Top Tax Deductions for Small Businesses and How to Claim Them
Running a small business comes with a host of expenses from office supplies to professional fees, but not all owners realise just how many of these costs can be claimed back to reduce their tax bill. The good news is, HMRC allows a wide range of tax deductions for small business owners through allowable expenses.
In this guide, we break down the most common deductions UK businesses can claim in 2025/26, how to do it properly, and where to find more support.
What Are Tax Deductions?
Tax deductions, or allowable business expenses, are costs you incur wholly and exclusively for the purpose of running your business. These can be offset against your income to reduce your taxable profit, meaning you pay less Corporation Tax (for companies) or Income Tax (for sole traders and partnerships).
For example, if your business earns £40,000 in income and you have £10,000 in allowable expenses, you’ll only be taxed on the remaining £30,000.
The list of allowable expenses depends on your business type, but HMRC provides general guidance which we’ve expanded below.
More on this: Allowable expenses if you’re self-employed – GOV.UK
1. Home Office Expenses
With more small businesses operating from home, home office deductions have become especially relevant.
You can claim:
- A proportion of household costs such as:
- Rent or mortgage interest
- Council tax
- Utilities (electricity, gas, water)
- Internet and phone bills
- Office-related equipment (e.g. desk, chair, computer)
There are two main methods for claiming:
Simplified Expenses
Use HMRC’s flat rate based on hours worked from home:
| Hours worked per month | Flat rate you can claim |
| 25–50 hours | £10 |
| 51–100 hours | £18 |
| 101+ hours | £26 |
Actual Cost Method
If your home office takes up a defined portion of your home, you can calculate expenses based on floor space and time used. This can lead to higher deductions but requires detailed records.
2. Travel Costs
You can deduct business-related travel expenses including:
- Mileage (45p per mile for the first 10,000 miles in the tax year, then 25p per mile)
- Train, bus, air fares
- Tolls, congestion charges, and parking
- Hotel accommodation and subsistence (for overnight stays)
Important: You cannot claim for normal commuting between home and a regular workplace—only for travel made exclusively for business purposes.
Expenses: business travel – GOV.UK
3. Professional Services
Fees paid to professionals directly related to running your business are fully tax-deductible. This includes:
- Accountants
- Legal professionals (for business purposes)
- Bookkeepers
- Business consultants
- Tax advisers
Professional membership fees and subscriptions (e.g. to a trade body) are also deductible, provided the organisation is on HMRC’s approved list.
Professional fees and subscriptions – GOV.UK
4. Office and Equipment Costs
You can claim for:
- Computers, laptops, printers
- Software licences
- Stationery and postage
- Office furniture
- Mobile phone costs (business use proportion only)
Capital Allowances may apply for large items (e.g. IT equipment), allowing you to deduct the cost over time—or sometimes immediately via the Annual Investment Allowance.
