Expenses You Didn’t Know Were Tax Deductible (UK Guide)

UK Guide for Sole Traders & Limited Companies

Many everyday business expenses are tax deductible in the UK, provided they are incurred for business purposes, properly recorded, and claimed using the correct rules for your business structure.

Common deductible costs include home-working expenses, software subscriptions, professional fees, mileage, qualifying business travel, and certain subsistence costs. Missing allowable expenses often results in UK business owners paying more tax than necessary, without reducing HMRC risk.

What expenses are tax deductible in the UK?

Key rule: Expenses must be wholly and exclusively for business, or reasonably apportioned where there is mixed personal and business use.

What makes an expense tax deductible in the UK?

An expense is tax deductible when it is incurred for the purposes of the business and is not private in nature.

HMRC expects that:

• The cost supports the business’s trading activity.

• Any mixed personal use is reasonably apportioned.

• The claim is supported by records, calculations, or consistent logic.

This applies to:

• Sole traders filing Self Assessment.

• Limited companies paying Corporation Tax.

• Directors or employees claiming or being reimbursed for business expenses (subject to employment-expense rules).

Why this matters: Unclaimed allowable expenses increase taxable profit, and therefore tax, unnecessarily.

Expense Decision & HMRC Risk Table (Quick Check)

Expense category	Decision test	HMRC risk	When to review
Home office costs	Are you using the correct HMRC method for your structure?	Medium	First year or profit spikes
Mobile & broadband	Is the business element clearly identifiable?	Medium	Personal contracts
Software tools	Does it directly support business operations?	Low	Unused subscriptions
Professional fees	Is it revenue (compliance/running costs), not capital?	Low	Personally paid fees
Training & courses	Is it within the existing trade or a new trade?	High	Business direction changes
Mileage & travel	Is it business travel rather than ordinary commuting?	Medium	Missing mileage logs
Meals & subsistence	Is it an additional cost caused by qualifying business travel?	High	Frequent food claims
Marketing spend	Is it promotion rather than client entertaining?	Medium	Branded hospitality
Bank charges & interest	Is the borrowing strictly business-related?	Low	Mixed-use finance

Can you claim home office costs as a business expense?

Yes, if you regularly work from home, certain home-working costs are deductible, but the method depends on your business structure.

If you’re a sole trader

You can usually claim either:

• Simplified expenses (flat rate) based on hours worked at home.

• Actual costs, apportioned on a reasonable basis.

Allowable costs under the actual-cost method may include:

• Electricity and gas.

• Internet (business proportion).

• Council tax (business proportion).

• Rent (business proportion).

• Mortgage interest only (not capital repayments), apportioned.

Important note: Using a room exclusively for business can create Capital Gains Tax implications when the property is sold.

If you’re a limited company director or employee:

• Most directors claim a flat employer-paid “use of home” amount, commonly aligned with HMRC’s guideline of £6 per week (£26 per month).

• Claims are intended to cover additional household costs caused by working from home.

Claiming rent, council tax, or mortgage interest through a company can create income tax, benefit-in-kind, and capital gains complications, and should only be done after professional review.

Why this matters: Home-working costs are commonly allowed, but incorrect methods are frequently challenged by HMRC.

Are mobile phone and broadband costs tax deductible?

Yes, but broadband requires more care than mobile phones, especially on personal contracts.

Mobile phones

You can usually claim:

• Business-only phones or SIMs paid by the business.

• Business calls and data.

• A reasonable business proportion of a mixed-use mobile contract (sole traders).

Broadband

• Sole traders can usually claim a reasonable business proportion of a mixed-use home broadband contract.

• Limited company directors/employees generally cannot be reimbursed tax-free for home broadband if the contract already exists personally, because there is usually no additional cost attributable to work.

Only genuine incremental business costs can normally be reimbursed without triggering tax.

Are software subscriptions tax deductible?

Yes, software and digital tools used for business are generally deductible.

Examples include:

• Accounting software

• Payroll systems

• Cloud storage

• Project management tools

Subscriptions paid personally but used for the business are commonly reclaimable when processed correctly.

Can professional fees be claimed as tax-deductible expenses?

Yes, professional fees incurred to run or comply with the business are usually deductible.

Allowable fees include:

• Accountancy and bookkeeping.

• Payroll processing.

• Tax compliance and advisory services.

Not usually allowable:

• Fines and penalties.

• Fees linked to capital transactions (for example, company formation or asset acquisition), which may need different treatment.

Is training and education tax deductible?

Sometimes, training is deductible where it develops, updates, or extends knowledge and skills used within the existing trade or business.

Allowable:

• Continuing professional development (CPD).

• Training that enhances expertise within the current business activity, even if it introduces new skills or knowledge.

Not allowable:

• Training undertaken to start a new trade, profession, or career.

• Education that represents a fundamental change in business direction.

This is a high-risk HMRC area and should be reviewed carefully.

Are travel and mileage costs tax deductible?

Yes, business travel is deductible, but ordinary commuting is not.

Allowable costs include:

• Business mileage (with a mileage log).

• Public transport fares.

• Parking related to business travel.

• Overnight accommodation for work trips.

Sole traders may use simplified mileage rates or actual vehicle costs, while company directors/employees usually claim approved mileage rates for personal vehicles.

Can meals and subsistence be claimed?

Sometimes, meals are deductible only when they are an additional cost caused by qualifying business travel.

Allowable:

• Meals while travelling to temporary workplaces.

• Overnight subsistence.

Not allowable:

• Everyday lunches.

• Meals taken while working near home.

• Most clients are entertaining.

This area is closely reviewed by HMRC.

Are marketing and advertising costs tax deductible?

Yes, marketing costs incurred to promote the business are generally deductible.

Examples include:

• Website design and hosting.

• Advertising.

• Branding and promotional services.

Boundary to watch: Client entertaining, even when branded, is usually disallowed for tax purposes.

Can bank charges and interest be claimed?

Yes, business bank charges and interest are usually deductible.

Allowable:

• Business account fees.

• Transaction charges.

• Interest on business borrowing.

Restrictions apply where borrowing is partly private.

Why do UK business owners miss deductible expenses?

Most missed deductions happen because:

• Expenses are paid personally and not reclaimed.

• Records are incomplete.

• Reviews happen too late.

• HMRC rules feel unclear, so nothing is claimed.1

These issues compound and surface when tax becomes due.

What effective expense tracking looks like?

A compliant system includes:

• Separating business and personal spending.

• Digital receipt storage.

• Monthly reviews.

• Consistent HMRC logic for apportionment.

Frequently Asked Questions

Q1. What expenses are tax deductible in the UK?

A: Tax deductible expenses are business costs incurred wholly and exclusively for business purposes, or reasonably apportioned where there is mixed personal and business use.

Q2. Can you claim personal expenses as tax deductible?

A: Personal expenses are not tax deductible unless a clear business portion can be identified and reasonably apportioned under HMRC rules.

Q3. Why do UK businesses miss tax deductible expenses?

A: UK businesses miss tax deductible expenses because costs are paid personally, records are incomplete, or HMRC rules feel unclear.

Takeaway

Unclaimed expenses rarely cause immediate problems.

They surface later, when tax bills arrive and cash decisions matter.

Understanding what is deductible for your specific business structure, and recording it correctly, is one of the simplest ways to reduce avoidable tax  without increasing HMRC risk.

Next Steps

Take 20 minutes this week to review your last three months of expenses.

Specifically check home working costs, subscriptions, professional fees, mileage, and anything you paid personally.

If you’re not fully confident that everything allowable has been claimed, don’t wait until year end.

Book a focused expense review now! So missed deductions can be corrected early, before they turn into unnecessary tax.

This is exactly the kind of practical, clarity-first support AMS provides: helping UK business owners turn everyday spending into a clean, compliant system they can rely on.

TL;DR: In the UK, business expenses are tax deductible if they are wholly and exclusively for business or reasonably apportioned. The rules differ for sole traders and limited companies, and missing allowable expenses commonly leads to overpaying tax without reducing HMRC risk.