Understanding the Basics of UK Expense Claims
If you’re running a side hustle in the UK, understanding what expenses you can legally claim is essential to keeping your finances above board and maximising your take-home pay. The rules set by HMRC (Her Majesty’s Revenue and Customs) draw a clear line between personal costs and those incurred “wholly and exclusively” for business purposes. For UK side hustlers—whether you’re freelancing, selling online, or doing gigs alongside your main job—this distinction can make a real difference at tax time.
Eligible expenses are those that are directly related to running your side business. These might include things like materials, stock, business-related travel, advertising, or even a portion of your home utilities if you work from home. However, any expense must be strictly for your business activities—personal purchases or mixed-use costs need careful handling to avoid falling foul of HMRC’s rules. Getting familiar with these basics means you’ll not only stay compliant but also avoid missing out on legitimate deductions that could reduce your taxable income.
2. Common Deductible Expenses for Side Hustlers
Understanding what you can and cannot claim as a business expense is essential for UK side hustlers aiming to maximise their tax efficiency. HMRC allows you to deduct costs that are “wholly and exclusively” for your business, but the rules can seem a bit opaque at first glance. Here’s a breakdown of typical deductible expenses that often apply to freelancers, gig workers, and those running small enterprises on the side.
Equipment and Tools
If you need specific equipment or tools to run your side hustle—be it a laptop, camera, specialist software, or even craft supplies—these purchases are generally allowable. Remember, if you also use them personally, you’ll need to apportion the cost accordingly.
Subscriptions and Professional Fees
Subscriptions to trade magazines, online services (like design platforms or accountancy software), and professional body memberships related directly to your work can be claimed. Netflix won’t cut it unless youre reviewing films professionally!
Marketing and Advertising
Promoting your side hustle is critical, so expenses such as social media ads, website hosting, flyers, or business cards are all deductible. These investments help you reach new customers and grow your venture.
Travel Expenses
If you travel as part of your work—say, meeting clients or picking up stock—you can claim reasonable travel expenses. This covers train fares, parking fees, mileage allowances (using HMRC’s approved rates), or even a proportion of vehicle running costs if you use your car for business purposes.
Quick Reference: Typical Allowable Expenses
| Expense Type | Examples | Notes |
|---|---|---|
| Equipment & Tools | Laptop, camera, sewing machine | Claim full amount if used solely for business; otherwise apportion |
| Subscriptions & Fees | Trade magazines, professional bodies | Must relate directly to your side hustle |
| Marketing & Advertising | Website costs, paid ads, business cards | Solely for promoting your business |
| Travel | Mileage allowance, train tickets, parking fees | No personal travel; keep detailed records |
| Home/Vehicle Use | Proportion of rent/utilities/car expenses | Apportioned based on business vs personal use (see next section) |
The key is always to keep clear records and only claim for the part of each expense that relates directly to your side hustle. In the next section, we’ll dive into more detail on claiming for home office space and vehicle usage.
3. Keeping Proper Records: It’s More Than Just Receipts
If you’re running a side hustle in the UK, accurate record-keeping isn’t just good practice—it’s a requirement under HMRC rules. While most people think claiming expenses is all about stashing away receipts, the reality is more detailed. To keep your tax affairs in order and ensure every legitimate expense is claimed without hassle, you’ll need to get organised from day one.
Best Practices for Documentation
First off, always record your income and outgoings as soon as possible. Relying on memory or sifting through bank statements months later is a recipe for missed deductions and potential headaches during an HMRC review. Use accounting software, spreadsheets, or even a dedicated notebook—whatever suits your workflow—to log each transaction with dates, amounts, and a brief description of the business purpose.
What Should You Keep?
HMRC expects you to retain evidence of all business-related expenditure. This includes but isn’t limited to: digital or paper receipts, invoices (sent and received), bank statements, mileage logs if you use your car for business, and even emails confirming bookings or purchases relevant to your side gig. For items like phone bills or home utilities where only part is claimable, note down how you calculated the business percentage. Keep these records for at least five years after the 31 January submission deadline of the relevant tax year.
Staying Compliant
Being meticulous pays off. If HMRC asks questions about your claims—or if you’re selected for a random compliance check—having everything clearly documented will smooth the process and prevent delays or disputes. Make it routine to back up digital records and regularly check that all documentation matches what you report on your Self Assessment return. A tidy system means peace of mind and maximises your chances of making every penny count when claiming expenses.
4. Navigating the Grey Areas
One of the trickiest aspects of claiming expenses as a UK side hustler is working out what actually counts as deductible, especially when it comes to items that sit in the “grey area”. HMRC has clear guidance on many costs, but some everyday expenses—like meals, clothing, and training—often cause confusion. Let’s break down these common grey zones and share practical tips for making sound judgement calls.
Meals: When Is Lunch Deductible?
Generally, everyday meals are not allowable unless you’re travelling for work outside your normal routine. Grabbing a sandwich while working from home? Not deductible. But if you travel to another city for a client meeting, your meal could be claimed.
| Scenario | Deductible? |
|---|---|
| Lunch at home office | No |
| Meal during overnight business trip | Yes |
| Coffee with a client (business discussion) | Potentially (if wholly business related) |
Clothing: Workwear vs Everyday Clothes
This is another classic grey area. Clothing that is part of a uniform, or protective gear required by your trade, is typically allowable. Everyday clothes—even if only worn for work—are not. For example, an actor’s costume or a branded T-shirt required for events might be claimable; jeans and jumpers generally are not.
| Item | Deductible? |
|---|---|
| Steel-toe boots for construction site | Yes |
| Suits for office meetings | No |
| Branded polo shirts for event staff | Yes |
Training: Investing in Your Skills
The rule here is that training must be relevant to maintaining or updating your current skills—not learning something new from scratch. A course to keep up-to-date with industry regulations? Allowable. A degree in a different field to start a new sideline? Not allowable.
Making Judgement Calls and Avoiding Pitfalls
- Ask yourself: Is this expense wholly and exclusively for my side hustle?
- Keep detailed records: Note down why each expense was necessary—receipts alone may not be enough.
- Avoid mixing personal and business spending: If in doubt, don’t claim it or seek advice from an accountant familiar with UK tax rules.
- If challenged by HMRC: Be ready to show how the cost relates directly to your side hustle activities.
Understanding these nuanced areas—and documenting your reasoning—can help you claim confidently while steering clear of common mistakes faced by UK side hustlers.
5. Claiming Expenses in Practice
Filing expense claims as a UK side hustler may sound daunting, but with the right approach and tools, it can become a manageable part of your business routine. Here’s a practical step-by-step guide to help you navigate the process efficiently and stay compliant with HMRC requirements.
Step 1: Keep Meticulous Records
Start by maintaining organised records of all your business income and expenses. Store receipts, invoices, and bank statements in a dedicated folder—either physical or digital. This is not just good practice; HMRC requires you to keep these records for at least five years after the submission deadline of the relevant tax year.
Step 2: Categorise Your Expenses
Break down your expenses into clear categories such as travel, office supplies, software subscriptions, or home office costs. Most accounting software allows you to tag transactions, making this job easier and more accurate for later reference.
Step 3: Use Reliable Software or Apps
There are several UK-friendly options designed for side hustlers:
- QuickBooks Self-Employed: Tailored for freelancers and sole traders, with automatic mileage tracking and receipt scanning.
- FreeAgent: Popular with small businesses, integrates well with UK bank accounts, and supports direct submission to HMRC.
- Xero: Robust cloud-based platform with mobile apps and a strong ecosystem of add-ons.
- HMRC App: For basic needs, allows some self-assessment tasks directly from your phone.
Step 4: Fill Out Your Self-Assessment Tax Return
You’ll need to complete an annual Self Assessment tax return (SA100) if you’re earning income outside PAYE employment. Enter your total income, then input allowable expenses in the appropriate sections (usually “self-employment” pages). The software mentioned above can walk you through this process step-by-step, ensuring you don’t miss any deductible items.
Top Tip
If your turnover is below £1,000 per year from self-employment, you might not need to register or submit returns due to the trading allowance. However, always check current thresholds on GOV.UK before skipping any filings.
Step 5: Submit and Save Confirmation
Once you’ve reviewed everything for accuracy, submit your return online via HMRC’s portal or supported software. Make sure to save proof of submission and a copy of your final return—these are vital if HMRC ever queries your figures.
A Final Word on Staying Organised
The key to smooth expense claims is regular maintenance—don’t leave everything until the end of the tax year! Set aside time monthly to review expenses, upload receipts, and reconcile your accounts. This habit saves stress come January’s deadline and helps ensure you claim every penny you’re entitled to under UK rules.
6. Pitfalls, Penalties, and How to Stay on the Right Side of HMRC
If you’re running a side hustle in the UK, it’s tempting to claim every possible expense to reduce your taxable profit. However, claiming deductions isn’t without risk, and HMRC keeps a close eye on what’s being submitted. Here’s an honest look at the common pitfalls, potential penalties, and how you can stay compliant while maximising your allowable expenses.
Common Mistakes When Claiming Expenses
Many side hustlers slip up by not keeping detailed records or by including personal costs as business expenses. For example, claiming for your daily lunch just because you worked from a café doesn’t cut it—HMRC expects clear separation between personal and business spend. Another frequent error is failing to keep receipts or proof of purchase; without these, any claim can be challenged or disallowed if you’re ever audited.
Risks and Legal Responsibilities
Submitting inaccurate claims—whether accidental or deliberate—can lead to problems ranging from fines to full-blown investigations. HMRC has the authority to review your financial records going back several years. If they find careless mistakes, penalties can be up to 30% of the extra tax due; for deliberate errors, it could be 70% or more. In serious cases, prosecution is possible.
How to Avoid Trouble
First and foremost, only claim what is “wholly and exclusively” for your business. Keep all receipts, invoices, and records for at least five years after the 31 January submission deadline of the relevant tax year. Use accounting software or organised spreadsheets to keep track of everything. If you’re unsure whether something qualifies as a deductible expense, check HMRC’s guidance or consult a professional accountant before including it in your Self Assessment.
Practical Advice for Peace of Mind
Be proactive: review your claimed expenses regularly, especially before submitting your tax return. If you discover a genuine mistake after filing, correct it promptly via an amendment—HMRC tends to be more lenient when you admit errors yourself. Finally, remember that honesty pays off in the long run; trying to sneak through dodgy claims will almost always come back to bite you.
By understanding the rules and approaching your expense claims with care and transparency, you’ll protect yourself from unnecessary stress—and keep both your profits and reputation intact.
