Claiming allowable expenses reduces your taxable profit — which directly reduces your tax bill. For a side hustler on a 20% basic rate paying 6% Class 4 NICs, every £100 of legitimate expenses claimed saves approximately £26. For a higher-rate taxpayer, the saving is approximately £46 per £100.
The rule that governs all expense claims is simple to state but requires judgment to apply: the expense must be incurred wholly, exclusively, and necessarily for the purposes of the trade. “Necessarily” is the strictest word.
If you can point to a non-business reason for the cost — or if the cost has personal and business elements mixed together — it either cannot be claimed or can only be partially claimed.
This guide covers every common expense category for UK side hustlers, whether each is claimable, the specific rules for partial-use items, and a claim-or-skip reference table for the 30 costs people most commonly ask about.
For the complete UK side hustle tax guide including how expenses fit into your return, see our complete UK side hustle tax guide.
Allowance vs Expenses — Which to Choose?
Before listing expenses, the most important decision: do you use the £1,000 trading allowance (Option A) or claim actual expenses (Option B)?
You use Option B (actual expenses) only when your actual allowable expenses exceed £1,000. Below £1,000, Option A gives a larger deduction without needing receipts.
Run both calculations: if your actual expenses are £900, the trading allowance gives a £100 larger deduction and requires zero receipts. If your actual expenses are £2,500, use Option B — it saves you tax on an additional £1,500 of deductions.
Once you choose a method, you cannot combine both for the same activity in the same tax year. For the full explanation of this choice, see our guide on how the trading allowance compares to claiming expenses.
The Wholly, Exclusively, and Necessarily Rule
Every claimed expense must pass this test:
- Wholly: The full amount must be for business purposes. A laptop bought half for gaming and half for your freelance work fails the “wholly” test for the full amount — but the business proportion may be claimable.
- Exclusively: The cost must not serve a private purpose as well as a business one. Clothing is the classic example — a suit can theoretically be worn to business meetings and to social events, so it is not exclusively business.
- Necessarily: The cost must be required for the trade, not merely helpful or convenient. This is why ordinary commuting to a regular workplace is not deductible.
Dual-purpose Costs
Where a cost has identifiable business and personal elements that can be separately measured, the business element can be claimed. Where they cannot be separated — where the business and personal purposes are inextricably mixed — neither element is claimable.
Claimable Expenses — Category by Category
Cost of Goods Sold
Stock purchased specifically for resale. Raw materials used in making products you sell. Packaging materials and postage supplies. These are the most straightforward deductions — directly traceable to income generation.
Platform and Transaction Fees
All fees charged by platforms directly against your income are deductible: Etsy listing and transaction fees, eBay final value fees, Vinted Pro subscriptions, Deliveroo or Uber Eats service fee deductions, Amazon Marketplace fees, Stripe and PayPal transaction charges, Shopify monthly subscription if used for the business.
Mileage and Travel
Using HMRC’s simplified mileage rates (see Section 5): 45p per mile for the first 10,000 business miles per tax year in a car or van; 25p per mile thereafter; 20p per mile for bicycles; 24p per mile for motorcycles.
Alternatively claim actual fuel, oil, tyres, insurance, servicing, and a proportion of depreciation (through capital allowances) — but most side hustlers find the simplified rate simpler and often more generous for low-mileage use.
Business mileage is travel between business locations, to client meetings, to collect stock, to make deliveries. It is not travel from home to a regular fixed workplace.
Equipment and Tools
Computers, laptops, phones, cameras, printers, and tools purchased for the business. Items used partly personally are apportioned — the business-use percentage of the cost is claimable. For wholly business-use equipment: claim the full cost under Annual Investment Allowance (AIA) in the year of purchase, up to £1 million per year.
If you use HMRC’s cash basis accounting (the standard for most small side hustlers), equipment is deducted as a capital expenditure in the year of purchase without needing to calculate depreciation.
Insurance
Business insurance, public liability insurance, professional indemnity insurance, product liability insurance, and hire-and-reward insurance for delivery work are all deductible. Your personal home or car insurance is not deductible — only the business-specific element is.
Professional Fees
Accountant fees for preparing your Self Assessment return: fully deductible. Solicitor fees for contracts or business legal advice: deductible for ongoing business matters; not deductible for costs incurred in setting up the business before trading started. Bookkeeping software subscriptions (QuickBooks, Xero, FreeAgent, Wave): fully deductible.
Phone and Internet
The business-use proportion of your phone bill and broadband. HMRC accepts a reasonable apportionment — if you use your phone 40% for business, 40% of the monthly bill is claimable. Keep a record of how you calculated the proportion in case of query.
Home Office Costs
Two methods (see Section 6 for calculation):
- Simplified flat rate: HMRC allows a monthly flat-rate deduction based on hours worked from home (£10/month for 25–50 hours, £18/month for 51–100 hours, £26/month for over 100 hours).
- Actual cost method: calculate the business-use proportion of mortgage interest or rent, utilities, council tax, and broadband — based on the number of rooms in the home and time used for business.
Advertising and Marketing
Paid social media advertising, Google Ads spend, Etsy wardrobe boosts, website domain and hosting fees, Canva Pro subscriptions used for business, business cards, and any other paid promotion of your side hustle.
Training
Courses that improve skills directly relevant to your existing business are deductible. A dog walker taking a canine first aid course: deductible. A web developer taking an advanced JavaScript course: deductible. A Vinted reseller taking a general business startup course: borderline — seek guidance. Starting a new, unrelated business: not deductible.
Bank Charges
Business bank account fees and transaction charges. Personal account fees are not deductible even if you use the account for business (one more reason to open a separate business account).
The 30-item Claim-or-skip Reference Table
| Item | Claim? | Notes |
|---|---|---|
| Stock bought to resell | YES | Directly linked to income |
| Packaging and postage | YES | Business necessity |
| Etsy / eBay / platform fees | YES | All platform charges |
| PayPal / Stripe fees | YES | Transaction costs |
| Mileage (business trips) | YES | 45p/mile first 10,000 miles |
| Mileage (home to regular work) | NO | Ordinary commuting |
| Fuel (actual cost, business use) | YES | With mileage log |
| Car insurance (business use %) | PARTIAL | Business proportion only |
| Hire-and-reward insurance | YES | Delivery work — 100% deductible |
| Laptop / PC (business use) | YES or PARTIAL | Full if 100% business; proportion if dual-use |
| Phone bill (business use %) | PARTIAL | Reasonable proportion |
| Broadband (business use %) | PARTIAL | Reasonable proportion |
| Home office (flat rate) | YES | £10–£26 per month |
| Home office (actual cost %) | YES | Business proportion |
| Accountant / bookkeeper fees | YES | 100% deductible |
| Business bank account fees | YES | Business account only |
| Professional membership | YES | If directly relevant to trade |
| Trade journal / subscriptions | YES | If directly relevant |
| Business insurance | YES | All types |
| Professional indemnity insurance | YES | 100% deductible |
| Relevant training / courses | YES | Existing business only; not a new direction |
| Advertising and marketing costs | YES | All paid promotion |
| Business software subscriptions | YES | Xero, QuickBooks, Canva Pro, etc. |
| Work uniform / protective clothing | YES | Specific to the job and cannot be worn socially |
| Ordinary clothing | NO | Even if worn to meet clients |
| Food and drink (client entertainment) | NO | Rarely deductible; strict HMRC rules |
| Home-cooked meals for energy | NO | Personal expense; never deductible |
| Fines and penalties | NO | Never deductible |
| Personal loan interest | NO | Only business loan interest is deductible |
| Personal subscriptions | NO | Netflix, Spotify, personal gym memberships, etc. |
Mileage Rates in Full
HMRC simplified mileage rates for 2026/27:
Cars and vans:
- First 10,000 business miles in the tax year: 45p per mile
- Every business mile above 10,000: 25p per mile
Motorcycles: 24p per mile (flat rate, no threshold)
Bicycles: 20p per mile (flat rate, no threshold)
You must keep a mileage log: date of each journey, starting point, destination, purpose, and distance. HMRC can ask for this if they query your return. A simple spreadsheet is sufficient — you do not need specialist mileage-tracking software, though apps like MileIQ and Driversnote automate this if you prefer.
Claiming actual vehicle costs instead: if you want to claim actual fuel, insurance, servicing, and capital allowances instead of the simplified rate, you must be consistent — you cannot switch between methods for the same vehicle once you have started using one method.
The Home Office Calculation
Simplified Flat-rate Method
| Hours Used for Business per Month | Monthly Deduction |
|---|---|
| 25–50 hours | £10 |
| 51–100 hours | £18 |
| 101+ hours | £26 |
This is the simpler option and requires no room calculations.
Actual Cost Method
Step 1: Calculate the proportion of your home used for business. Divide the number of rooms used exclusively or primarily for business by the total rooms in the property.
Step 2: Apply this proportion to eligible home costs: rent or mortgage interest (not capital repayment), council tax, heat and light, broadband, repairs to the business area.
Step 3: If the room is not used exclusively for business (which is typical — most people work from a kitchen table or shared desk), apply a further time proportion: hours used for business per day ÷ 24 hours.
The actual cost method only produces a materially larger deduction than the flat rate for people who work long hours from home in a dedicated space. For occasional home working, the flat rate is usually simpler and gives a comparable result.
Partially Claimable Items — How to Calculate?
For items with identifiable business and personal use:
- Phone: Estimate business use percentage based on time spent on business calls and data. Keep one or two months of call logs as supporting evidence. HMRC accepts reasonable estimates if you can explain your methodology.
- Laptop: If you buy a laptop used 60% for your freelance design work and 40% for personal use: 60% of the cost is deductible.
- Car Expenses (Actual Cost Method): Keep a record of total miles driven in the year and total business miles. Business miles ÷ total miles = business percentage. Apply that percentage to total fuel, insurance, servicing, and depreciation claims.
What You Cannot Claim?
The following are common misconceptions — items that seem business-related but are not deductible:
- Ordinary clothing: even if you only wear it for client meetings, clothing that could be worn in any other context is personal expenditure. The exception is uniform or protective gear specific to the job.
- Food and drink: entertaining clients is not deductible under HMRC’s rules in the way many assume. Food for yourself while working from home is personal. The only food and drink deductible is subsistence on qualifying travel away from your regular work base for extended periods.
- Personal telephone contracts: HMRC expects a genuine apportionment. Claiming 100% of a personal phone contract as a business expense when you also use it personally will not survive scrutiny.
- Capital costs on cash basis: if you use cash basis accounting (standard for most small side hustlers), you cannot claim capital allowances separately from the purchase — instead, deduct the cost directly in the year of purchase.
- Pre-trading costs: costs incurred before you started trading — including purchases before your first sale — are generally not deductible unless they would have been deductible if incurred after trading began (which some are, subject to specific rules).
Frequently Asked Questions
Do I need receipts for everything I claim?
For actual expenses claims, yes — you need evidence for every item. Bank statements, platform fee statements, invoices, and photographed receipts all count. HMRC does not require physical receipts specifically, but they do require evidence of the expenditure if they query your return. Digital records kept for at least 5 years after the relevant return deadline satisfy HMRC’s requirements.
Can I claim the cost of my home broadband if I work from home?
Yes — the business-use proportion. If you use broadband 30% for your side hustle and 70% personally, 30% of the monthly bill is deductible. Keep a record of how you calculated the proportion.
Can I deduct the full cost of a new laptop?
If the laptop is used exclusively for your side hustle, yes — claim the full cost under Annual Investment Allowance in the year of purchase. If used partly personally, only the business-use proportion is deductible.
Can I claim expenses even if I’m using the trading allowance?
No. The trading allowance (Option A) and actual expenses (Option B) are mutually exclusive. If you claim the £1,000 trading allowance, you do not also claim any actual expenses. The allowance replaces all expense claims.
What to Read Next?
To calculate exactly how your claimed expenses reduce your tax bill, use our free side hustle tax calculator.
For the decision between claiming expenses versus using the trading allowance, see our guide on how the trading allowance compares to claiming expenses.
Verified against HMRC guidance as of 13 June 2026.
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