What Counts as a Business Expense in 2025/26

Understanding what qualifies as a business expense is key to reducing your tax bill and staying compliant with HMRC. Whether you're a sole trader, landlord, or running a limited company, claiming the right expenses can make a real difference, but it’s important to know where the line is.

Here’s a breakdown of allowable expenses for the 2025/26 tax year, plus tips to help you stay on track.

What Is a Business Expense?

A business expense is a cost that’s “wholly and exclusively” for the purpose of running your business. If it’s used personally or partly for personal reasons, only the business portion can be claimed.

Common Allowable Expenses

For Sole Traders & Self-Employed:

• Office costs: stationery, postage, software subscriptions

• Travel: mileage, train fares, parking (not commuting)

• Marketing: website costs, ads, branding materials

• Professional fees: accounting, legal, training

• Home office: a portion of rent, utilities, broadband (based on usage)

• Equipment: laptops, phones, tools (capital allowances may apply)

For Limited Companies:

• Director salaries and staff wages

• Employer NIC and pension contributions

• Business insurance

• Software and subscriptions

• Rent and utilities for business premises

• Professional services and training

• Travel and subsistence (with receipts and justification)

For Landlords:

• Letting agent fees

• Repairs and maintenance (not improvements)

• Insurance

• Council tax and utilities (if paid by landlord)

• Legal and accounting fees

• Mortgage interest (via finance cost relief)

🚫 What You Can’t Claim:

• Personal expenses (e.g. clothes, meals, holidays)

• Client entertainment (not allowable for tax)

• Fines and penalties

• Commuting costs

• Capital improvements (e.g. extensions, renovations)

🧠 Tips for 2025/26:

• Keep digital records and receipts — HMRC expects clarity

• Use accounting software to tag expenses correctly

• If in doubt, ask your adviser before claiming

• Consider automation to track recurring costs and mileage

• Review your expense categories quarterly to stay proactive

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