Sole Trader Allowable Expenses & Simplified Expenses Check

As a sole trader or freelancer you pay Income Tax and National Insurance on your profit, not your turnover, so every genuine business expense you claim lowers your tax bill. Under section 34 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA), you can only deduct costs incurred “wholly and exclusively” for your trade, and where something is used partly for personal life you can only claim the business part. Since April 2024 the cash basis is the default for most sole traders, which simplifies when you claim, and you can choose HMRC’s flat-rate simplified expenses for vehicles, working from home and living at your business premises (ITTOIA ss.94B to 94I) instead of working out actual costs.

Getting expenses wrong cuts both ways. Claiming personal spending, clothing, or your own time as a business cost can lead to HMRC amending your return, charging interest and adding penalties of up to 100% of the extra tax under Schedule 24 to the Finance Act 2007. Missing expenses you are entitled to means you simply overpay. You must also keep records supporting your figures for at least five years after the 31 January filing deadline (Taxes Management Act 1970 s.12B), and from April 2026 many sole traders earning over £50,000 must keep them digitally under Making Tax Digital. This check helps you make sure you are claiming what you can, and only what you can, before your 31 January 2027 Self Assessment deadline.

Use this free tool to check which expenses you can claim as a UK sole trader or freelancer, whether simplified expenses or the trading allowance would save you more, and whether your records would satisfy HMRC.