You made £60,000 last year. You think you owe tax on £60,000. But you don't. You owe tax on profit. After expenses.
Most tradespeople don't claim enough expenses. Either they're nervous of HMRC, or they genuinely don't know what they can claim. So they pay more tax than they should.
Some tradespeople swing the other direction and claim ridiculous things (personal car insurance, gym memberships, home WiFi). They get audited. They end up owing back taxes plus penalties.
This guide walks the line. What's actually claimable. What's not. How to keep evidence so HMRC doesn't argue. How to sleep at night knowing you're doing it right.
How UK Tax Actually Works for Tradespeople
You're likely a sole trader or recently incorporated. Either way, the tax system is the same basic concept.
Revenue: Money you invoice customers. £60,000.
Expenses: Legitimate business costs. £20,000.
Profit: Revenue minus expenses. £40,000.
Tax: You pay income tax on the £40,000 profit (not the £60,000 revenue). At 20% basic rate, that's £8,000. Plus national insurance (around £3,600). Total: £11,600 to HMRC.
If you didn't claim the £20,000 in expenses, you'd pay tax on £60,000 and owe £12,000 plus national insurance. Extra £3,000+ down the drain.
That's why legitimate expense claims matter. They're not optional. They're how you legally reduce taxable profit.
The critical thing: You need evidence. Invoices. Receipts. Bank statements. If HMRC asks, you need to prove every expense you claimed. No evidence, no claim. Simple.
What You Can Definitely Claim
Materials and tools for jobs: Anything you buy specifically for a job and it's consumed or used in the work. Pipes, wire, solder, etc. Materials are always claimable.
Small tools and equipment: Items under £500 you use for work. Drill bits, wrenches, screwdrivers, etc. All claimable. Keep receipts.
Vehicle costs (work-related portion): Van fuel, van insurance, van maintenance, van repairs. If you use the van 80% for work and 20% for personal, claim 80% of costs. Keep a log if you're mixing personal and business use.
Home office costs (if you work from home): Portion of your rent/mortgage, utilities, internet, phone. Calculate as a percentage of your home's square footage used for office. Use the simplest method: £10-26 per week depending on workspace size. Keep it reasonable.
Professional fees: Accountant costs (to file your tax return), legal fees (if fighting a customer dispute), subscriptions to industry bodies. All claimable.
Training and qualifications: Course fees to maintain or improve skills in your trade. Gas safe retraining. Electrical certification. All claimable.
Insurance: Public liability, employer's liability, tools insurance, professional indemnity. All claimable.
Phone and internet: Business portion of your bill. If you use it 70% for business, claim 70%.
Advertising and marketing: Website, flyers, Google Ads, Facebook ads, business cards. All marketing costs claimable.
Office supplies: Stationery, paper, pens, invoice books, branded bags, etc. All claimable.
Subscriptions and software: Accounting software, project management software, industry publications. Claimable.
Fuel and expenses for training or client meetings: Travel to training, fuel to get to jobs. Claimable.
The rule that saves you: If it's a cost you wouldn't have if you didn't have the business, it's likely claimable. Keep the receipt and move on.
What You Absolutely Cannot Claim
Personal expenses: Groceries, clothes (unless branded workwear), personal car insurance, home mortgage (the main residence, not a dedicated office building), rent (personal portion). These aren't business costs.
Clothes and shoes: Unless they're specifically branded with your business name or logo. Then they might be claimable as uniform. But normal work clothes are personal.
Health and fitness: Gym membership, supplements, diet. Personal. Can't claim even if you argue fitness helps your work.
Large capital items: A new van or equipment over £500 typically gets added to your "capital assets" and depreciated, not claimed as a single year expense. This gets into accounting complexity. Talk to an accountant.
Meals and entertaining: Food for yourself is personal. Client entertainment is limited and needs specific rules. Generally not worth it unless you're regularly entertaining clients (then it's 50% claimable).
Home expenses (personal portion): If you have a dedicated office in your home, fine. Claim that portion. But you can't claim your whole council tax or energy bill as business expense.
Fines and penalties: Traffic fines, parking tickets, professional discipline fines. HMRC doesn't let you claim penalties as business expenses. Makes sense.
VAT you've paid: If you're VAT-registered, you claim back VAT separately, not as an expense. Different system.
Personal loan interest: If you borrowed money for personal reasons, you can't claim the interest.
The Gray Area (Where HMRC Gets Strict)
Home office: You can claim home office costs. But HMRC is suspicious of claims that are too large relative to the home. If your home office claim is 30% of your house, prepare for questions. Reasonable claims (10-15%) are fine.
Vehicle use: You can claim vehicle costs. But if your logbook shows no business use on Saturdays but you claim 100% business use, they'll challenge it. Keep realistic logs. Mixing personal and business is normal; claim the business portion honestly.
Meals while working away: You can claim meal costs while genuinely working away from home (all-day job on a client site). But daily commute meals or convenience snacks don't count.
Equipment: You can claim tools. But if you claim a £3,000 power tool every year and it obviously lasts three years, you should depreciate it. One big claim looks dodgy; breaking it into thirds looks honest.
Subscriptions and software: Claimable. But if you claim Slack, Office 365, and five other subscriptions you barely use, HMRC might question business necessity. Claim stuff you actually use.
Internet and phone: Claimable if work-related. But claiming 100% when you obviously use it personally too is risky. Claim the business portion realistically (usually 50-70%).
Home internet for a plumber who's rarely home: Can you claim it? Technically yes, if you're using it to send invoices, manage jobs, communicate with clients. But the claim should be proportionate. 10-20%, not 100%.
How to Stay Safe with HMRC
Keep receipts: For every expense you claim. Bank statements aren't enough. You need the actual invoice or receipt showing what you bought and when.
Keep records for seven years: HMRC can come back and audit you for the last six years (technically seven). Keep digital copies of invoices and receipts. Use cloud storage so you don't lose them.
Use a separate business bank account: Mixing personal and business money makes it impossible to prove what's business expense and what's personal. Get a business account. Everything work-related goes through it.
Be realistic in claims: The biggest red flag to HMRC is claims that don't match your business. A plumber claiming £50,000 in design software is obviously dodgy. A builder claiming office supplies is obvious.
Use accounting software: Xero, Sage, FreeAgent. They organize your expenses and make it trivial to provide documentation. Cost: £10-30 per month. Saves you from chaos at year end.
Talk to an accountant: £400-800 per year well spent. They'll advise on what's claimable for your specific situation. They'll organize the claims properly. They know the current rules (they change). Their fee is itself a claimable expense.
Be honest: Don't claim stuff you know is personal. HMRC randomly audits. If they find you've been cheating, penalties are brutal (50%+ fines on back taxes). It's not worth it.
The Annual Expense Checklist
At the end of each tax year (5 April for UK tradespeople), go through this list and gather receipts:
Vehicle costs (fuel, insurance, maintenance, repairs)
Materials and consumables used on jobs
Tools and small equipment
Home office (if applicable)
Professional fees (accountant, solicitor)
Training and qualifications
Business insurance (all types)
Phone and internet (business portion)
Advertising and marketing
Office supplies and stationery
Software and subscriptions
Memberships in professional bodies
Clothing (if branded or specific workwear)
Bank charges and fees
Travel to training or client meetings
Add it all up. That's your total expenses. Subtract from revenue. That's your taxable profit.
The rough benchmark: A tradesperson earning £50,000 revenue typically claims £15,000-25,000 in expenses. If you're claiming £5,000 or £45,000, something's off. The middle is normal.
The Long-Term Perspective
Smart tax management isn't about dodging tax. It's about paying exactly what you owe, not more.
Every pound you save in tax is a pound in your pocket. Every legitimate expense you claim reduces your taxable profit proportionally. Over a decade of business, that's thousands in legitimate savings.
But you have to do it right. Keep records. Stay honest. Use an accountant. Let HMRC know you take compliance seriously. That way, you get the benefit of legitimate deductions without the risk of being audited or penalised.
That's how you actually manage money as a tradesperson. Not by hiding things. By being smart and legitimate about it.