What a sole trader can deduct.

GOV.UK's own sketch is the cleanest one: turnover of £40,000 and £10,000 of allowable expenses leaves a taxable profit of £30,000. Put those two numbers into the take-home calculator and you can see the tax and National Insurance on that profit for the year you pick. This page is about which costs belong in the £10,000.

The test

The cost has to be for the business. If a bill is mixed, you claim the business part only. GOV.UK's phone example is a £200 mobile bill of which £70 was business calls: the claim is £70, not a hopeful half. The same idea applies to a room at home. Their electricity example is a £1,120 bill, four rooms, one used only as an office, so £280, and then a further split if you only work from home one day a week.

The overview groups allowable running costs like this:

• Office costs, such as stationery and phone bills.
• Travel, such as fuel, parking, and train or bus fares.
• Clothing, such as a uniform.
• Staff costs, such as wages or subcontractors.
• Goods you buy to sell, including stock and raw materials.
• Financial costs, such as insurance and bank charges.
• Business premises: heat, light, business rates.
• Advertising and marketing, including a website.
• Subscriptions to trade or professional journals.
• Training courses related to the business, the example given being a refresher course.

If you are not sure, the overview says to ask HMRC rather than guess. That is better advice than a blog pretending every grey case is allowed.

The trading allowance instead

You can have up to £1,000 of trading income covered by the trading allowance. There is a separate £1,000 property allowance, which this guide is not about. If your gross trading income is £1,000 or less, you may not have to tell HMRC at all, though there are cases where you still must register, and you must keep records. If gross income is higher, you can deduct £1,000 instead of your actual expenses. You cannot deduct both, and the allowance cannot be used to create a loss.

It is often the better claim when real expenses are small. It is the worse claim when expenses are large, or when you want to declare a loss. The calculator compares the two on the figures you enter and says which leaves more after tax. Where the expenses route produces a loss, it also says that loss relief is not calculated, because a lower taxable profit is not automatically the better outcome.

You cannot use the allowance for trading income from a partnership, from your employer or your spouse or civil partner's employer, or from a company you or a connected person owns or controls.

Mileage, and the 2026 change

Simplified vehicle expenses are a flat rate per business mile instead of the actual cost of fuel, insurance and repairs. You cannot use them for a vehicle you have already claimed capital allowances on, or already put through as a cost. Once you use the flat rate for a vehicle, you keep using it while that vehicle is in the business. Parking and train fares can still be claimed on top.

GOV.UK's table splits the car and van rate. For 2026/27 the first 10,000 business miles are 55p, and miles after that are 25p. Before 6 April 2026, including the whole of 2025/26, the first 10,000 were 45p and the rest 25p. Motorcycles are 24p in both columns. Cars designed for commercial use, such as a black cab or a dual-control instructor's car, are outside this flat rate.

Their worked example is 11,000 business miles. At the 2026/27 rates that is £5,750.00: 10,000 miles at 55p and 1,000 at 25p. The same journey in 2025/26 is £4,750.00.

Working from home, the flat rate

If you work 25 hours or more a month from home, simplified expenses let you claim a monthly flat rate instead of splitting the household bills. The flat rate does not include telephone or internet; those are still worked out from the actual business cost. The current GOV.UK table is £10 a month for 25 to 50 hours, £18 for 51 to 100 hours, and £26 for 101 hours or more. Their example is 10 months at £10 and 2 months at £18, which is £136.

Unlike mileage, that page does not publish a separate column for earlier tax years. The pounds above are the live table as checked on 15 November 2026. If you are claiming for 2025/26, open the page and do not assume it has always shown these three amounts.

Equipment is often not an "expense"

Under traditional accounting, equipment, machinery and business vehicles are capital allowances, not a running cost. Under the cash basis, a car still goes through capital allowances, and other things you buy and keep are usually claimed as expenses. The trading allowance blocks capital allowances as well as expenses. The annual investment allowance and the rates for cars are easy to misquote, so they are not repeated here. Use the capital allowances guidance for the purchase itself.

From the 2024/25 tax year, the cash basis is the default. You opt out if you want traditional accounting, or if you cannot use the cash basis. Cash basis means you record income when it arrives and costs when you pay them. The calculator does not convert one basis into the other. Enter the turnover and the allowable costs that match the basis you are on.

Keep the records. The rule is at least five years after the 31 January filing deadline for that tax year. GOV.UK's example is a 2022/23 return filed online by 31 January 2024, with records kept until at least the end of January 2029.