Is accountancy fees
tax deductible?

Yes, for the business work. Fees for an accountant to keep your books and prepare your business accounts are allowable (GOV.UK), and HMRC accepts normal recurring fees for agreeing the tax on your trading profits in practice (HMRC BIM46450). Strictly, the cost of completing your personal tax return, or working out Capital Gains Tax, is not allowable.

Almost every sole trader who uses an accountant asks whether the fee is deductible. The answer is yes for nearly all of it. Keeping books and preparing accounts is a business cost. The grey area is the tax return itself, where HMRC's strict view is that it is personal, softened by a long-standing practice that allows normal recurring fees for working out the tax on your business profits.

Is accountancy fees tax deductible?

The HMRC rule

Professional fees for business reasons and professional indemnity insurance are allowable. The cost of preparing your Self Assessment return is not. The rule comes from Legal and financial costs, HMRC Business Income Manual BIM46450: taxation, accounts and negotiations, Work out your rental income when you let property.

GOV.UK lists hiring accountants for business reasons as allowable, and says you cannot claim the cost of preparing and submitting your Self Assessment tax return (legal and financial costs). HMRC's manual explains that fees for preparing accounts satisfy the wholly and exclusively test, and that, under Statement of Practice SP16/91, normal recurring fees for agreeing the tax liability on trading profits are allowed, while tax return completion and Capital Gains Tax computations are not (BIM46450). Fees go in box 28 of the full self-employment pages (SA103F notes).

When you can claim it

• Bookkeeping, payroll and VAT return services.
• Preparing your business accounts and Making Tax Digital quarterly updates.
• Normal fees for working out and agreeing the tax on your trading profits.
• Advice on running the business, such as cash flow or pricing.

When you cannot

• Strictly, the part of the fee for completing your personal tax return.
• Capital Gains Tax computations, such as on selling a second home.
• Advice on personal matters, such as inheritance planning.
• Extra fees for an HMRC enquiry that finds careless or deliberate errors.

What to claim instead

Ask your accountant to itemise the bill if it covers substantial personal work, such as Capital Gains Tax on a property sale or other income sources. For most sole traders with simple personal affairs, HMRC's manual accepts that the personal part is minimal, and the whole normal fee is claimed in practice.

How to decide if you can claim it

1. Was it for the business? A cost is only allowable if you incur it wholly and exclusively for the business. If it also serves a personal purpose that cannot be separated, such as clothing that keeps you warm or a meal that keeps you going, HMRC disallows it.
2. Is part of it personal? Where a cost has a business part you can identify, such as the business calls on a phone bill or the business miles in a car, you claim that part and leave the rest out, on a reasonable basis you can explain.
3. Is it a running cost or something you keep? It is a running cost, so on the cash basis it counts when you pay it and on traditional accounting when you incur it. Nothing about it needs spreading over later years.
4. Is there a specific rule? For accountancy fees, the deciding rule is accountants, solicitors and other professionals: professional fees for business reasons and professional indemnity insurance are allowable. The cost of preparing your Self Assessment return is not.

Worked example: a gardener’s annual fee

A gardener pays her accountant £650 a year for quarterly updates, year-end accounts and her tax return, and £400 one year to work out Capital Gains Tax on a flat she sold. The £650 is claimed in full as normal recurring fees for accounts and agreeing the tax on her trading profits. The £400 Capital Gains Tax work is personal and not allowable.

The tax return question

GOV.UK says the cost of preparing and submitting your Self Assessment return is not allowable, and HMRC's manual says the same in strict terms. The same manual then explains that normal recurring fees for accounts and agreeing the tax on trading profits are allowed in practice, and that for straightforward personal affairs the additional personal cost is likely to be minimal. In real life, that means most sole traders claim a normal annual accountancy fee in full.

Enquiries and investigations

If HMRC opens an enquiry into your return and it closes with no additional tax, or only because of an innocent error despite reasonable care, the extra accountancy fees are allowable. If the enquiry finds careless or deliberate errors and extra tax, the additional fees for that enquiry are not. This is why tax investigation insurance that covers such cases is itself not allowable.

Software and bookkeeping

Bookkeeping and accounting software, including Making Tax Digital software, is allowable as an office cost. If you do your own books and pay a bookkeeper only for part of the work, their fees are allowable in the same way as an accountant's. Paying a family member to keep your books is allowable at a commercial rate.

Timing on the cash basis

On the cash basis, fees are deducted in the year you pay them, which is often the year after the accounts they relate to. On traditional accounting, the fee for preparing a year's accounts can be accrued into that year. Either way, each fee is claimed once.

Where it goes

Accountancy fees go in accountancy, legal and other professional fees, box 28 of the full self-employment pages. Landlords put accountant's fees in box 27 of the UK property pages, legal, management and other professional fees.

If you are a landlord

Landlords can deduct accountant's fees for the letting business (GOV.UK). If one accountant handles both a trade and a letting business, split the fee between the two on a reasonable basis, such as the time spent on each.

Where it goes on your return and in MTD

For a sole trader, the allowable part goes under accountancy, legal and other professional fees (SA103F box 28 on the full self-employment pages). Under Making Tax Digital for Income Tax, it goes in the same category of your quarterly update, which is the category TapTax files it under when you record the cost.

For a landlord, it belongs in legal, management and other professional fees (property) (SA105 box 27 on the UK property pages), and in the matching category of a Making Tax Digital property update.

If your turnover was under £90,000, you can use the short self-employment pages (SA103S), which ask for a single figure for total allowable expenses rather than a box-by-box breakdown, and the full pages let you give just a total in box 31 too. The category still matters for your own records and for Making Tax Digital, where each quarterly update uses the same categories unless you choose to send one consolidated figure.

Most sole traders now use the cash basis, the default from the 2024/25 tax year, which counts a cost when you pay it. On traditional accounting you count it when you incur it, and equipment you keep goes through capital allowances rather than expenses.

How much an allowable cost saves

The value of a deduction is the tax it removes from your profit, not the cost itself. At the basic rate a sole trader saves 26p for every pound of allowable expense, at the higher rate 42p, and in the personal allowance taper between £100,000 and £125,140 as much as 62p. Landlords pay no Class 4 on rental profit, so they save 20p or 40p.

What £1,000 of allowable expense saves a sole trader in 2026/27

• Basic rate (20% + 6%)£260
• Higher rate (40% + 2%)£420
• Additional rate (45% + 2%)£470
• Allowance taper band (60% + 2%)£620

Records to keep

Keep engagement letters, invoices and a note of what each fee covered, especially where one bill mixes business work with personal matters such as your tax return or a house purchase. Records must be kept for at least five years after the 31 January deadline for the tax year.

From 6 April 2026, sole traders and landlords with qualifying income over £50,000 keep these records digitally and send quarterly updates under Making Tax Digital, falling to £30,000 from April 2027 and £20,000 from April 2028. The MTD requirement checker shows when it applies to you.

Common mistakes

• Claiming Capital Gains Tax computation fees against business profit.
• Claiming extra fees from an enquiry that found careless errors.
• Claiming the same fee both in the year of the accounts and the year it was paid.

Related expenses

This item sits in the accountancy, legal and other professional fees category, alongside legal fees, professional indemnity insurance and tax investigation insurance. The A to Z of expenses answers the same question for every other cost.

TapTax sorts each cost into the right category as you record it, applies the business share where you set one, and keeps the receipts with the figures, ready for your quarterly updates and final return.