The one rule everything hangs on
An expense is allowable if it's incurred “wholly and exclusively” for the trade. That sounds stricter than it is: mixed-use costs can be apportioned — a phone used 70% for business is 70% claimable; a car used for both is claimable by business proportion. What fails is spending with a joint purpose you can't split (the classic: everyday clothing, even if you'd never wear the suit outside work).
Golden habit: capture everything, decide later. A receipt snapped into FreeAgent in three seconds can be disallowed at review; a receipt in a skip can't be claimed at all.
The full A–Z below covers vehicles (with the mileage-vs-actual decision), premises and home working, people costs, kit, and the five claims that invite HMRC letters.
Vehicles: the big one, decided once
Option A — flat-rate mileage: 45p/mile for the first 10,000 business miles each year, 25p after. Covers fuel, insurance, servicing, depreciation — everything except tolls and parking (claim those separately). Simple, generous for efficient cars, no receipts beyond a mileage log.
Option B — actual costs: claim the business proportion of real running costs plus capital allowances on the vehicle. Better for expensive-to-run vehicles or high business-use vans. Once chosen for a vehicle, you generally stick with the method — so decide with numbers, not habit. (Commuting-equivalent journeys — home to a regular base — don't count as business miles either way.)
Home working
Simplified flat rate: £10–£26/month depending on hours worked from home. Actual-cost method: apportion heating, electricity, broadband, rent/mortgage interest by rooms and hours — routinely worth several times the flat rate for genuine home-based businesses. Keep the workings; that's the whole audit defence.
The A–Z (the ones that matter)
- Accountancy fees — allowable (this service is tax-deductible).
- Advertising & website — ads, domains, hosting, design: yes.
- Bank charges & interest — on business accounts and business borrowing: yes.
- Clothing — protective gear and genuine uniform with a logo: yes. Ordinary clothes: no, famously, ever.
- Entertaining clients — never allowable. The most commonly wrongly-claimed line in the book. (Your own subsistence when travelling on business or working away: yes, reasonable amounts.)
- Insurance — public liability, professional indemnity, tool cover: yes.
- Phone & internet — business proportion: yes. Justify the split once, apply consistently.
- Software & subscriptions — FreeAgent, trade apps, professional memberships on HMRC's approved list: yes.
- Tools & equipment — smaller items as expenses; larger kit via capital allowances (Annual Investment Allowance covers most sole traders' purchases in full, in year).
- Training — updating or expanding skills for your existing trade: yes (rules were relaxed recently — refresher and related-new-skills courses count). Retraining for a brand-new career: no.
- Travel & accommodation — business journeys beyond commuting, reasonable hotels and subsistence when working away: yes.
- Trading allowance alternative — under £1,000 gross income, or very few expenses? You can claim a flat £1,000 instead of actual costs. Rarely right for a real business, occasionally right for a side income.
Five claims that invite letters
- Round numbers everywhere (£500 "materials", £1,000 "misc") — real books don't look like that.
- 100% of a car, a phone or home broadband with no private use at all — implausible for most lives.
- Client entertaining dressed as "marketing".
- Expenses out of line with your trade's norms (HMRC benchmarks by sector).
- A big year-on-year expense jump with flat income — sometimes legitimate, always worth pre-empting with notes.
What this is worth A tradesperson on £45k profit who starts properly claiming mileage, home-office, tools and phone typically adds £2,000–£4,000 of legitimate expenses — roughly £520–£1,040 of tax saved, every year. That's many multiples of our
£19/month package, before we've done anything else.
