Hamster blog

Allowable expenses for a side hustle in the UK: what you can and can't claim

By the Hamster team · Published 25 October 2026

Last checked: 25 October 2026 against GOV.UK · Figures are for the 2026–27 tax year unless stated

The rule: business costs, and only the business part

You pay tax on your side hustle profit: what you earned minus your allowable expenses. HMRC says you can only claim costs related to the business, and if something is used both for the business and personally, you can only claim the business part.

Its own example is a phone bill: if the bill is £200 and £70 of it is business calls, you claim £70.

What you can claim

GOV.UK groups allowable expenses into these categories, with some typical side hustle examples:

• Office costs: stationery, printer ink, postage, the business share of your phone bill
• Travel: fuel, parking, train and taxi fares for business journeys, or the flat mileage rate instead of running costs
• Clothing: protective clothing, uniforms that are not everyday wear, and costumes for performing or advertising
• Staff costs: if you pay someone to help
• Things you buy to sell on: stock and the raw materials for things you make
• Financial costs: business insurance and bank charges
• Business premises: rent, heating and lighting, or a share of your home's costs
• Advertising and marketing: promoted listings, ads, website costs
• Subscriptions: trade or professional journals and memberships
• Training courses

Working from home

If you work from home for 25 hours or more a month, you can claim HMRC's flat rate instead of working out a share of your bills:

• 25 to 50 hours a month: £10
• 51 to 100 hours a month: £18
• 101 hours or more: £26

The flat rate does not include phone or internet, so claim the business share of those separately. Alternatively, you can work out a reasonable share of your actual heating, electricity, Council Tax, rent or mortgage interest, and internet.

Equipment

How you claim a laptop, camera, tools or a sewing machine depends on your accounting method:

• Cash basis, where you record money when it comes in and goes out: equipment you buy and keep for the business is claimed as an allowable expense in the normal way. The exception is a car, which goes through capital allowances.
• Traditional accounting: equipment, machinery and vehicles are claimed through capital allowances instead.

If you also use the item personally, claim only the business share.

What you cannot claim

• Everyday clothing, such as suits, shirts, dresses or ordinary shoes, even if you only wear them for work
• Entertaining clients, suppliers or customers
• Fines and penalty charges, such as parking tickets
• Travel between home and work, and any non-business journeys
• Paying yourself: your own wages, drawings or National Insurance
• The cost of buying a car as an expense (it goes through capital allowances), and depreciation
• The personal share of anything you use both ways

HMRC's notes for the self-employment pages list the cost of entertaining, depreciation, your own salary, wages and drawings, and National Insurance as not allowable.

Expenses or the £1,000 trading allowance?

Instead of claiming expenses, you can take the flat £1,000 trading allowance off your income. It is one or the other: if you claim the allowance, you cannot claim any expenses or capital allowances.

So add up your allowable costs. Under £1,000, claim the allowance. Over £1,000, claim the costs.

A worked example

Mo works part time in an office and designs logos on the side. In 2026–27 he is paid £9,000. His costs:

• a laptop used only for design work: £900
• design software subscriptions: £240
• phone bill of £360, 40% for the business: £144
• working from home about 30 hours a month, every month: £10 × 12 = £120
• train fares to client meetings: £85
• lunch with a client: £60, not allowable

Allowable expenses: £900 + £240 + £144 + £120 + £85 = £1,489, which beats the £1,000 allowance.

Profit: £9,000 − £1,489 = £7,511. His salary uses his Personal Allowance, so that is taxed at 20%: £1,502.20.

Had he claimed the allowance instead, his profit would be £8,000 and the tax £1,600. Claiming his expenses saves him £97.80. If he files using the SA103S pages, he can put £1,489 in box 20 as a single total.

Taking stock for yourself

If you take goods out of your business for your own use, such as a dress from your resale stock or materials for a personal project, you cannot keep the cost as an expense. The SA103S notes ask you to add it back in box 27, usually at what it cost you.

Keep the evidence

You do not send receipts with your return, but you need records of your income and costs in case HMRC asks. A photo of each receipt, taken on the day, is easier than a shoebox in January.

Keeping track

The deduction you get depends on knowing your costs, and whether they have overtaken £1,000. Hamster is a free Android app that logs costs alongside your earnings, uses the trading allowance until your costs beat it, and with Premium lets you attach a photo of each receipt.

This is general information, not personal tax advice. Rules and rates change — check the linked GOV.UK pages or speak to an accountant about your own situation.