10 Tax-Deductible Expenses for UK Businesses: What You Can and Can’t Claim

For UK small business owners, entrepreneurs, or startup founders, understanding what expenses are tax-deductible is essential for keeping costs down and staying compliant with HMRC. By correctly claiming business expenses, you can significantly reduce your tax liability, freeing up funds to reinvest into your business. Whether you're a sole trader, run a limited company, or manage an online business, knowing which expenses are allowable can make the difference between tax efficiency and costly mistakes. However, HMRC’s rules on what can and can’t be claimed can sometimes feel complex. This guide will simplify the process and help ensure you know what’s claimable and what isn’t. 10 Tax-Deductible Expenses Every UK Business Should Know 1. Office Costs If you work from home, you’re probably entitled to claim a proportion of your rent, utilities, and internet costs as business expenses. These expenses must represent the portion used exclusively for work. For online businesses and sole traders working remotely, this deduction can significantly ease monthly costs. Businesses operating from dedicated office spaces can claim costs such as business rent, office maintenance, and cleaning. 2. Equipment and Tools Items like computers, printers, software, and specialised tools needed to run your business are deductible—so long as they’re exclusively for business use. Office furniture such as desks, chairs, or filing cabinets also qualifies as allowable expenses. If your business requires frequent upgrades to tech, this can be a valuable benefit. 3. Travel Expenses HMRC allows claims for business-related travel expenses. This could include mileage for driving to client meetings, fuel costs, taxi fares, train tickets, or even flights and hotel stays for business trips. However, travel expenses must be strictly business-related—commuting between your home and your business premises or personal travel cannot be claimed. 4. Marketing and Advertising Investing in marketing can grow your brand, and the good news is, many promotional costs are tax-deductible. Whether you’re running ads on Facebook, printing flyers, commissioning a website, or paying for SEO, you can claim these expenses as part of growing your online or physical business presence. 5. Professional Fees Running a business often involves hiring experts to help with specialised tasks, like accounting, legal advice, or consultancy services—and the good news is, these costs are deductible. Engaging accounting experts, for example, can help you reduce tax liability while accurately navigating HMRC rules. 6. Staff Costs If you employ staff, costs such as salaries, wages, bonuses, and employer National Insurance contributions can all be claimed as business expenses. Offering perks like pension contributions and benefits to your team can also qualify, helping you take care of your staff while reducing taxable profits. 7. Stock and Materials Businesses in retail, ecommerce, or production can claim the cost of purchasing stock or raw materials essential for their operations. For example, a clothing retailer can claim the cost of fabric, while an online seller can deduct purchases like packaging materials. Do note that any stock not used solely for the business (e.g., personal use) is disallowable and cannot be claimed. 8. Subscriptions and Memberships Professional subscriptions to trade organisations, industry membership bodies, and tools like SaaS platforms are deductible. Whether you’re subscribing to Zoom for meetings or using an inventory management system like Shopify, these costs may reduce your tax liability. 9. Insurance Protecting your business is crucial, and the premiums for business-related insurance policies like public liability, professional indemnity, or employer’s liability insurance are allowable expenses. These policies not only safeguard your operation but also reduce your taxable profit when correctly claimed. 10. Utilities and Running Costs For businesses operating from a physical premise, utilities like electricity, heating, and water are tax-deductible—so long as they are proportionate to business use. Accurately recording these costs will help you claim the correct amount. If you’re unsure about calculations, consulting accounting experts can ensure that your utilities are handled correctly in your tax return. What You Can’t Claim While many business-related costs are deductible, others are strictly disallowable under HMRC rules. Here are some common expenses you cannot claim on your tax return:Personal expenses: Non-business-related travel, daily lunches, and clothing (unless it’s protective or a uniform). Fines or penalties: Parking fines or late payment penalties, no matter how they occurred. Extravagant expenses: Excessively costly or non-essential items that HMRC determines aren’t crucial to your business. Failing to differentiate between allowable and non-allowable expenses could result in penalties, so always double-check guidelines or consult an accountant when in doubt. Simplify Your Tax Returns with Expert Support Managing your tax-deductible expenses doesn’t have to be a headache. By understanding what you can and can’t claim, you’re already one step closer to optimising your tax returns and minimising liabilities. That said, every UK business has unique financial needs, which is why seeking professional advice can ensure you’re maximising claims while staying fully compliant with HMRC rules. At Virtue Accountants, we specialise in helping sole traders, startups, and online businesses get it right. Contact our team today for tailored advice on organising your tax returns and reducing your tax liability. Don’t pay more tax than you should—let us help you take control of your finances!