Business Expense Claims for UK Contractors

by Team Tradify, March 2, 2023

Contractors that say business expense claims are “not worth the trouble” are simply missing out. What is often regarded as a complicated and time-consuming task is actually rather simple – and an essential part of running a successful trade business.

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Aside from being able to work your own hours and run things your way, a self-employed contractor or business owner can also claim back business expenses for any business-related purchase. By claiming for these expenses you could significantly lower your tax bill, leaving more money in your pocket.

When starting your trade business, there’s a lot of admin jargon to get your head around. This can sometimes mean that things like business expense claims fall by the wayside. But it’s important to keep an ongoing, up-to-date record of those all-important figures – incomings and outgoings – so that you’re maximising the tax benefits for your business. 

This article covers which business expenses you can claim and why good expense management is important.

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1. What is a business expense and should you claim it?

A business expense is when you pay for something necessary for the everyday running of your business:

  • Tools & materials
  • Petrol & phone bill
  • In some cases, a portion of your utility bill (if you do any work from home)

You can probably think of other examples too. Your first instinct as a new trade business owner might be to keep your business expenses as low as possible, so your business profits are high. But business expense claims are deducted pre-tax and VAT which means you’ll come away with a smaller tax bill and more cash in your business.

2. HMRC guidelines on business expenses

Under Government regulations, a business (or allowable) expense is generally any necessary cost incurred as part of the daily running of your business. However, the category of each allowable expense will determine just how much of that expense you can deduct from your taxable profit. 

3. Types of business expenses

There are three categories of business expenses when it comes to claiming tax back:

  1. Tax-deductible expenses: Most business expenses fall into this category. They’re goods and services that you’ve paid for directly out of your business account, and 100% of the cost can be attributed exclusively to the day-to-day running of your trade business.

  2. Partially tax-deductible expenses: This category covers expenses where only a portion of the cost needs to be deducted for personal use. Examples include a personal vehicle used for business purposes or a mobile phone you use for both work and non-work calls.

  3. Non-tax-deductible expenses: Personal items and expenses are non-tax-deductible. These expenses are not business-related and therefore can’t be deducted from your year-end profits. Doing so can result in scrutiny and penalties from HMRC.

    Setting up a separate bank account for your business is an easy way to keep personal and business costs separate. It’ll make things easier come tax time.


4. Business expense claims – common expenses

Business start-up costs

If you’re just starting out, any expense that you’ve already paid for using personal funds can be claimed when your business officially starts trading. For corporation tax purposes, the expense must be no older than seven years, and for VAT purposes, no older than six months before you started trading.

Business utilities and services

Trade business owners that do admin from their home office can claim a portion of their home expenses like power, water and internet. Similarly, you can claim a percentage of your personal phone bill as a business expense if you use it for work. 

Then there are services you require to run your business. These are fully tax-deductible and may include professional services like an accountant, marketing professional, or insurance consultant. 

Capital expenditure

This type of expense refers to items like computer hardware, office furniture, work vehicles or tools and equipment. Things that will help you run your business over a long time. How much you can claim and in what tax year will depend on the capital allowance rate

If you buy a capital asset through hire purchase, then the cost of the interest payments can also be claimed as a revenue expense. 

Entertainment costs

Despite what many think, schmoozing a prospective client is not a tax-deductible expense. Client gifts are considered a business expense, but they must be under ₤50 and do not include food, alcohol or anything that promotes your business. 

Employee entertainment like staff Christmas parties can be claimed as a tax-deductible expense up to £150 per person. This still applies to solo-operators, so feel free to claim it for your party of one!

Tools and equipment

The repair or maintenance of your tools and equipment may not be considered capital expenditure, but the cost is still a tax-deductible business expense. Personal protective equipment like high-vis jackets and steel cap boots can be claimed, as well as computer software like Tradify or Sage.

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Training and professional memberships

You can claim subscriptions to approved professional bodies or fees for training as allowable expenses, provided they are directly related to your work. If you need to keep qualifications updated to provide a service, be sure to claim the costs back.

Travel expenses

Travel could be a tradesperson’s greatest business expense – in some instances, it’s an expense you can claim. If you have a work vehicle (that is strictly for business purposes only), you can claim 100% of your fuel, mileage and car maintenance expenses.

A few things to note about travel expenses:

  • Working onsite for longer than 24 months could compromise your IR35 status. Should your contract be longer than 24 months, this is then deemed a ‘permanent’ workplace and you can no longer claim your travel expenses.

How you travel will determine the amount of tax relief that you’re entitled to:

  • Public transport (including air and rail). Pay directly using your business account or reimburse your personal account for the transaction using business funds. Keep the receipt and claim for your fare.
  • Toll roads and parking charges. Provided these costs are incurred while performing business activities, these are also eligible for tax relief if accompanied by a supporting receipt.
  • Use of a personal vehicle. You’re eligible to claim the cost per mile for eligible business travel in your personal vehicle. The number of miles travelled during the financial year will determine the monetary value of your claim. 

Mileage claims soon add up, so claiming for all work-related journeys can make a real difference to your tax liabilities – just make sure you’re noting your mileage down after every journey.

  • Overnight travel expenses. If you have to stay the night somewhere to complete a job, you may be able to claim tax relief.

5. Claiming your business expenses

It’s at this stage that many contractors fall into the trap of dealing with receipts and invoices later. But with good expense management, you’ll always have a view of how well your business is performing financially. 

When claiming business expenses, the most important thing is that you have proof. Keep a good record of each expense (date, cost, item) as well as any VAT expenses. You also need to keep receipts or order documentation for your business transactions. 

6. Tips for better expense management

  • Use your business bank account. Keep your personal and business expenses separate. Create a business bank account and use that to pay all your business expenses.

  • Store your receipts digitally. Small expenses can get lost in piles of papers. Rather than holding onto hard copies, ask for a digital receipt or take a photo and assign it to the relevant job in Tradify.

  • Track as you go with technology. Get rid of the paper – use accounting software with expense management capabilities, then streamline that workflow process by integrating with Tradify. That way you can track your jobs and your expenses while you’re on the go.

7. Business expense claims made easy

Like many admin tasks, keeping on top of your expenses can be fiddly and time-consuming. But putting off dealing with those receipts and invoices could mean you’re missing out on valid claims for business expenses. 

Streamline expense management with a combination of your favourite accounting software and Tradify. As a bonus, they’re also tax-deductible.

You can refer to the HMRC guidelines for a list of the types of expenses that can be claimed. You can also visit the HMRC website for detailed examples of allowable and non-allowable business expenses. We recommend discussing any specifics with your accounting provider.

Take Tradify for a free 14-day test drive or pop over to one of our live demo webinars to see the app in action. Fancy a chat? Give us a ring on 0800 088 5611.

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Please note: this article is a basic overview of business expense claims in the UK and is not intended to be financial advice. We strongly recommend speaking to an accountant about your individual situation before filing your returns. For more detailed information, visit

UK Business Expense FAQ

What are business expense claims in the UK?

Business expense claims refer to the costs incurred by the owner/s that are necessary to carry out their work, and which can be claimed as tax deductions.

What types of expenses can I claim?

You can claim expenses such as tools, equipment, vehicle expenses, travel costs, insurance, software like Tradify, and any other expenses related to running your business.

Can I claim all my expenses as tax deductions?

No, you can only claim tax back on the expenses that relate directly to your income-generating activities as a business.

Do I need to keep receipts for all my expenses?

Yes, you will need to show proof that you purchased something in order to claim tax back. Tradify can help by storing receipts and attaching them to jobs so they're ready come tax time.

Can I claim tax back for both personal and business-use items?

No, you can only claim tax back for items that are used solely for business purposes. If an item is used for both personal and business purposes, you can only claim the percentage that is used for business.

If you use a vehicle 50/50 for both work and personal life, then you can only claim 50% of the cost as a business expense.

How do I know if an expense is deductible?

An expense is deductible if it is necessary for your business and directly related to your income-generating activities. Check with your accountant if you're not sure.

Can I claim expenses for meals and entertainment?

You can claim expenses for meals and entertainment if they are directly related to your income-generating activities and if they are reasonable and necessary.

What is the process for claiming business expenses in the UK?

You can claim business expenses by keeping receipts and records of your spending, and then including these expenses in your tax return at the end of tax year.

What happens if I claim expenses that are not deductible?

If you claim personal expenses that are not legally deductible, you may be subject to penalties and/or interest charges.

Can I get help with claiming my business expenses in the UK?

Yes, you can seek help from an accountant or tax agent to ensure you are claiming all the expenses that you are entitled to and maximising your tax back every year.

Accounting software like Xero, MYOB, and QuickBooks can also make life easier — especially when they sync up with Tradify!

Read our guide on when tradies should hire an accountant.