Allowable expenses for sole traders: which MTD category to use
Your quarterly update shows expenses in categories. The calculator uses the same headings as HMRC’s self-employment figures. Costs must be wholly and exclusively for your business, and mixed-use items can only be claimed in proportion to business use.
| Category | Typical examples |
|---|---|
| Cost of Goods | Stock and materials bought for resale. Also where the calculator puts all money out first, before you adjust it. |
| CIS Subcontractor Costs | Payments to subcontractors under the Construction Industry Scheme. |
| Staff Costs | Wages, employer NI, pensions, other subcontractors. |
| Travel Costs | Fuel, parking, train and air fares, business mileage. Not normal commuting. |
| Premises Costs | Rent, business rates, utilities, insurance of premises. |
| Maintenance Costs | Repairs and upkeep. Not improvements. |
| Admin Costs | Phone, mobile, broadband, stationery, postage, software subscriptions. |
| Advertising Costs | Marketing and promotion, including website costs such as hosting and design if the site promotes your business. |
| Entertainment Costs | Client entertainment. Not allowable, so tick Disallowable. |
| Interest Payments | Interest on business loans. |
| Finance Charges | Bank and card charges, hire purchase interest. |
| Bad Debts | Invoices you have written off as unrecoverable. |
| Professional Fees | Accountant, solicitor, other professional advice. |
| Depreciation | Not allowable for tax. Use capital allowances instead, and tick Disallowable. |
| Other Expenses | Anything allowable that fits none of the above. |
Mobile phone, broadband and hosting
Claim only the business share. A separate business phone line avoids having to split it. HMRC’s flat rate for working from home does not include phone or broadband, so you can claim the business share of those on top. Website hosting fits Advertising if the site promotes or sells your services, otherwise Admin. Pick one and stay consistent.
Cars and depreciation
You cannot claim a car’s depreciation as an expense. Instead use either simplified mileage rates (45p a mile for the first 10,000 business miles, then 25p, covering fuel, insurance and wear) or claim actual running costs for the business share plus capital allowances. You cannot mix the two for the same car. Keep a mileage log either way.
Consolidated expenses
If your turnover is under £90,000 you may be able to report one consolidated expenses figure instead of itemising. In the calculator, the Cost of Goods line is labelled for this. Check the rules with HMRC or your accountant.
Related guides
- Who needs Making Tax Digital for Income Tax
- Quarterly update deadlines
- Allowable expenses and categories
- Cumulative figures explained
This guide is general information, not tax advice. Always check GOV.UK or ask an accountant about your own position.