Business expenses you might be missing from your Self Assessment

If you run a business or have income to declare through Self Assessment, it’s worth taking a closer look at which expenses you can claim. Claimed correctly, they can lower your tax bill – but exaggerated or undocumented claims could lead to adjustments, penalties, or awkward questions from HMRC. So how do you recognise the right costs and not exaggerate?

Let’s start with the basics: what does the term ‘allowable expenses’ mean?

Allowable expenses are costs incurred solely for the purpose of running your business — things that genuinely help you operate, attract clients, or deliver your services. HMRC uses the phrase ‘wholly and exclusively’, meaning the expense must be entirely for business use.

If a given cost is of a mixed nature (e.g. private and business), only the part that actually relates to the business can be deducted – reasonably calculated and justifiable. In practice, you should calculate a reasonable business percentage for any mixed costs and apply the same method consistently each year. It is also good practice to keep short notes or attach descriptions to invoices so that, in the event of questions from HMRC, the relationship between the expense and the income can be clearly demonstrated.

Examples of typical costs and rules for their application

With the above principles in mind, let us examine specific areas, starting with one of the most common among self-employed individuals: working from home.

Working from home

If you run a business from home, you can deduct part of your utility, rent, or internet and telephone bills – but only for the period during which the space was actually used for business purposes.

Example: if you have four rooms and one of them serves as an office, you can claim the proportion of costs attributable to that room. Alternatively, you can use the simplified expenses method (i.e. a lump sum), provided that you work a certain number of hours per month at home.

Important: you must not combine the proportional and lump-sum methods for the same costs.

Using your car for business

If you own a car, there are two main methods of calculation:

The first is mileage allowance, which is applied when using a personal car for business purposes. The standard rate is 45 pence per mile for the first 10,000 miles in a tax year and 25 pence for each additional mile. Mileage allowance covers all expenses (fuel, servicing, insurance), so you should not deduct any other operating costs.

The second method is actual costs, which include fuel, servicing, insurance, possible depreciation (in the case of a company car) and other actual expenses.

Important: Important: you can’t switch between the two methods for the same vehicle — your choice applies for as long as you use it for business. Additionally, commuting from home to your permanent place of work is not an acceptable expense.

Phone, internet and connectivity

If you use your telephone or internet both privately and for business purposes, you can only deduct the portion corresponding to business use. It is important to be able to justify how this proportion was calculated (e.g. percentage of time, number of calls, data used for business purposes).

Hardware, software and tools

The purchase of a computer, software or equipment needed for work can be accounted for as a current expense or as a so-called capital allowance, especially if the equipment will be used for several years. Depending on the type of expense, different rules may apply to expense recognition.

Travel and meals while working away

If you regularly travel outside your normal place of work, you can deduct the costs of travel, accommodation and meals related to business travel. However, daily lunch ‘at home’ or the cost of travelling from home to your permanent office are not considered eligible costs.

What can’t you usually deduct?

The most common expenses that do not qualify as costs include:

• commuting from home to a permanent place of work,
• fines and penalties (e.g. for parking, speeding),
• expenses of a clearly private nature — even if only partially.
• everyday clothing (even if worn to work),
• gifts for family.

If an expense was at least partially private, it must be reduced accordingly or excluded entirely.

Mini-checklist: what to check before making your tax return?

Before submitting your declaration:

• review your bank statements and diary — highlight all business-related purchases and trips.
• separate your costs into business and mixed.
• if you use a car, keep mileage records (in an app or spreadsheet).
• collect invoices for software, domains, hosting, licences, and office supplies.
• make sure every expense has proof — without evidence, HMRC may disallow it.

Do you already know what expenses you can deduct?

Well-described and documented costs mean lower taxes and smooth tax returns.

Overstated, unclear, or poorly documented costs can lead to corrections, extra tax, or penalties.

Keep your records tidy, follow the ‘wholly and exclusively’ rule, and avoid mixing methods – especially for car expenses. It’s the simplest way to make your Self Assessment easier and stress-free.

Not sure where to start? Speak to Essence Accounting – we’ll make sure your return is complete, compliant, and on time.