When starting a trades business, understanding which expenses you can claim is essential for reducing your tax bill and keeping accurate financial records.
Self-employed tradespeople such as plumbers, electricians, builders and contractors often incur many business expenses throughout the year. Claiming these expenses correctly allows you to reduce your taxable profit and ensure you are not paying more tax than necessary.
In this guide we explain what expenses can tradespeople claim in the UK, including common allowable expenses and how to record them properly.
What Are Allowable Business Expenses?
Allowable expenses are business costs that can be deducted from your income before calculating tax.
HMRC states that expenses must be wholly and exclusively for business purposes in order to be claimed.
For example, materials used for jobs, business insurance and tools are clearly business-related expenses.
However, personal expenses that are not related to the business cannot be claimed.
Keeping accurate records of all business expenses helps ensure that tax returns are completed correctly.
Common Expenses Tradespeople Can Claim
Trades businesses often have many different types of expenses. Below are some of the most common allowable expenses for self-employed tradespeople.
Tools and Equipment
Tradespeople regularly purchase tools and equipment required to complete jobs.
Examples include:
- power tools
- hand tools
- ladders and safety equipment
- testing equipment
- work-specific machinery
These purchases can usually be claimed as business expenses, provided they are used primarily for work.
Materials and Supplies
Materials used to complete jobs are one of the most common expenses for trades businesses.
Examples include:
- pipes and fittings for plumbers
- electrical cables and components
- building materials
- fasteners and fixtures
Tracking materials accurately helps ensure project costs are properly recorded.
Vehicle and Travel Costs
Many tradespeople rely on vehicles to travel between job sites and transport tools or materials.
Allowable vehicle expenses may include:
- fuel
- vehicle insurance
- maintenance and repairs
- road tax
- business mileage
Alternatively, some self-employed individuals choose to claim mileage expenses instead of tracking actual vehicle costs.
Work Clothing and Safety Equipment
Protective clothing required for work can usually be claimed as a business expense.
Examples include:
- safety boots
- protective gloves
- high visibility clothing
- protective helmets
However, everyday clothing that could be worn outside work is typically not allowable.
Insurance
Most trades businesses require various forms of insurance.
Common policies include:
- public liability insurance
- professional indemnity insurance
- tool insurance
- vehicle insurance for business use
Insurance premiums related to the business are generally allowable expenses.
Phone and Internet Costs
Many tradespeople use their mobile phones to communicate with customers, schedule jobs and send invoices.
If a phone or internet connection is used for both personal and business purposes, only the business portion can be claimed as an expense.
Maintaining records helps justify these claims if needed.
Accounting and Bookkeeping Costs
Professional services related to managing finances can also be claimed as expenses.
This includes:
- accountant fees
- bookkeeping services
- accounting software subscriptions
Many tradespeople use accounting software such as QuickBooks or Xero to manage finances and track expenses automatically.
Using Accounting Software to Track Expenses
Keeping records of expenses manually can become difficult as a business grows.
Accounting software simplifies this process by:
- importing bank transactions automatically
- categorising expenses
- storing digital receipts
- generating financial reports
Platforms such as QuickBooks, Xero and Sage allow tradespeople to track expenses and prepare tax records efficiently.
Using accounting software can significantly reduce administrative work.
For a full guide to using accounting software, click here
VAT and Expense Tracking
Tradespeople who are registered for Value Added Tax (VAT) must also track VAT on business expenses.
This allows businesses to reclaim VAT paid on eligible purchases.
Accurate expense tracking ensures VAT returns remain correct and compliant with HMRC rules.
For official guidance on VAT and allowable expenses, refer to HMRC:
Keeping Records of Expenses
HMRC requires businesses to maintain accurate financial records.
Tradespeople should keep records such as:
- receipts for purchases
- invoices for materials
- bank statements
- mileage logs
- digital expense records
These records should typically be kept for several years in case HMRC requests verification.
Many accounting software platforms store receipts digitally, making record keeping much easier.
Why Tracking Expenses Matters
Understanding which expenses can be claimed allows tradespeople to reduce their taxable income and maintain accurate financial records.
Tracking expenses also provides better insight into business profitability. By reviewing expenses regularly, business owners can identify areas where costs may be reduced.
This helps ensure the business remains financially sustainable as it grows.
Final Thoughts
Understanding what expenses tradespeople can claim is an important part of managing a successful business.
From tools and materials to vehicle costs and insurance, many business-related expenses can be deducted when calculating taxable income.
Maintaining organised financial records and using accounting software can make it much easier to track these expenses throughout the year.
By staying organised and understanding allowable expenses, tradespeople can reduce their tax burden and maintain a clearer picture of their business finances.