How Expenses Work for Self-Employed Tradespeople
As a self-employed sole trader, you pay Income Tax and National Insurance on your profit — not your total income. Profit is your income minus your allowable business expenses. This means every pound you legitimately claim as an expense reduces the amount of tax you pay.
HMRC's rule is simple in principle: an expense must be "wholly and exclusively" for the purpose of your trade. In practice, there are nuances — particularly around things you use for both business and personal purposes, like a van or a phone. We'll cover those in detail below.
Example: If you earn £45,000 and have £12,000 of allowable expenses, you only pay tax on £33,000. At the basic rate, that's roughly £2,400 less tax than if you'd claimed nothing. Expenses matter.
The Quick-Reference Guide: What You Can Claim
Running costs fully claimable if used only for business. If personal use mixed in, claim the business proportion or use HMRC's flat rate (45p/mile for first 10,000 miles).
Cars are treated differently to vans. You can claim the business proportion of running costs, or use the mileage rate. Cannot claim the full vehicle cost through capital allowances as easily.
Hand tools, power tools, ladders, equipment — all claimable. Small items expensed immediately; larger items may need to go through capital allowances (Annual Investment Allowance covers most).
A dedicated business phone is fully claimable. If you use one phone for both, claim the business-use proportion — typically 50–80% for a tradesperson.
Safety boots, gloves, hi-vis, hard hats, overalls — all claimable as they're required for your work. Ordinary clothing is not claimable even if you wear it only for work.
Public liability insurance, tool insurance, van insurance (business proportion), professional indemnity — all claimable. Your annual premium is a straightforward deduction.
Materials bought for jobs you've invoiced are claimable. Keep your receipts. Materials you buy speculatively and don't use on a job can still be claimed as stock.
Fuel for travelling to and between job sites is claimable. Commuting from home to a fixed regular workplace is not — but most tradespeople don't have a fixed workplace.
If you do admin at home (quotes, invoicing, record-keeping), you can claim a proportion of household costs. HMRC's simplified flat rate is £10/month for 25–50 hours worked at home per month.
The cost of your accountant preparing your tax return and bookkeeping is fully claimable. So is the cost of invoicing software and business subscriptions like TaskDrop.
Training to improve existing skills (e.g. a refresher course) is claimable. Training to learn an entirely new trade is not — HMRC treats that as a capital investment, not an expense.
Day-to-day meals are not claimable, even if you eat them on site. The exception is if you're working away from home overnight — subsistence costs for overnight stays are claimable.
Van Expenses in Detail
The van is where most tradespeople have the most money to claim — and where the rules trip people up.
Option 1: Actual costs
You claim the real costs of running the van — fuel, insurance, servicing, repairs, MOT, road tax — plus the purchase cost through capital allowances (the Annual Investment Allowance lets you deduct 100% of the van's purchase price in the year you buy it, up to the current limit). If you use the van privately, you must reduce your claim by the personal use proportion.
Option 2: HMRC mileage rate
You claim 45p per mile for the first 10,000 business miles in a tax year, then 25p per mile after that. You don't need to track individual costs — just keep a mileage log. This is simpler but may give you a smaller deduction if you have a high-cost van or drive a lot.
You must pick one method and stick to it for a given vehicle. You can't switch between actual costs and mileage rate for the same van mid-way through. Most tradespeople with a van they own outright benefit more from the actual costs method — but run the numbers with your accountant.
Tools and Equipment
Hand tools — drills, grinders, spanners, levels — can generally be expensed in full in the year you buy them. Power tools and more expensive equipment go through capital allowances, but the Annual Investment Allowance (AIA) covers up to £1 million of equipment purchases per year at 100% deduction, so in practice most tradespeople can deduct the full cost of their tools in the year of purchase.
Keep receipts for everything. If a tool is stolen or damaged, you'll need records to claim the loss. Tool insurance (fully claimable) covers replacement, but HMRC still wants to see you bought the original.
What You Cannot Claim
Equally important — the things HMRC won't allow:
- Ordinary clothing — even if you only wear it for work. HMRC's position is that clothing can be worn outside work, so it's not exclusively for business. PPE and branded workwear with your company logo are the exceptions.
- Entertaining clients — taking a customer to lunch or buying them a drink is not claimable. HMRC does not allow client entertainment as a business expense.
- Fines and penalties — parking fines, speeding fines, HMRC penalties are not deductible.
- Personal purchases — anything you buy for personal use, even if you're paying through your business account.
- Home-to-work travel — your commute to a fixed regular place of work. Most tradespeople travel to different sites each day, which makes their travel claimable — but if you have a fixed yard or depot you report to each morning, that commute is not claimable.
Keeping Records HMRC Will Accept
You must keep records of all your income and expenses for at least 5 years from the 31 January after the end of the tax year they relate to. HMRC can request these records during a compliance check — and if you can't produce them, they'll disallow the expense.
Good record-keeping doesn't have to be complicated. A photo of every receipt on your phone, organised by month, is enough for smaller amounts. For larger purchases, keep the original. Your accountant will want a record of income and expenses at year end — the cleaner you keep them throughout the year, the cheaper that conversation is.
With Making Tax Digital now live, HMRC expects digital records going forward. Every invoice you generate through TaskDrop is automatically logged with a date, amount, and reference — giving you a clean digital record of all your income automatically. Your expenses side still needs tracking separately. Read more about what MTD means for tradespeople.
Expenses and Cash Jobs
One thing worth understanding: you can only claim expenses against declared income. If you're not declaring all your income, you're also cutting off your ability to claim the expenses that relate to it. A tradesperson who declares £30,000 of income but had £45,000 of actual income can't legitimately claim all their van and tool expenses — at least not against the right income figure.
This is one of the practical reasons why declaring all income, including cash jobs, matters. Our guide on cash in hand work and HMRC covers this in more detail.
Every invoice you generate through TaskDrop is timestamped, numbered and saved to your dashboard — giving you a complete digital income record for HMRC without any extra admin.
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