Is client entertaining tax-deductible?

No. Entertaining clients (meals, drinks, hospitality, event tickets) is specifically disallowed for tax purposes — even if the expense is genuinely for business. Staff-entertainment deductibility is separate from the employee annual-function exemption; the £150 per-head exemption is not a general cap on the employer’s tax deduction.

Can I claim my mobile phone?

Yes, in proportion to business use if it's a personal contract. If the contract is in the company's name, the full cost is deductible and there's no benefit-in-kind charge to the employee.

Are accountancy fees deductible?

Yes. Professional fees for ongoing bookkeeping, accounts preparation and tax compliance are allowable. Fees relating to disputes, investigations or capital transactions may not be.

What records do I need for expenses?

Keep receipts, invoices and bank statements showing the business nature of each expense. Sole traders must keep records for at least 5 years after the 31 January submission deadline; companies must keep them 6 years from the end of the accounting period.

Guides

Allowable Business Expenses in the UK

What you can and can't claim as business expenses for tax — capital vs revenue, common categories, and rules for sole traders and limited companies.

2 min read·Updated 10 November 2026

Quick answers

What can I claim as a business expense?

You can claim costs incurred wholly and exclusively for your trade — including office costs, travel, staff wages, stock, professional fees, marketing, bank charges and trade subscriptions. Personal costs, client entertaining, fines are normally disallowed; qualifying equipment may be expensed under cash basis, while traditional accounting uses capital-allowance rules.

Can I claim mileage for business travel?

Yes. Sole traders and limited company directors can claim 45p per mile for the first 10,000 business miles in a tax year and 25p per mile after that, using the HMRC simplified mileage rate. The rate covers fuel, insurance, servicing and depreciation.

Can I claim working-from-home costs?

Eligible sole traders and partnerships can use simplified homeworking expenses or an appropriate business proportion of costs. Limited companies and employee reimbursements use different rules; the £10–£26 monthly sole-trader scale is not a company allowance.

Allowable Business Expenses

To reduce your taxable profit, you deduct allowable business expenses. The basic test is simple but strict: the expense must be incurred wholly and exclusively for the purposes of the trade.

Common allowable categories

Office costs — rent, utilities, stationery, phone, internet.
Travel — public transport, fuel/mileage (45p per mile up to 10,000 then 25p), parking, hotels.
Staff costs — wages, salaries, employer NI, pensions, training.
Stock and raw materials.
Professional fees — accountants, solicitors, business insurance.
Marketing — website hosting, advertising, design.
Bank charges and interest on business loans.
Subscriptions to trade bodies and journals.

What's NOT allowable

Client entertaining (food, drinks, tickets) — never deductible for tax.
Personal expenses or the private portion of mixed-use items.
Fines and penalties (parking tickets, HMRC penalties).
Capital purchases under traditional accounting — consider capital allowances. Under cash basis, qualifying equipment costs are normally expenses; cars have separate rules.
Drawings for sole traders.
Most clothing unless it's protective wear or a uniform.

Capital vs revenue

Revenue expenses — day-to-day running costs, fully deductible in the year incurred.
Capital expenses — assets that last more than a year (laptops, machinery, vans). Traditional accounting may use capital allowances; cash-basis rules differ. Full expensing is a company relief, not a sole-trader relief.

Working from home

For eligible sole traders and partnerships (not limited companies), two options:

Simplified flat rate — £10–£26/month based on hours worked from home.
Apportionment — claim a fair share of actual costs (utilities, council tax, mortgage interest, internet) based on rooms used and hours.

Use of own car

Sole traders and partners — claim the simplified mileage rate (45p/25p) OR a portion of actual running costs.
Limited companies — pay yourself the same mileage rate tax-free; reclaim VAT on the fuel element if VAT-registered.

Records you need

Keep receipts, invoices, bank statements and a simple log of business journeys. HMRC can ask for evidence years after a return is filed.

This is general guidance for the 2025/26 UK tax year and is not personal tax advice. Always check the latest figures on GOV.UK or speak to a qualified accountant for your situation.

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