and services you need to operate your business. Find out what expenses you can claim as a sole trader.

What are allowable business expenses?

Business expenses are what your spend on the products and services you need to operate your business. Expenses are also used to calculate your company’s profit – to do this, you simply subtract your allowable expenses from your revenue. The lower your profit calculation, the less income tax you need to pay – so you’ll want to claim every expense that you’re eligible to. In short, having control over your expenses can save you money.

What expenses can I claim as a sole trader?

If you’re a sole trader in the UK, the guidance around what is a “necessary” expense can be confusing, with many of the rules based on loose concepts and can seem unclear. Remember, always consult with your accountant if you’re not entirely sure if something counts as a business expense. However, there are some categories of business expenses that are generally safe bets:

  • Travel

You can claim mileage, fuel, parking, food, and accommodation (within reason) for business trips and travel.

  • Accounting services

So long as the accounting services are solely for your business, and not for your personal finances, they can be claimed.

  • Equipment, supplies, and raw materials

The broadest category of business expenses, this will typically include things like computers, notebooks, software, and paper, but can extend well beyond office supplies. If you need it to get the job done, it generally counts in this category.

  • Your home office

Furniture and things like computers and software are allowable expenses. Even if it may seem like home furnishings have dual purpose (work and personal), if they’re for your home office, you’ll be able to claim them. You can also claim a proportion of your utility bills in line with how much you use your home as your workplace. You can calculate this yourself, or choose to claim Simplified Expenses. The HMRC has a handy calculator here.

  • Phone and internet service

As long as the service is solely used for business purposes, you can claim it. If you use a mobile phone for both work and personal use, you may struggle to claim it as a business expense.

  • Professional subscriptions

So long as they are directly relevant to your business, professional subscriptions are allowable expenses.

  • Staff expenses

You can claim allowable business expenses  for employee and staff salaries, bonuses, pensions, benefits, agency fees, subcontractors, and employer’s National Insurance.

  • Training

You’re able to claim course fees, travel, and accommodation related to training that helps you build on your existing skills. Claims may be rejected if they are perceived to be re-training or to gain new skills, ie, getting an additional degree.

What doesn’t count as an allowable expense?

  • Charitable donations

Since you and your business entity are one in the same, your business will not benefit from any tax relief when you make a donation as a business.

  • Medical care and insurance

These can be claimed in very rare cases, but are not generally allowed.

Manage your business expenses with Revolut Business

Company cards are available on all of our plans – for both companies and freelancers. While many sole traders use their personal accounts to cover business expenses, you may want to consider having a dedicated business account to keep yourself organised.

Our company cards help you to automate your expenses and capture receipts in the app instantly. We’ll even send you helpful reminders to add expense details and receipts images, so you’ll never go sorting through your jacket pockets again. Then it’s up to your accountants and administrators to simply review expenses and reject or approve them – and even upload or import files to their accounting platform of choice.

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