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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.

Claiming allowable expenses is a practical way to reduce your tax burden and retain more of your hard-earned income. By staying informed and organised, you’ll ensure compliance and financial efficiency.

 

Need help? Get in touch today

 

E-mail us at enquiries@onlineaccountsandtax.co.uk or call us on 0116 298 2425