Allowable expenses: the basics

Allowable expenses reduce the profit you pay tax on, so getting them right genuinely matters. The whole thing rests on one test.

The "wholly and exclusively" rule

An expense is allowable if it is incurred wholly and exclusively for the purposes of your business. If something has a private element, you can usually only claim the business proportion — and you need to be able to evidence it.

Commonly allowable

• Office costs — stationery, software, phone and internet (business use).
• Business travel — mileage or actual costs, and accommodation when away for work.
• Stock and raw materials, and direct costs of providing your service.
• Professional fees — accountancy, legal, professional subscriptions and insurance.
• Staff costs, subcontractors and bank/finance charges on business accounts.
• A reasonable proportion of home-working costs if you work from home.

Commonly not allowable

• Anything for personal use, or the private share of a mixed cost.
• Client entertaining.
• Most ordinary commuting, and everyday clothing (even if you only wear it for work).
• Fines and penalties.

Simplified expenses

For some costs — vehicle mileage, working from home, living on business premises — HMRC offers flat rates instead of working out the exact business proportion. Whether the flat rate or the actual cost is better depends on your situation; it's worth checking both.

Keep records you can stand behind

The rule of thumb: keep the receipt, keep it for the required period, and keep business and personal money separate. Clean records mean a smaller bill, less stress, and no scramble in January.

Last reviewed: 2026 · Maze TS