What you can deduct from your income as a sole trader, what you cannot, and how flat rates work. Cited to GOV.UK, checked 20 October 2026.

Short answer: you can deduct the costs of running your business from your income, as long as they are allowable expenses. You pay Income Tax only on what is left, your taxable profit. You can only claim for business costs, and you cannot claim expenses if you use the £1,000 trading allowance.

GOV.UK gives an example. If your turnover is £40,000 and you claim £10,000 of allowable expenses, you pay Income Tax on the remaining £30,000.

What you can claim

GOV.UK lists these as costs related to business purchases:

• office costs, such as stationery or phone bills
• travel costs, such as fuel, parking, train or bus fares
• clothing expenses, such as uniforms
• staff costs, such as salaries or subcontractor costs
• things you buy to sell on, such as stock or raw materials
• financial costs, such as insurance or bank charges
• costs of your business premises, such as heating, lighting and business rates
• advertising or marketing, such as website costs
• subscriptions to trade or professional journals
• training courses related to your business

What you cannot claim

• money taken from your business for personal use
• non-business driving or travel costs
• fines or penalty charges
• travel between home and work

Where something is used for both business and personal reasons, you claim only the business part. GOV.UK’s example: phone bills of £200 for the year, of which £70 is business calls, gives a £70 claim.

Equipment, machinery and vehicles

If you use traditional accounting, these are claimed as capital allowances rather than expenses. That covers equipment, machinery and business vehicles such as cars, vans, lorries and bicycles. If you use cash basis accounting and buy a car for your business, you can claim capital allowances on the cost. Other items you buy and keep for the business are claimed as allowable expenses in the normal way.

Flat rates instead of actual costs

Sole traders can use simplified expenses, which are flat rates for some vehicle costs, working from home, and living in your business premises. You do not have to use them. You can only use the working from home rate if you work 25 hours or more a month from home. The rate covers your home costs but not phone or internet, which you claim as the business share of the actual bills.

Hours of business use at home per month	Flat rate per month
25 to 50	£10
51 to 100	£18
101 and more	£26

GOV.UK has a simplified expenses checker to compare the flat rate with your actual costs.

What to do next

• Keep a record of every business cost, including receipts, and separate business use from personal use.
• Check the trading allowance before claiming. You cannot claim expenses and the £1,000 allowance on the same income.
• If you are unsure whether a cost is allowable, GOV.UK says to contact HMRC.

Sources

GOV.UK, Expenses if you are self-employed; Car, van and travel expenses; Simplified expenses: working from home. Checked on 20 October 2026. General information, not tax advice. Rates and rules change, so check the source for your own position.

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