Disallowable expenses: what can’t you claim for if you’re a sole trader?

Being a sole trader can be an expensive business, with many outgoings to cover. The good news is, many can be claimed as an “allowable expense”, which (as the name suggests) are costs that you’re allowed to claim as a tax expense, which lowers your tax bill. Happy days.

However, if you lack know-how, you may wrongly believe that you can claim for “disallowable expenses”, which (however innocently) can later cause you problems, so it’s best to find out what costs are allowable and which ones are disallowable. Although some believe them to be allowable, here are 12 disallowable expenses. 

1. Gym membership

Exercise is a proven way to improve your mood and boost your energy levels. But regardless of the mental, physical and business benefits of regularly going to the gym, membership fees are a disallowable expense. If you want to be a gym bunny, you’ll have to spend your own money.

2. Netflix or Spotify subscription

After a hard day’s work, many of us like nothing better than to relax on the couch in front of the latest Netflix blockbuster or boxset. This and other such personal expenses cannot be charged to your business. And however much you like to listen to your Spotify playlists while you work, you can’t claim it as a tax expense either.

Need to know! Any expense will be disallowable unless it’s “incurred wholly and exclusively for the purposes of the trade, profession or vocation”. You cannot claim for personal use.   

3. Commuting costs

Another popular myth is that sole traders can claim all travel costs, whether fuel or public transport, for all journeys. This isn’t always true. You cannot claim sole trader tax expenses for journeys between your home and normal place of work, if you have premises, you must pay your own commuting costs like everyone else. If you work at different locations, because you’re a plumber or mobile hairdresser, as examples, you can charge for all work-related journeys. 

4. Glasses and contact lenses

Many of us couldn’t do our jobs without our glasses and if you rely on glasses or contact lenses to do your work, you can claim for the cost of your eye test. However, glasses, contact lenses and laser corrective eye surgery are all disallowable expenses, so you’ll have to cover the costs out of your own pocket.

5. Childcare

Many sole traders have babies or young children and combining running a business with looking after them is challenging. The bad news is, childcare costs are disallowable expenses for sole traders, so are carer and domestic help costs.

Did you know? You may be able to get Tax-Free Childcare of up to £2,000 a year per child to help with childcare costs (£4,000 if the child has a disability). Visit government website GOV.UK for more information about Tax-Free Childcare. 

6. Home renovations

You claim allowable expenses if, for example, you decorate the room in your home that you use to run your business. No problem. But that doesn’t mean your business can help pay for a loft conversion, new kitchen or bathroom.

Read our blog: What allowable expenses can you claim when you’re self employed and work from home?

7. Parking and speeding fines

Tut, tut, tut. Even if you were given your parking or speeding fine while out and about for work, you’ll have to pay it yourself, you cannot claim it as a sole trader allowable expense.

Need to know! Sole traders are not allowed to claim for the cost of settling tax disputes either. Charges resulting from late VAT payments are also disallowable.  

8. Breakfast, lunch or dinner

Another popular myth is that self-employment means you can treat yourself to a free daily meal-deal. Not so. There’s no such thing as a free lunch, breakfast or dinner when you’re a sole trader, not unless you’re away on business, for example, if you’ve travelled a reasonable distance from base to visit a customer or supplier or to attend a trade show, when reasonable “subsistence” is allowable.

Need to know! Subsistence costs must also be reasonable, so you can forget all about dining in style at a swanky restaurant. And if you need to stay overnight, your accommodation costs must also be reasonable.   

9. Hospitality

Sole traders cannot claim for the cost of entertaining potential/existing clients or suppliers. Whether it’s a football, rugby or cricket match, the races, a concert or other event, hospitality is disallowable. You’ll have to pay for your own entertainment (or get an invite from someone else).

10. Hair, beauty, business clothes

No matter how smart your appearance needs to be for business, you cannot claim allowable expenses for visits to the barbers, hair or beauty salon. Neither can you claim for a new suit, smart pair of shoes, blouse, short or tie. Nor can you claim for everyday clothing, even if you wear it for work.

Did you know? Branded workwear, such as a polo short bearing your business name and logo, can be claimed as an allowable expense, because it’s marketing your business and you’re not likely to wear it outside of work hours. Safety clothes and footwear is allowable.

11. Donations to charity or political parties

No matter how worthy the cause, donations to charity are disallowable, so they’ll need to come out of your own pocket. The same is true of political parties or causes.

12. Gifts for customers

Business gifts given to clients or customers at any time of year are disallowable expenses, because they’re considered to be entertainment. But gifts given at Christmas to clients or customers are allowable if they’re worth less than £50, clearly feature your business logo (on the gift and not just the packaging) and they’re not food, drink, tobacco or a voucher that can be exchanged for goods or cash.

Read: Can sole traders claim for Christmas nights out and customer gifts?

What if you claim for disallowable expenses?

• You should know what expenses are allowable and disallowable. If you’re ever in any doubt, seek guidance from a tax expert or contact HMRC.
• Knowingly and deliberately reporting false tax expense information to HMRC via your Self Assessment tax return counts as tax fraud. As well as having to pay any tax due, plus interest, you could be faced with a hefty fine.
• If you claim what you later discover to be a disallowable expense, you can correct a tax return within 12 months of the Self Assessment filing deadline.
• Based on the income and expense information you report, HMRC might contact you to tell you they want to carry out an investigation. Best to claim only allowable expenses and have receipts where necessary to prove legitimacy.

GoSimpleTax features an expenses categorisation system, enabling you to better organise and claim your tax expenses. You can also specify what percentage of your cost was for private use, helping to ensure that you don’t claim disallowable expenses. Start your FREE trial now.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.