Online Accountant | Low cost fixed fee accountant
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.
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.
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. |
E-mail us at enquiries@onlineaccountsandtax.co.uk or call us on 0116 298 2425