Running a business comes with plenty of costs, but many small business owners are still unsure about what they can actually claim as an allowable expense.
Understanding your business expenses properly can help reduce your tax bill, improve cash flow and ensure you are not paying more tax than necessary.
Here’s a straightforward guide to some of the most common small business expenses you may be able to claim in the 2026/27 tax year.
What Counts as an Allowable Business Expense?
In simple terms, an expense must be “wholly and exclusively” for business purposes in order to be claimed against your taxable profits.
This applies whether you are a:
- Sole trader
- Limited company
- Freelancer
- Contractor
Keeping accurate records and receipts is essential in case HMRC ever asks for evidence.
1. Office and Home Working Costs
If you work from home, you may be able to claim a portion of:
- Electricity and heating
- Internet and phone bills
- Office equipment
- Business-related stationery
You can either use HMRC’s simplified expenses method or calculate actual business usage.
For limited companies, there may also be alternative ways to reimburse home office costs tax-efficiently.
2. Travel and Mileage Expenses
Business travel is one of the most commonly claimed expenses for small businesses.
You may be able to claim for:
- Business mileage
- Train fares
- Parking fees
- Hotel accommodation for business trips
However, commuting between your home and permanent workplace is usually not allowable.
Keeping a mileage log is highly recommended if you use your own vehicle for business purposes.
3. Mobile Phones and Internet Costs
If your mobile phone or internet is used for business, you can usually claim the business-related proportion of the cost.
For limited companies, one company mobile phone per employee can often be provided tax-free.
4. Software and Subscription Costs
Many businesses now rely on cloud-based software to manage finances and day-to-day operations.
Allowable expenses can include:
- Accounting software
- CRM systems
- Design software
- Website hosting
- Professional subscriptions relevant to your industry
These costs are often overlooked but can add up over the year.
5. Marketing and Advertising
Promoting your business is generally tax deductible.
This may include:
- Website costs
- Social media advertising
- Printed flyers and business cards
- Google Ads or Facebook advertising
- Email marketing software
As businesses continue to focus on online visibility, marketing expenses are becoming increasingly important.
6. Staff Costs and Training
If you employ staff, you can normally claim:
- Salaries and wages
- Employer National Insurance
- Pension contributions
- Staff training courses
Training must generally relate to improving existing business skills rather than learning entirely new ones.
7. Professional Fees
Professional services that support your business are usually allowable expenses.
Examples include:
- Accountancy fees
- Solicitor fees for business matters
- Business insurance
- Consultancy fees
Many businesses forget to claim smaller professional costs throughout the year.
8. Meals and Entertainment – A Common Area of Confusion
Business meals are one of the areas that causes the most confusion.
In many cases:
- Staff meals during business travel may be allowable
- Client entertaining is usually not tax deductible
- Staff functions may qualify for exemptions within certain limits
Because the rules can be complicated, it’s always worth checking before making assumptions.
Keep Accurate Records
Good bookkeeping is essential for claiming expenses correctly and staying compliant with HMRC requirements.
With Making Tax Digital continuing to roll out, keeping digital records is becoming increasingly important for small businesses.
Using accounting software and reviewing your expenses regularly can save time and reduce errors later on.
Final Thoughts
Claiming the right business expenses can make a significant difference to your overall tax position.
Many small businesses miss legitimate expenses simply because they are unsure what can and cannot be claimed.
If you would like advice on allowable expenses, bookkeeping, or tax planning for your business, our team is always happy to help.
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