How do I claim tax expenses for tools and equipment as a Sole Trader?

How do I claim tax expenses for tools and equipment as a Sole Trader?

As a sole trader, you can deduct a variety of business expenses from your taxes, which helps lower your overall tax bill and increases the take-home profit of your business. One major category of allowable expenses is for tools and equipment related to your trade or business.

Claiming tool, technology, vehicle, and equipment expenses properly can lead to substantial tax savings and is an important part of managing finances for a self-employed tradesperson or small business owner.

This guide will provide an in-depth overview of tax deductions available for different types of job-related tools and equipment, rules around capital allowances vs regular expenses, detailed expense categories with examples, common pitfalls to avoid, record-keeping best practices, and information on making use of allowances like the Annual Investment Allowance.

What Counts as Allowable Tools & Equipment Expenses?

When claiming tax deductions for tools, technology, vehicles, and other equipment, the first step is understanding what counts as an allowable expense related to your sole trader business.

In basic terms, any tool, vehicle, machinery, appliance, computer, phone, furniture, or other equipment that is predominantly used for the purposes of your trade is eligible for tax relief.

There can sometimes be debate around dual-purpose tools that are used both personally and business-wise. Generally, if an item is mostly used for business purposes, tax relief can be claimed on the appropriate proportional amount. More on common problem expense areas later.

It’s also important to understand the difference between claiming regular expenses on equipment throughout the tax year vs longer term capital allowance tax relief:

Regular Tool & Equipment Expenses:

  • Expenses for maintenance, repairs, fuel costs, equipment rental fees etc related to an existing business asset.

Capital Allowances:

  • Tax relief for decline in value (depreciation) of fixed assets and equipment owned by your business over time.
  • Claimed on larger investments like vehicles, heavy machinery, manufacturing equipment etc.
  • Relief spread over several years depending on asset type.

In your tax return, both regular expenses and capital allowances deductions will be claimed, just in different sections.

How do I claim tax expenses for tools and equipment

Claiming Tools & Equipment Expenses in Your Self-Assessment

When it comes to claiming allowable tax deductions for equipment, vehicles, and assets related to your sole trader business, there are a few important steps to take so everything is properly captured and organised for your annual Self-Assessment tax return:

Throughout the Tax Year:

  • Maintain thorough records of all asset purchases and ongoing expenses.
  • Keep invoices, receipts, and logbooks detailing business use reasons.
  • Track depreciating values of existing assets as they age.

When Filing Your Tax Return:

  • Report capital allowance deductions in the appropriate section
  • Claim regular expenses like repairs, maintenance, fuel etc.
  • Organise paperwork and have all backup materials ready.

Having expenses, assets, and their tax deductions properly prepared ahead of time will make filing your Self-Assessment much smoother.

Expense Categories with Examples

Some common categories of tools and equipment expenses sole traders can claim include:


  • Job-related manual tools (hammers, power tools, gardening tools)
  • Tool storage and organisation systems


  • Computers, phones, tablets, printers, calculators
  • Software subscriptions, apps

Vehicles & Fuel

  • Van, truck, or car registration, insurance, maintenance
  • Mileage logs and fuel costs

Job-Specific Equipment

  • Uniforms, job-related clothing, PPE
  • Specialised items unique to your trade

Home Office

  • Desk, chair, home office decor (if run from home)

What is NOT Allowed for Sole Traders

While sole traders do enjoy substantial tax relief on legitimate business expenses, there are certain types of purchases that do not qualify as deductible. Some examples include:

  • Personal or dual-purpose items: Unless an item is predominantly used for trade purposes, it cannot be claimed. A smartphone for personal and business use would only qualify for a partial deduction.
  • Very large equipment without HMRC approval: Expensive vehicles, heavy machinery over £500k, industrial tools etc may trigger further review. Approval is sometimes needed.
  • Salary expense if employing others: Wages paid to employees cannot be deducted (different than contractor labour expenses).
  • Non-essential luxury items: Equipment needs to be necessary and not seen as extravagant for the type of business.

Items that are not wholly or mainly used for business purposes should not be claimed in your tax return or Self-Assessment.

Common Expense Claims That Are Questioned or Rejected

There are a few types of tools, vehicle, and equipment expenses that HMRC frequently challenges or rejects from sole trader tax returns:

Home Office Expenses

Part or full home office deductions are often questioned if rules around exclusive business use space are not met or if expenses claimed seem disproportionate. Have your deduction rationale clearly prepared.

Vehicle Mileage & Fuel

Without thorough mileage logs, fuel costs can raise flags. Ensure you have the proper mileage records.

Extended Asset Life Claims

Attempting to claim capital allowances longer than typical asset life expectancies can draw scrutiny without sufficient rationale.

Sole Trader

Record-keeping Requirements & Best Practices

Proper and accurate record-keeping is crucial for claiming tax deductions on tools, equipment, assets, and related expenses. Here are some key guidelines sole traders should follow:

  • Expenses Log: Maintain a log or journal detailing every business purchase throughout the tax year no matter how small. Include supplier, amount, category, business rationale etc.
  • Keep Receipts: Retain paper or digital receipts/invoices for all asset purchases and ongoing expenses to back up claims.
  • Cash Purchases: Extra documentation is required proving a cash purchase was for legitimate business uses and not personal. Otherwise, deduction claims will likely be rejected.
  • Asset Inventory: Track key details on current business assets like purchase dates, costs, expected lifespans, and approximate current values each tax year. This is crucial for capital allowances claims.
  • Usage Logs: Logs documenting business vs personal use percentages are required for phones, computers, or vehicles that aren’t 100% for trade purposes.

How Many Years to Keep Expense Records

Business expense records, invoices, receipts, and any tax documentation must be kept for 5 years after the 31 January Self Assessment deadline each year. So records should be securely archived and accessible for quite some time even after submitting your return.


Making Use of the Annual Investment Allowance

One way for sole traders to maximise tax relief on major equipment and machinery purchases is by using the Annual Investment Allowance (AIA).

The Annual Investment Allowance allows 100% same-year tax deduction on qualifying plant and machinery assets up to a set limit. This allowance is in addition to normal capital allowances claims.

Key AIA Details:

  • Current annual limit: £1 million (Tax year 2023/2024)
  • Definition of “plant and machinery” includes vehicles, equipment, tools, appliances.

Strategically timing major investments in vehicles, heavy equipment, machinery etc just before the end of a tax year in order to fall under the higher AIA deduction is a smart tax planning technique used by many sole traders.

Just remember that normal capital allowance rules apply to costs beyond the annual limit. Proper asset records are key to using this allowance efficiently.



Investment allowance

Tax Relief if You Run Your Business from Home

Many self-employed tradesmen and sole traders operate their small business out of their home. Fortunately, a proportion of household bills and expenses can be claimed as allowable deductions.

Types of Home Office Expenses

If you have a designated workspace area only used for business purposes, you may qualify for deductions on the following household expenses:

  • Electricity, gas, other utilities
  • Property insurance
  • Repairs and maintenance
  • Rent (if renting)
  • Mortgage interest (not capital repayments if owned)

The deduction percentage is based on the ratio of total home floor space used for business activities. So if your office is 10% of total space, you could claim 10% of the above bills.

Council tax and TV licenses cannot be claimed.


To qualify, your workspace must meet these tests:

  • Area is specifically set up to be an office.
  • Needed for business activities.
  • Used exclusively for business.

An improvised corner of a living room where you occasionally do administrative tasks would not meet the exclusivity criteria for example.

Ideally have a separate room in order to claim tax relief confidently. Keep accurate usage logs as home office claims often undergo scrutiny.