Allowable vs Disallowable Expenses — The Difference Explained for Sole Traders
Not every business cost is tax deductible. Here is how to tell the difference between allowable and disallowable expenses under HMRC rules.
The Golden Rule
HMRC allows you to deduct expenses that are wholly and exclusively for business purposes. If an expense has a personal element — even a small one — HMRC may disallow all of it or only allow the business proportion.
Allowable Expenses — What You Can Claim
These are expenses that are accepted without question when they are genuinely for business:
| Expense | Claimable? |
|---|---|
| Laptop purchased solely for work | ✅ Yes |
| Accounting software subscription | ✅ Yes |
| Business insurance | ✅ Yes |
| Mileage at 45p/mile for client visits | ✅ Yes |
| Professional training directly related to your work | ✅ Yes |
| Tools and equipment for your trade | ✅ Yes |
| Advertising and marketing costs | ✅ Yes |
| Stock purchased to sell | ✅ Yes |
Disallowable Expenses — What You Cannot Claim
| Expense | Claimable? |
|---|---|
| Personal clothing (even if worn to work) | ❌ No |
| Food and drink (unless overnight business travel) | ❌ No |
| Entertaining clients (HMRC specifically disallows this) | ❌ No |
| Fines and penalties | ❌ No |
| Personal telephone calls | ❌ No |
| Childcare costs | ❌ No |
| Home improvements (only repairs to business-use area allowed) | ❌ No |
Mixed-Use Expenses (Part Allowable)
Some expenses are used for both personal and business purposes. In these cases, you can claim the business proportion only:
- Mobile phone: If you use your personal phone for both business and personal calls, claim the business percentage. Many sole traders claim 50–70%.
- Home broadband: If you work from home, claim the proportion used for work.
- Car: If you use your personal car for both business and personal driving, you can either use the mileage rate (45p/mile for business journeys only) or claim actual costs on a business percentage.
- Laptop or tablet: If used for both work and personal use, claim the business proportion.
Professional Development — Allowable or Not?
Training costs are allowable if they update or improve skills you already use in your business. They are not allowable if they allow you to enter a new profession or trade.
- A copywriter doing an advanced copywriting course ✅
- A copywriter doing a photography course to start a new service ❌
What About Working From Home?
You can claim a portion of your home costs if you work from home. HMRC's simplified flat rate is:
- 25–50 hours per month: £10
- 51–100 hours: £18
- 101+ hours: £26
Alternatively, you can calculate the actual proportion of your home used for work (by room and by hours).
How Pivitax Helps
When you upload a receipt to Pivitax, our AI categorises it automatically. You can review the category for each document and edit it if needed. This means your expenses are organised correctly throughout the year — not just guessed at in January.
Summary
- Expenses must be wholly and exclusively for business
- Mixed-use expenses can be partially claimed
- Client entertainment is specifically disallowed by HMRC
- When in doubt, keep the receipt and ask your accountant
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