Self-employed expenses calculator 2026/27
Claiming your business expenses lowers your taxable profit — and your tax bill. Enter your income and costs to see your taxable profit, the tax and National Insurance you save, and whether the £1,000 trading allowance would be better.
2026/27. Only claim expenses incurred wholly and exclusively for the business.
What your expenses do
2026/27- Income
- £40,000
- Expenses claimed
- −£6,000
- Taxable profit
- £34,000
- Tax + NI on that profit
- £5,572
Tax & NI saved by your expenses
vs claiming nothing
£1,560
Your expenses are more than £1,000, so claiming the actual costs beats the £1,000 trading allowance.
Verified · 2026/2721 June 2026
How this was calculated
We compare your tax two ways: on your full income with no expenses, and on your profit after the expenses you enter. The difference is what your expenses save you — your income falls out of the higher tax and National Insurance bands at your marginal rate. We also check the £1,000 trading allowance against your actual expenses and use whichever leaves you better off. Rates are traced to dated gov.uk sources for 2026/27.
The full method and every source is on our methodology page.
Built & maintained by the Pay Packet team · methodology sourced from HMRC · last reviewed 21 June 2026. About our figures →
Expenses cut your profit, not just your bill
As a sole trader you are taxed on profit, so every allowable expense reduces the amount you pay tax and National Insurance on. The saving is at your marginal rate: for most self-employed people that is 26% — 20% Income Tax plus 6% Class 4 NI — so £1,000 of genuine costs saves £260. Once your profit is over £50,270 the marginal rate rises to 42%, so expenses are worth even more.
The flip side: an expense still costs you most of the money. Spending £1,000 to save £260 only makes sense if you needed the thing anyway. Claim everything you are genuinely entitled to, but do not spend to “save tax”.
If your costs are small, the flat £1,000 trading allowance can be the better deal — you deduct £1,000 with no records of individual expenses, but you cannot also claim actual costs. This calculator flags whichever leaves you better off. To see the full picture including your take-home, use the sole trader tax calculator; for the deadlines and what you owe, the Self Assessment calculator.
What counts as allowable is set out on gov.uk: expenses if you’re self-employed and the trading allowance.
Expenses questions
- How do expenses reduce my tax?
- Allowable expenses come off your income before tax, lowering your taxable profit. Every £1 of genuine expense saves you tax and National Insurance at your marginal rate — 26% for most sole traders (20% Income Tax + 6% Class 4 NI), or 42% once your profit is over £50,270. Expenses do not give you the money back; they stop you being taxed on money you had to spend to trade.
- What counts as an allowable expense?
- Costs incurred wholly and exclusively for the business: stock and materials, tools and equipment, business travel and mileage, a reasonable share of home and phone costs if you work from home, software and subscriptions, accountancy and professional fees, advertising, and business insurance. Personal spending and most entertaining do not qualify.
- Should I use the £1,000 trading allowance instead?
- If your real costs are less than £1,000, claim the trading allowance — it is simpler and gives a bigger deduction. If your expenses are more than £1,000, claim the actual expenses. You cannot claim both, and you cannot use the trading allowance to create a loss.
- Do I need receipts?
- Keep records and receipts for everything you claim — HMRC can ask to see them, and from April 2026 Making Tax Digital brings in quarterly digital record-keeping for many self-employed people with income over £50,000. Good records also make sure you do not miss a deduction.
An estimate for the 2026/27 tax year — guidance, not personal tax or accountancy advice. Whether a cost is allowable depends on your circumstances; check gov.uk/HMRC or your accountant. Figures assume trading profit only and a standard Personal Allowance.