Tax deductions can make a big difference to your profit margin. And with a new tax year on the horizon, it’s worth taking another look at what you can claim. Below, we’ll walk you through common allowable expenses for various businesses in the UK, including sole traders, limited companies and partnerships, along with examples from different sectors. We’ll also share record-keeping tips and point to places where you can find extra guidance.
Understanding allowable expenses
Allowable expenses are costs that can be subtracted from your taxable profits, ultimately lowering the amount of tax you pay. UK businesses can claim expenses, such as:
- office costs (rent, stationery, printer ink)
- travel (fuel, public transport fares, hotel stays for business trips)
- staff costs (wages, employer national insurance contributions, pensions)
- stock or raw materials
- advertising and marketing (including website costs).
If you’re a sole trader, this is taken off your profits before income tax is applied. For limited companies, allowable expenses cut down your corporation tax bill, which in 2025/26 remains at up to 25% for profits over £250,000. For more details about these expenses, see the official HMRC guidance.
Different business types and core deductions
1. Sole traders
If you’re self-employed, you’re taxed on your business profits after allowable expenses. You’ll continue to benefit from the basic personal allowance of £12,570 for the 2025/26 tax year. Any additional profits fall under the relevant income tax rates, which currently start at 20% for earnings above your personal allowance and then move into higher rates.
Common deductions for sole traders include the following.
- Home office costs: You can claim a flat rate or a proportion of your actual bills if you run your business from home.
- Professional fees: Subscriptions to trade bodies or accounting software.
- Equipment: Tools or IT equipment used solely for work.
And if you’ve got any industry-specific software or materials, make sure you claim them.
2. Limited companies
A limited company is a separate entity for tax purposes. You pay corporation tax on your profits, and your own salary or dividends are taxed separately. Allowable deductions for limited companies include:
- staff salaries – this covers directors’ salaries, too
- office rent and utilities – if the office is leased by the company
- capital allowances – for equipment or vehicles
- research and development (R&D) – if you invest in innovation and meet HMRC’s criteria.
It’s helpful to make sure any expense is “wholly and exclusively” for business use to avoid complications.
3. Partnerships
Partnerships share profits and expenses among partners. Each partner accounts for their share of profits on a self assessment tax return. The same types of allowable expenses apply as with sole traders, but you’ll split them according to your partnership agreement. Carefully document each partner’s share in your records.
Sector-specific examples
Retail
Retailers rely on stock, staff and premises to run their operation. So, consider:
- stock costs – as long as you’re only buying items you plan to sell
- premises upkeep – store rent, business rates, utility bills and maintenance
- website and e-commerce fees – if you sell online, monthly hosting and transaction fees count
- marketing – local advertising or paid online ads.
Good record-keeping is essential to separate personal use from business use. For instance, if you sell both online and instore, keep track of e-commerce-related expenses separately so that you can claim accurately.
Construction
Builders, contractors and tradespeople often need to purchase materials, pay for site visits and maintain vehicles. You could claim for:
- tools and protective clothing – hard hats, high-vis jackets, specialist equipment
- vehicle costs – fuel, repairs and insurance, if you use your van or car for business purposes.
- training courses – health and safety certifications, for example, if they’re relevant to your work.
Be sure to keep receipts for all materials to show these were used for business, rather than private, jobs.
Creative industries
Designers, writers, photographers, film producers – creativity often requires specialised tools and software. You can typically claim:
- software licences – creative suites or editing programs
- professional development – workshops or courses that support your creative work
- home studio costs – if you rent studio space or set aside a room at home exclusively for work, you can claim a share of the costs
- equipment – cameras, lighting kits, drawing tablets and other similar items.
Again, the main rule is that the expense should be for business purposes only.
Keeping records accurate
It’s tempting to put everything on a spreadsheet at the end of the year, but that can lead to missed opportunities and errors. Even a simple system of storing receipts digitally can help you keep a clear record. This is especially important if HMRC asks to see evidence.
Don’t forget about the Making Tax Digital (MTD) requirements, which now apply more broadly. These rules mean that businesses must keep digital records and file returns using compatible software. You can read more about Making Tax Digital requirements on the HMRC site.
Why your records matter for tax deductions
When claiming any tax deductions, the key is accurate records. You need to be able to show what was bought, when it was bought and why it was used. Keep:
- clear invoices, receipts and bank statements
- notes explaining what each expense relates to if it’s not obvious from the invoice
- mileage logs if you use your vehicle for both business and personal journeys.
It’s better to keep detailed documentation than lose out on a valid claim because you’re missing proof.
How we can help you thrive
There’s a lot to think about, but don’t worry – we’ve got this! At Blue Shore, our online accountancy services are designed to help you maximise your allowances and deductions without breaking a sweat. From sole traders to limited companies and partnerships, we’ll guide you through the process in a relaxed and efficient way.
Ready to make the most of your tax deductions? Get in touch with us to see how we can help cut your tax bill and boost your bottom line.
