What does 'wholly and exclusively' mean?

It's the core test for a self-employed business expense: the cost has to be incurred entirely for business purposes. Where something is used for both business and personal reasons, you can usually only claim the business proportion.

Can I claim expenses if I work from home?

Yes. You can claim a reasonable proportion of household running costs based on your business use, or use HMRC's flat-rate simplified expenses. Which is better depends on your actual costs and hours worked.

Can I claim for my car?

You can claim either a flat rate per business mile or the business proportion of your actual running costs. You generally have to keep to one method per vehicle, so it's worth choosing carefully at the outset.

Can I claim clothing as a business expense?

Only protective clothing and genuine uniforms. Everyday clothing isn't allowable, even if you only wear it for work.

Do I need to keep receipts?

Yes — you need records to back up what you claim, and Making Tax Digital increasingly requires them to be kept digitally. Bookkeeping software with receipt capture makes this straightforward.

Allowable business expenses: what you can actually claim

Every pound of legitimate business expense you claim reduces the profit you pay tax on — so knowing what you can and can't claim is one of the simplest ways to avoid paying more tax than you need to. It's also one of the areas where people either miss claims they're entitled to, or claim things they shouldn't and store up a problem for later. Here's how it actually works.

The one rule everything hangs on

For the self-employed, an expense is allowable if it's incurred "wholly and exclusively" for the purposes of the business. For limited companies the test is similar. That word "exclusively" is where most of the grey areas live: if something has both a business and a personal use — your phone, your car, a room in your home — you can usually only claim the business proportion, not the whole thing.

What you can typically claim

The common allowable costs for most small businesses include:

Office and admin — stationery, postage, printing, software subscriptions, business insurance and bank charges on a business account.
Premises — rent, business rates, utilities and insurance for business premises; or a proportion of your home costs if you work from home.
Travel — business mileage, train and bus fares, parking, and accommodation on business trips. Note that ordinary commuting to a normal workplace doesn't count.
Staff costs — salaries, employer's National Insurance, pension contributions and subcontractor costs.
Stock and materials — the cost of goods you buy to sell on, and raw materials.
Professional fees — accountancy, legal and other professional services for the business.
Marketing — website costs, advertising, and the cost of running social media.
Equipment — tools, computers and machinery, usually claimed through capital allowances rather than as a straight expense.

Working from home

If you run the business from home, you can claim a reasonable proportion of your household running costs — heating, electricity, broadband and so on — based on how much you use the space for work. HMRC also offers a flat-rate "simplified expenses" amount per month based on hours worked, which is simpler but sometimes less generous than working out the actual proportion. Which is better depends on your setup.

Cars and mileage

For a vehicle used for both business and personal journeys, you can either claim a flat rate per business mile (the simplest and most common approach for the self-employed) or claim the business proportion of actual running costs. You generally have to stick with one method for a given vehicle, so it's worth picking the right one from the start.

What you can't claim

Some things trip people up. You can't claim ordinary commuting, everyday clothing (even if you only wear it for work — uniforms and protective gear are different), client entertaining, fines and penalties, or the personal portion of any mixed-use cost. And you can't claim your own "wages" if you're a sole trader — drawings aren't an expense.

Companies vs sole traders

The categories are broadly similar, but there are differences in how things are treated — for example, benefits in kind, directors' expenses and the rules around what the company can pay for on your behalf. If you trade through a limited company, some costs that feel personal can be paid by the company efficiently, and others create a taxable benefit. It's worth getting that mapped out.

Keep the records, claim with confidence

Whatever you claim, you need to be able to back it up — keep receipts and records, ideally digitally, which is also what Making Tax Digital increasingly requires. Good bookkeeping software with receipt capture makes this almost automatic. If you're not sure whether something's claimable, that's exactly the sort of thing we sort out for clients — the goal is to claim everything you're genuinely entitled to, and nothing you're not.