Quick Summary: What You'll Learn
If you're a freelancer, contractor, or self-employed in the UK, you're probably overpaying tax. Most freelancers miss thousands of pounds in legitimate tax deductions simply because they don't know what they can claim.
This guide explains every allowable expense for UK freelancers and self-employed workers in 2025/26. From the £1,000 trading allowance to software subscriptions, mileage rates to home office deductions—we cover everything HMRC allows you to claim. This is the comprehensive, HMRC-compliant guide you need to reduce your tax bill legally.
Whether you're a graphic designer, consultant, writer, developer, or any other freelancer, understanding tax deductions is crucial for your financial health. With proper record-keeping and Making Tax Digital compliance, claiming expenses becomes straightforward.
What Expenses Can Freelancers Claim in the UK?
HMRC allows you to deduct any expense that is "wholly and exclusively" for your business. This is the golden rule. If something has both personal and business use (like your phone or car), you can claim the business portion.
The "Wholly and Exclusively" Rule
An expense must be incurred wholly and exclusively for your trade or profession. This means it must be necessary for running your business, not for personal benefit. Mixed-use items (home office, phone, car) can be claimed proportionally based on business usage.
Mixed-use expenses require you to calculate the business percentage. For example, if you use your mobile phone 60% for business calls, you can claim 60% of the bill. Keep records showing how you calculated this split. HMRC may ask during an enquiry.
Documentation is critical. Every expense you claim should have a receipt, invoice, or bank statement. Under Making Tax Digital, you'll need digital records in MTD-compatible software. Keep everything for at least 5 years after the 31 January submission deadline.
The £1,000 Trading Allowance Explained
The trading allowance is HMRC's simplification for small-scale self-employment. If your gross self-employed income (before expenses) is £1,000 or less per year, you automatically get £1,000 tax-free. You don't need to register for self-assessment, keep receipts, or declare the income.
Who Qualifies?
Anyone with self-employed income under £1,000/year automatically qualifies.
Example: Side project
Income Over £1,000?
If income is £1,000-£2,000, compare trading allowance vs actual expenses.
Example: Compare methods
Use trading allowance (saves more tax)
When to use it: If your actual expenses are less than £1,000, use the trading allowance. If your expenses exceed £1,000, claim actual expenses instead. You can't use both, choose whichever gives you more relief. For income over £2,000, you must use actual expenses and submit a self-assessment tax return.
Complete List of Allowable Expenses for UK Freelancers
Here are 25+ expenses every UK freelancer can claim. This is broken down by category to help you identify what you're missing. Most freelancers leave £2,000-£5,000 on the table by not claiming everything they're entitled to.
Office & Workspace Expenses
- Home office costs: Proportion of rent, mortgage interest, council tax, utilities, insurance
- Office rent: Co-working space, serviced offices, studio rental
- Office supplies: Stationery, printer ink, paper, pens, notebooks
- Furniture and equipment: Desks, chairs, filing cabinets, shelving
Technology & Software Expenses
- Computer equipment: Laptops, monitors, keyboards, mice, tablets, hard drives
- Software subscriptions: Adobe Creative Cloud, Microsoft 365, Xero, QuickBooks, Canva Pro, Figma, Notion
- Website costs: Domain registration, hosting, SSL certificates, website builders
- Cloud storage: Dropbox, Google Workspace, iCloud, OneDrive
Travel & Vehicle Expenses
- Business mileage: 45p first 10,000 miles, 25p thereafter (cars). Keep mileage log.
- Public transport: Train, bus, tube, tram tickets for business travel
- Parking and tolls: Car parks, congestion charge, road tolls for business journeys
- Accommodation: Hotels, Airbnb for overnight business trips
Professional & Marketing Expenses
- Professional memberships: ACCA, CIMA, CIPR, CIM, ACM, trade associations, LinkedIn Premium
- Training and courses: Courses that update existing skills (not initial training for new profession)
- Advertising and marketing: Google Ads, Meta Ads, LinkedIn Ads, business cards, brochures
- Client entertainment: Limited to £50 per person per year (strict rules apply)
Insurance & Legal Expenses
- Professional indemnity insurance: Essential for consultants, designers, advisors
- Public liability insurance: Cover for accidents involving third parties
- Legal and professional fees: Solicitors, accountants, tax advisors, debt collection
- Accountancy fees: Bookkeeping, tax return preparation, year-end accounts
Communication Expenses
- Mobile phone: Business proportion of contract or PAYG costs
- Internet: Business proportion of broadband bills (or 100% if dedicated business line)
- Landline: Business proportion of line rental and call charges
- Postage: Stamps, courier services, recorded delivery for business correspondence
Home Office Tax Deduction UK: How to Calculate It
Working from home? You can claim a portion of your household costs. HMRC offers two methods: simplified expenses (flat rate) or actual cost calculation. Choose whichever gives you more relief.
Method 1: Simplified Expenses
Use HMRC's flat rates based on hours worked per month. No receipts needed, but keep a time log.
Method 2: Actual Cost Calculation
Calculate proportion based on room size and usage time. Requires receipts for all household bills.
Example Calculation:
Which Method Should You Choose?
Use simplified expenses if you work from home occasionally or have low household costs. Use actual costs if you have a dedicated home office, high rent/mortgage, or work full-time from home. Calculate both and choose whichever saves more tax. You can switch methods each year. Need help deciding? Book a free call with our team.
Not sure which method works best for your situation? Book a free call to review your expense strategy and ensure you're claiming everything you're entitled to.
Mileage Rates and Vehicle Expenses 2025/26
If you use your personal vehicle for business, HMRC's approved mileage rates are the simplest way to claim. You don't need to track fuel costs, servicing, insurance, or depreciation—just record your business miles.
| Vehicle Type | First 10,000 Miles | After 10,000 Miles |
|---|---|---|
| Cars and vans | 45p per mile | 25p per mile |
| Motorcycles | 24p per mile | 24p per mile |
| Bicycles | 20p per mile | 20p per mile |
Example Calculation
Record-keeping requirements: Keep a mileage log showing date, destination, purpose, and miles travelled. Apps like MileIQ, Driversnote, or Google Sheets work well. HMRC can request evidence during enquiries.
Alternative method: Instead of mileage rates, you can claim actual vehicle costs (fuel, insurance, servicing, MOT, road tax, depreciation) proportionally based on business use. This is more complex but may save more if you drive extensively for business. Calculate both methods to see which is better.
Common Expenses Freelancers Forget to Claim
Most freelancers claim the obvious expenses (laptop, software, mileage) but miss these often-overlooked deductions. Each one could save you hundreds in tax.
Professional Memberships
ACCA, CIMA, CIPR, CIM, ACM, British Computer Society, trade associations, LinkedIn Premium—all fully deductible if relevant to your work. Don't forget annual renewal fees.
Bank Charges and PayPal Fees
Business account fees, overdraft charges, PayPal transaction fees, Stripe fees, credit card merchant fees—all allowable. Check your bank statements monthly.
Subcontractor Costs
If you outsource work to other freelancers (designers, writers, developers), their fees are fully deductible. Keep invoices showing they provided services for your business clients.
Bad Debt Write-Offs
If a client doesn't pay and you've exhausted collection efforts, you can write off the bad debt as an expense. Must have been included in taxable income first. Keep evidence of collection attempts.
Use of Home (Even Without Simplified Expenses)
Many freelancers think they need a dedicated home office to claim. Not true. If you regularly work from home, even at the kitchen table, you can claim simplified expenses or proportional costs.
Eye Tests and Glasses
If you use screens for work, eye tests (£20-£50) are deductible. If glasses are prescribed specifically for screen use, they're allowable too. Keep the optician's letter confirming they're for work.
Documentation Requirements: What HMRC Expects
HMRC can request evidence for any expense you claim, even years after filing. Proper record-keeping protects you during enquiries and makes tax returns straightforward.
What Receipts to Keep
- Invoices and receipts for all expenses over £10 (bank statements alone aren't sufficient)
- Bank statements showing payments (digital exports are fine)
- Mileage logs with date, destination, purpose, and miles
- Contracts and agreements with clients and suppliers
- Evidence of business purpose for mixed-use items (home office floor plan, usage calculations)
Digital record-keeping under Making Tax Digital: From April 2026, all self-employed individuals with income over £50,000 must use MTD-compatible software to keep digital records. Popular options include Xero, QuickBooks, FreeAgent, and Sage. You can photograph receipts with your phone—apps like Dext, Receipt Bank, or built-in software features make this easy.
How long to keep records: Keep everything for at least 5 years after the 31 January submission deadline for that tax year. For 2025/26 tax year (filing by 31 January 2027), keep records until at least 31 January 2032. Digital copies are acceptable—no need to keep paper originals.
Expenses You Cannot Claim
Not everything qualifies for tax relief. Here's what HMRC specifically excludes:
Personal Expenses
Groceries, personal clothing, gym memberships, personal travel, entertainment not related to business. The "wholly and exclusively" rule means no personal benefit.
Clothing (Unless Uniform or Costume)
Everyday business clothes aren't deductible, even if you only wear them for work. Exception: branded uniforms, protective equipment, or costumes required for the job (e.g., actors, performers).
Fines and Penalties
Parking fines, speeding tickets, late tax payment penalties, HMRC interest charges—none are allowable, even if incurred during business activities.
Client Entertainment (Mostly)
Taking clients to lunch, dinners, events—generally not deductible. Exception: up to £50 per person per year for reasonable hospitality. Staff entertainment is fully deductible.
Initial Training to Start a New Business
Courses that teach you a completely new skill to start a business aren't deductible. Example: a teacher can't claim for an accountancy degree to become an accountant. But updating existing skills (advanced Excel for accountants) is fine.
Making Tax Digital Compliance for Freelancers
Making Tax Digital (MTD) is HMRC's digital record-keeping requirement. From April 2026, it expands to include self-employed individuals and partnerships with income over £50,000. Even if you're not required yet, using MTD-compatible software now makes expense tracking easier.
Who Needs MTD?
- Self-employed income over £50,000 (from April 2026)
- Partnerships with income over £50,000
- Must keep digital records in MTD-compatible software
- Submit quarterly updates to HMRC
MTD Software Options
- Xero: £12-£30/month, excellent for freelancers
- QuickBooks: £10-£35/month, user-friendly
- FreeAgent: £19-£29/month, built for freelancers
- Sage: £10-£32/month, traditional option
Read our full guide: Making Tax Digital 2025: What You Need to Know.
Frequently Asked Questions
Can I claim home office expenses UK?
Yes, if you work from home regularly and exclusively for business. You can use HMRC's simplified flat rate (£10-£26/month based on hours worked) or calculate your actual costs proportionally based on room size and usage time. Even if you don't have a dedicated office (e.g., working at the kitchen table), you can still claim.
What percentage of home expenses can I claim?
Calculate by room area (e.g., 10sqm office / 100sqm house = 10%) or time spent working (e.g., 8 hours/day × 5 days = 23% of the week). Multiply this percentage by utilities, rent, council tax, and insurance costs. For example, if your office is 12% of your home and you work 24% of the time, claim 12% × 24% = 2.9% of household bills.
Can I claim software subscriptions as business expenses?
Yes, 100% if used solely for business. Adobe Creative Cloud, Microsoft 365, Xero, QuickBooks, Slack, Asana, Figma, Canva Pro, and any industry-specific software are all fully deductible. Even if you occasionally use them for personal projects, as long as the primary purpose is business, you can claim them.
What's the trading allowance for freelancers?
£1,000 tax-free trading income per year. If your self-employed income is under £1,000, you don't need to declare it or pay tax. If it's between £1,000-£2,000, compare using the trading allowance versus claiming actual expenses—whichever gives you more relief. For income over £2,000, you must claim actual expenses and submit a self-assessment return.
Can I claim mileage for client visits?
Yes, at HMRC approved rates: 45p per mile for the first 10,000 miles, then 25p per mile. Keep a detailed log of business journeys with dates, destinations, mileage, and purpose. Apps like MileIQ or Driversnote make this easy. You can't claim for commuting (home to regular place of work), but client visits, networking events, and temporary workplaces all qualify.
What records do I need to keep for HMRC?
Digital or physical records of all income and expenses, bank statements, invoices, and receipts. Under Making Tax Digital, you'll need MTD-compatible software if your income exceeds £50,000. Keep everything for at least 5 years after the 31 January submission deadline. Digital copies are acceptable—photograph receipts with your phone using apps like Dext or Receipt Bank.
Can I claim for training and courses?
Yes, if they maintain or update existing skills related to your current business. Initial training to start a completely new profession is not allowable. For example: a web designer can claim for an advanced CSS course, but not a law degree to become a solicitor. Online courses, conferences, workshops, and certifications all qualify if they improve your existing skills.
Are professional memberships tax deductible?
Yes, if directly relevant to your work. ACCA, CIMA, CIPR, CIM, ACM, British Computer Society, Chartered Institute of Marketing, and trade body memberships all qualify. LinkedIn Premium is also deductible if you use it primarily for business networking. Annual renewal fees, joining fees, and subscription costs are all fully claimable.
Can I claim internet and phone bills?
Yes, but only the business portion. Calculate percentage based on usage (e.g., 50% of calls are business = 50% deductible) or use a reasonable estimate. If you have a dedicated business line, claim 100%. For internet, if you work from home full-time, claiming 50-80% is reasonable. Keep records showing how you calculated the split.
Do I need receipts for everything I claim?
Yes, HMRC can request evidence for any expense claimed. Digital copies are acceptable. For expenses under £10, a bank statement may suffice, but receipts are safer. Use expense tracking apps to photograph receipts immediately after purchase. Cloud storage (Dropbox, Google Drive) with proper folder organisation works well for long-term archiving.
Still Have Questions About Tax Deductions?
Book a free call with our chartered accountants. We'll review your situation, identify missed deductions, and show you exactly how much tax you can save.
Your Next Steps: Action Checklist
Now that you know what you can claim, here's your action plan to maximise tax relief and stay HMRC-compliant:
Review this year's expenses
Go through your bank statements and identify expenses you haven't claimed yet
Set up expense tracking
Choose MTD-compatible software (Xero, QuickBooks, FreeAgent) or use spreadsheets
Calculate home office deduction
Compare simplified expenses vs actual costs—use whichever saves more
Start a mileage log
Use an app or spreadsheet to record business journeys from today forward
Photograph receipts immediately
Use your phone camera or receipt scanning app—don't let them fade or get lost
Review professional memberships
List all memberships, subscriptions, and associations—ensure you're claiming them
Check self-assessment deadline
31 January is for both filing AND payment—don't leave it to the last minute
Consider tax planning strategies
Explore pension contributions and dividend tax planning
Need help implementing this? Our team of chartered accountants specialises in helping UK freelancers and contractors maximise tax relief. We'll review your expenses, identify missed deductions, and show you exactly how much you can save. Most clients find £2,000-£5,000 in overlooked expenses during their first review.
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