Running a small business in the UK comes with many costs, from office expenses and professional fees to travel, software and equipment. The good news is that many legitimate business costs can be deducted when calculating your taxable profit, provided they meet the relevant HMRC rules.

For the 2026/27 tax year, understanding allowable business expenses is particularly important. Claiming genuine expenses correctly can reduce your taxable profit and therefore potentially reduce the amount of tax your business pays.

HMRC explains that the expenses and reliefs available depend on factors such as whether you are self-employed, operate through a limited company or are in a partnership.

Here are 12 common small business tax deductions and allowances to consider in 2026/27.

1. Office and Business Premises Costs

If your business operates from an office, shop, studio or other commercial premises, certain costs associated with running that premises may be allowable.

Depending on the circumstances, these can include:

• Rent
• Business rates
• Electricity
• Gas
• Water
• Property insurance
• Cleaning
• Repairs and maintenance

The key requirement is that the expense must relate to the business rather than private use.

Keeping invoices, bills and payment records makes it easier to demonstrate that the costs were incurred for business purposes.

2. Working From Home Expenses

Many small business owners operate partly or entirely from home.

If you work from home, you may be able to claim a proportion of relevant household costs, depending on your circumstances.

These can include costs such as:

• Electricity
• Gas
• Metered water
• Internet
• Heating
• Repairs relating to the business-use area

Self-employed individuals may also be able to use HMRC's simplified expenses system instead of calculating actual household costs. HMRC provides flat-rate methods for working from home, vehicle mileage and living at business premises.

It is important not to claim private household costs as business expenses simply because you work from home.

3. Business Travel and Mileage

Travel undertaken for genuine business purposes can represent a significant expense for small businesses.

Potentially allowable travel costs can include:

• Train fares
• Bus fares
• Taxi fares
• Parking
• Hotel accommodation
• Business mileage

If you use your own vehicle for business journeys, mileage claims may be available under HMRC's approved mileage rates.

For 2026/27, the approved mileage rate for cars and vans is 45p per mile for the first 10,000 business miles and 25p thereafter when calculating the tax deduction for business mileage. Motorcycles have a rate of 24p per mile, while bicycles have a rate of 20p per mile.

Ordinary commuting between home and a permanent workplace generally does not qualify as business travel.

4. Professional and Accounting Fees

Professional advice is another common business expense.

Depending on the circumstances, you may be able to claim costs relating to:

• Accountants
• Bookkeepers
• Tax advisers
• Solicitors
• Business consultants
• Professional subscriptions
• Legal advice

For example, fees paid to an accountant for bookkeeping, accounts preparation or business tax compliance can be an important part of your normal business administration costs.

Keep the relevant invoices and make sure the service relates to the business.

5. Business Insurance

Businesses often require different types of insurance depending on their activities.

Potentially allowable insurance costs can include:

• Public liability insurance
• Professional indemnity insurance
• Employers' liability insurance
• Business property insurance
• Stock insurance
• Professional or industry-specific cover

Insurance premiums should be properly recorded in your bookkeeping system and supported by invoices or policy documents.

6. Software and Online Services

Modern businesses rely heavily on digital tools.

Software subscriptions and online services used wholly or primarily for business purposes may qualify as allowable expenses, depending on the circumstances.

Examples include:

• Accounting software
• Payroll software
• CRM systems
• Project management platforms
• Cloud storage
• Website hosting
• Cybersecurity software
• Business communication tools

With more businesses moving to cloud accounting and digital bookkeeping, software costs can become a regular part of monthly expenditure.

However, if software has both business and personal use, only the appropriate business proportion should generally be considered.

7. Advertising and Marketing

Marketing is essential for many small businesses, and genuine business advertising costs can generally be deductible where they meet the relevant rules.

Examples include:

• Google advertising
• Social media advertising
• Website development
• Business cards
• Printed brochures
• Promotional materials
• SEO services
• Content marketing
• Trade show costs

Maintaining proper records is important because marketing expenses can cover many different types of transactions.

Your bookkeeping records should make it clear what was purchased, who supplied it and how it relates to your business.

8. Telephone and Internet Costs

Business communication costs can also be deductible where they relate to business use.

This may include:

• Business mobile phone costs
• Business telephone lines
• Internet services
• Business communication platforms

If a phone or internet connection has both personal and business use, you should consider the business element rather than automatically claiming the entire bill.

Accurate records can help demonstrate how the expense was calculated.

9. Staff Salaries and Employment Costs

If your business employs staff, employee-related costs can form a substantial part of its deductible expenditure.

Depending on the circumstances, these can include:

• Employee salaries
• Employer National Insurance
• Employer pension contributions
• Certain employee benefits
• Statutory payments
• Staff training

Businesses should operate appropriate payroll procedures and retain employment records.

For 2026/27, employers should also consider the current PAYE and National Insurance thresholds when budgeting for employment costs. HMRC's 2026/27 employer guidance applies from 6 April 2026 to 5 April 2027.

10. Training and Professional Development

Training can be an important investment for business owners and employees.

Training costs may qualify where they are incurred for a business purpose and meet the relevant tax rules.

Examples might include:

• Professional courses
• Industry training
• Business-related seminars
• Skills development
• Professional conferences
• Relevant certification

However, not every educational expense automatically qualifies.

The nature of the training and its connection with the existing business should be considered before claiming it.

11. Business Equipment and Capital Allowances

Equipment used in a business can provide valuable tax relief, but equipment is often treated differently from ordinary day-to-day expenses.

Examples include:

• Computers
• Printers
• Office equipment
• Machinery
• Business furniture
• Certain tools

Depending on the business structure and the asset, relief may be available through capital allowances rather than an ordinary revenue expense deduction.

For 2026/27, the Annual Investment Allowance remains £1 million, subject to the applicable rules. The main writing-down allowance rate for plant and machinery changed to 14% from 6 April 2026 for Income Tax purposes.

Businesses should therefore identify capital purchases separately in their bookkeeping records rather than simply treating every equipment purchase as a normal expense.

12. Bank Charges and Financial Costs

Banking and payment-processing costs can also form part of the normal cost of operating a business.

Potential examples include:

• Business bank charges
• Payment processing fees
• Merchant fees
• Certain loan interest
• Business finance costs

The exact tax treatment can depend on the type of finance and the legal structure of the business.

Keeping these transactions separate from personal banking makes bookkeeping and tax reporting considerably easier.

What Does "Wholly and Exclusively" Mean?

One of the most important principles for self-employed businesses is that expenses generally need to be incurred wholly and exclusively for the purposes of the trade to qualify as an allowable business expense.

This means you should not assume that every cost connected to your business can automatically be deducted.

For example, if you purchase an item for both business and personal use, the private element may need to be excluded or apportioned.

This is why good bookkeeping is essential.

Simplified Expenses vs Actual Costs

Some self-employed individuals can choose simplified expenses for specific categories rather than calculating actual costs.

HMRC's simplified expense rules can cover areas such as:

• Vehicle mileage
• Working from home
• Living at business premises

The simplified method can make record keeping easier, but businesses should consider which method provides the most appropriate result for their circumstances. HMRC requires records such as business mileage and hours worked at home to support the relevant calculations.

Keep Proper Records of Every Expense

Claiming tax deductions successfully starts with good record keeping.

Businesses should retain evidence such as:

• Invoices
• Receipts
• Bank statements
• Mileage records
• Contracts
• Utility bills
• Software invoices
• Insurance documents
• Payroll records

A clear bookkeeping system can help categorise expenses correctly throughout the year rather than trying to find everything when the tax return is due.

Common Mistakes Small Businesses Should Avoid

Some common mistakes can result in incorrect tax deductions.

Claiming Personal Expenses

A personal purchase should not automatically be treated as a business expense.

Claiming the Same Cost Twice

Avoid claiming a cost through both actual expenses and a simplified method.

Ignoring Capital Expenditure

Large equipment purchases may need to be considered under capital allowance rules.

Losing Receipts

Missing documentation can make it harder to support a deduction.

Mixing Business and Personal Spending

Separate business banking and bookkeeping can make tax reporting much easier.

Assuming Every Expense Is Deductible

Different expenses have different tax treatments. When uncertain, professional advice can prevent costly errors.

Why Bookkeeping Matters for Tax Deductions

Good bookkeeping is not just about recording transactions.

It helps identify which costs relate to the business, categorise expenses correctly and prepare accurate financial information for tax reporting.

For small businesses, regular bookkeeping can also provide a clearer picture of:

• Revenue
• Gross profit
• Operating costs
• Cash flow
• Taxable profit
• Outstanding payments
• Business performance

This makes it easier to plan ahead rather than discovering an unexpected tax bill at the end of the year.

2026/27 Tax Planning for Small Businesses

For 2026/27, the standard Personal Allowance remains £12,570, while the main Income Tax rates for England, Wales and Northern Ireland remain 20%, 40% and 45% across the relevant bands. Scotland has different Income Tax bands and rates.

For limited companies, Corporation Tax treatment is different from sole trader Income Tax. The 2026/27 small profits rate remains 19% for qualifying profits below the £50,000 lower threshold, with the main rate at 25% above the £250,000 upper threshold and marginal relief applying between the thresholds, subject to the applicable rules.

This makes it important for business owners to understand not only which expenses are deductible but also how their business structure affects the overall tax position.

Final Thoughts

Knowing which small business tax deductions you can claim in 2026/27 can help you avoid paying more tax than necessary while keeping your accounts accurate.

Common areas to review include office costs, working from home, business travel, professional fees, insurance, software, marketing, communication costs, staff expenses, training, capital equipment and banking costs.

However, an expense should not be claimed simply because it appears on a list. The actual tax treatment depends on the type of business, the nature of the expense, business and private use, and the applicable HMRC rules.

For this reason, accurate bookkeeping and professional tax advice can make a significant difference.

MyIVA can help small businesses with accounting, bookkeeping and tax-related requirements, helping business owners maintain accurate records and make informed decisions about their tax position.

If you are reviewing your expenses for the 2026/27 tax year, taking time to organise your bookkeeping and review potential deductions can help you prepare a more accurate tax return and avoid missing legitimate tax relief.