Introduction
Running a small business in the UK comes with its fair share of responsibilities—especially when it comes to your finances. One common mistake many entrepreneurs make is not claiming all the allowable expenses that could reduce their tax bill. Whether you’re a sole trader, freelancer, or limited company director, understanding what counts as a tax-deductible business expense can save you serious money.
Here are 10 commonly missed UK tax deductions that you should know about before filing your next Self-Assessment or Corporation Tax return.
- Use of Home as Office
If you work from home, even just a few days a week, you may be able to claim a portion of your household bills such as heating, electricity, Council Tax, and broadband. HMRC allows either a flat rate or a calculated proportion based on usage.
Sole traders can use simplified expenses, while limited companies should reimburse directors through a formal arrangement.
- Business Mileage
If you use your personal vehicle for business trips (not including commuting), you can claim mileage at HMRC’s approved rates—45p per mile for the first 10,000 miles, and 25p thereafter. This covers petrol, insurance, wear and tear, and more.
Keep a detailed mileage log to support your claim.
- Professional Services (Accounting, Legal, Consultancy)
Any fees paid to accountants, solicitors, or business consultants are allowable expenses—provided the services are used for business purposes. This includes tax return preparation, business advice, and contract drafting.
- Marketing and Advertising
Many small businesses forget to claim marketing costs. This includes your website hosting, graphic design, paid ads on Google or social media, and printed materials like flyers and signage.
Don’t forget any agency or freelancer fees you pay for digital marketing services.
- Training and Development
If you attend a workshop, seminar, or buy books relevant to your current business, these can usually be claimed as training expenses.
New qualifications or courses to enter a new trade may not be deductible.
- Software and Online Subscriptions
Do you use accounting software like Xero, project management tools like Asana, or subscriptions like Microsoft 365? As long as they are used for business, they’re usually fully tax-deductible.
- Bank Charges and Loan Interest
Charges on your business bank account, payment provider fees (like PayPal or Stripe), and interest on business loans or credit cards are allowable expenses—just ensure they relate solely to business use.
- Mobile Phone and Internet
If you use your personal mobile or broadband for business, you can claim a reasonable proportion of the costs. If you’re a limited company, it’s better to have a separate business contract paid directly from your business account.
- Insurance
Premiums for essential business cover—such as public liability, professional indemnity, employers’ liability, and even cyber insurance—can be claimed as business expenses.
- Staff Costs and Freelancers
Wages, National Insurance contributions, pensions, and even holiday pay for employees are deductible. If you hire freelancers or subcontractors, payments are also allowable—just ensure they’re properly recorded and, where applicable, submitted through the Construction Industry Scheme (CIS).
Final Thoughts
Every pound you save in tax is a pound you can reinvest into your business. While these deductions might seem small on their own, they add up quickly. The key is good record-keeping and a clear understanding of HMRC’s rules.
Need help navigating allowable expenses? At Diamond Accounts we specialise in tax planning for UK small businesses, sole traders, and limited companies.
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Our expert accountants can help you identify missed deductions, stay compliant with HMRC, and reduce your overall tax liability.
Contact us today for a free consultation