If you earn income from a side hustle in the UK, you may be able to reduce the amount of tax you pay by claiming allowable expenses.
In simple terms, allowable expenses are costs that are wholly and exclusively for your business activities, as defined by HM Revenue and Customs. Claiming these correctly can significantly reduce your taxable profit.
This guide explains what you can claim, what you cannot, and how to approach expenses properly.
Quick Summary
- You can claim expenses that are necessary for your business
- Common expenses include software, equipment, and marketing
- Personal costs cannot usually be claimed
- Keeping clear records is essential
What Counts as an Allowable Expense?
An allowable expense is something you spend only for the purpose of running your side income activity.
The key rule from HM Revenue and Customs is:
The expense must be wholly and exclusively for business use.
If a cost is partly personal and partly business, only the business portion can usually be claimed.
Common Expenses You Can Claim
Here are typical expenses many UK side hustlers can claim:
Software and Tools
- Accounting software
- Design or editing tools
- Subscriptions used for your work
Equipment and Supplies
- Laptop or computer (business use portion)
- Office supplies
- Tools required for your service
Marketing and Advertising
- Website hosting
- Domain names
- Paid ads
- Branding or design work
Professional Services
- Accountant fees
- Legal advice related to your business
Travel (Business-Related)
- Travel to meet clients
- Transport for business activities
Home Office Costs
If you work from home, you may be able to claim:
- A portion of electricity, heating, and internet
- Or use simplified flat-rate allowances
Expenses You Usually Cannot Claim
Some costs are not allowed, even if they seem related:
- Personal expenses
- Everyday clothing (unless specialist workwear)
- Food and drink (unless travelling for business)
- Fines or penalties
The general rule is: if you would have bought it anyway for personal use, it is unlikely to be allowable.
Part-Business, Part-Personal Expenses
Some expenses are shared between personal and business use.
Examples:
- Phone bills
- Internet
- Laptop usage
In these cases, you can only claim the business portion.
Example:
- £50 monthly phone bill
- 40% used for business
👉 You can claim £20
Trading Allowance vs Claiming Expenses
If your income exceeds £1,000, you have two options:
Option 1: Use the £1,000 Trading Allowance
- Deduct £1,000 from income
- Simpler, no need to track expenses
Option 2: Claim Actual Expenses
- Deduct real costs
- Often better if expenses exceed £1,000
For more detail, see our guide on the £1,000 trading allowance.
The £1,000 Trading Allowance Explained
How to Keep Track of Expenses
Good record-keeping is essential.
You should:
- Keep receipts (digital or physical)
- Track expenses regularly
- Separate business and personal spending where possible
Using accounting tools like FreeAgent or Xero can make this easier.
Common Mistakes to Avoid
Claiming personal expenses
Only claim costs directly related to your business.
Not keeping records
Without records, you may not be able to justify claims.
Overcomplicating things early
Keep it simple when starting out.
Forgetting small expenses
Small costs add up over time.
Final Thoughts
Understanding what expenses you can claim is one of the simplest ways to reduce your tax as a UK side hustler.
The key is to follow the “wholly and exclusively” rule, keep clear records, and stay consistent in how you track your costs.
To understand how these expenses affect your overall tax, see our guide on how side income is taxed in the UK.
UK Side Income Tax Explained Simply
Want a simple way to track your side income and stay organised? A full UK side income toolkit will be available soon.