Allowable Business Expenses 2026/27 — HMRC Guide
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Try free →The "wholly and exclusively" rule
HMRC allows you to deduct any cost that is incurred wholly and exclusively for the purposes of your trade. That single test underpins every allowable expense decision — if a cost has any significant personal element (a phone contract used half for personal calls, for example), only the business-use proportion is deductible, not the whole amount.
Common categories that get missed
- Home office costs — either a proportion of household bills based on rooms and hours used for work, or HMRC’s simplified flat rates depending on hours worked from home each month
- Mileage — 55p per mile for the first 10,000 business miles in a car each tax year, dropping to 25p per mile after that, covers fuel, wear, insurance and maintenance in one simple rate rather than tracking every cost separately
- Professional subscriptions and training — membership fees for trade bodies relevant to your work, and training that maintains or updates existing skills (though training for a genuinely new skill or qualification is usually treated as capital, not revenue)
- Bank charges and interest on a business account, and a proportion of accountancy fees for preparing your accounts and tax return
Revenue vs capital expenditure
Day-to-day running costs (revenue expenditure) are deducted directly against profit. Larger purchases that last beyond a year — equipment, vehicles, tools (capital expenditure) — are usually claimed instead through Capital Allowances, most commonly the Annual Investment Allowance, which lets most small businesses deduct the full cost in the year of purchase up to a generous annual limit.