Business entertainment
for sole traders

Business entertainment is hospitality of any kind for people who are not your employees: meals, drinks, tickets, events and gifts. It shares box 24 on the full self-employment pages with advertising, but it is not allowable, so any entertaining you include there must also go in box 39, the disallowable column. The main exception is entertaining your own staff.

What goes in this category

• Meals, drinks and hospitality for clients, customers and suppliers.
• Tickets to sporting, cultural or social events for guests.
• Business gifts, other than small branded items.
• Hospitality at events you host.

What does not

• Staff entertainment, which is allowable.
• Small branded gifts under £50 per recipient that are not food, drink, tobacco or vouchers.
• Free samples of your products.
• Food and drink sold in the ordinary course of a hospitality business.

Items in this category

The ban is specific

The law does not ask whether entertaining was good for business. It disallows business entertainment and gifts outright, with narrow exceptions. So a client dinner that wins a large contract is just as disallowed as drinks with a supplier.

Who counts as staff

Only employees count as staff for the exception. Self-employed subcontractors, freelancers and agency workers are not employees, so entertaining them is business entertainment. Directors and partners have their own rules; a sole trader has no employer and entertaining themselves is simply personal.

Staff and guests together

If staff and clients attend the same event, the clients' share is disallowed. HMRC's manual adds that if an employee's hospitality is incidental to entertaining a client, such as taking a client to a restaurant, the employee's share is disallowed too.

Gifts

Gifts are treated as entertainment. The exception for gifts carrying a conspicuous advert covers items such as pens, diaries and mugs up to £50 per recipient a year, and never covers food, drink, tobacco or vouchers.

Hospitality businesses

The ban applies to free or subsidised hospitality. A restaurant's food, a hotel's rooms and a caterer's drinks sold to paying customers are the business's trade, allowable as cost of sales.

Subsistence is different

Your own meals when travelling for business, such as an overnight trip or an occasional journey outside your normal pattern, follow the subsistence rules and can be allowable. Meals with clients are entertainment, not subsistence, even while travelling.

VAT

VAT on business entertainment is generally not reclaimable. VAT on staff entertainment can be reclaimed, and there are limited rules for overseas customers. Keep the treatments consistent with your Income Tax figures.

How to record it

Some businesses keep entertaining out of the accounts altogether, paying personally. Others record it and then add it back. On the full self-employment pages, include it in box 24 and box 39. On the short pages, leave it out of allowable expenses.

Business meetings and refreshments

Tea, coffee and simple refreshments for visitors at your premises during a business meeting are usually treated as a running cost rather than hospitality. Taking the meeting to a café or restaurant, or providing lunch and drinks, is entertainment. When in doubt, the more the provision looks like hospitality in its own right, the more likely it is disallowed.

Conferences and events you attend

Your own ticket to a conference, trade show or networking event is allowable when the main purpose is business. If the ticket includes meals as part of the event, the whole ticket is normally treated as allowable. Buying tickets for clients, or hosting them at a hospitality box, is entertainment.

Partners and spouses

If your partner or spouse comes along to a client dinner, their share is entertainment too, or personal. If they are employed in the business and attend a staff event, their share is staff entertainment in the same way as any other employee's. A partner who is not employed but helps informally is a guest, and their share is not staff entertainment.

Records to keep

Keep receipts with the names of the people entertained and their connection to the business. The difference between staff entertainment, client entertainment and your own subsistence depends on who was there, so a receipt without names is hard to classify later.

Staff entertainment and the £150 rule

Staff entertainment is allowable for the business. Separately, for the employees, an annual event open to all staff costing £150 a head or less is tax-free. Above that, the event is still allowable for you but becomes a taxable benefit for them.

Worked example: an architect’s entertaining

An architect spends £600 on client lunches, £300 on tickets to a football match with a developer, £480 on a Christmas meal for her three employees and £200 on branded notebooks for clients at £10 each. Box 24 includes £900 of client entertaining, also put in box 39. The staff meal is allowable staff costs and the notebooks allowable advertising.

Four questions before a cost goes here

1. Was it for the business, and only for it? A cost must be incurred wholly and exclusively for the trade. A cost with a personal purpose that cannot be separated is not allowable at all.
2. Is part of it personal? Where a business part can be identified, such as business miles or business calls, claim that part on a reasonable basis and leave the rest out.
3. Is it a running cost or something you keep? Running costs belong in the expense categories. Things you keep are capital: an expense on the cash basis (except cars), capital allowances on traditional accounting.
4. Is there a specific rule? Some costs are disallowed whatever their purpose, such as fines and client entertaining, and some have their own treatment, such as cars, which always go through capital allowances.

Trading allowance or expenses

Instead of deducting expenses, a sole trader can claim the £1,000 trading allowance against trading income. You cannot claim both, so the allowance only helps when your allowable expenses are under £1,000. If your gross trading income is £1,000 or less, the allowance covers it and you may not need to register. Once your costs pass £1,000, deducting actual expenses gives the lower profit.

This category in Making Tax Digital

Under Making Tax Digital for Income Tax, each quarterly update carries your expenses in the same 15 categories as the full self-employment pages, so this category is one line of every update. Sole traders with qualifying income over £50,000 join from 6 April 2026, falling to £30,000 from April 2027 and £20,000 from April 2028. If your turnover is under £90,000 you can send one consolidated expenses figure instead of the categories, but you still keep the records behind it. The same £90,000 limit decides whether you can use the short self-employment pages (SA103S), which ask only for total allowable expenses.

Cash basis or traditional accounting

Which accounting basis you use changes when a cost in this category counts, and sometimes whether it counts as an expense. On the cash basis, now the default, you deduct costs when you pay them and most things you buy to keep are ordinary expenses (cars being the exception). On traditional accounting, you deduct costs when you incur them and claim capital allowances for things you keep.

The disallowable column

The full self-employment pages have a second column of boxes (32 to 45) for disallowable expenses. If your accounts include something that is not allowable, such as the private share of a phone bill or client entertaining, you put the total cost in the expense box and the disallowable part in the matching box, so the tax calculation adds it back. The short pages (SA103S) simply ask for allowable expenses, so you leave the disallowable part out.

How much an allowable cost saves

Each pound of allowable expense saves a sole trader 26p at the basic rate (20% Income Tax plus 6% Class 4 National Insurance) and 42p at the higher rate, in England, Wales and Northern Ireland. Scottish Income Tax bands differ, and the sole trader tax calculator works out your own figure.

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 the invoice or receipt for every cost in this category, with a note of the business purpose wherever it is not obvious, and how you worked out the business share of anything also used privately. From 6 April 2026, sole traders and landlords with qualifying income over £50,000 keep digital records and send quarterly updates under Making Tax Digital, falling to £30,000 from April 2027 and £20,000 from April 2028.

Common mistakes

• Claiming client entertaining.
• Treating subcontractors as staff.
• Claiming your own share of a client meal.

Every other category

The other 14 categories on the self-employment pages, in box order:

• Cost of goods sold, SA103F box 17
• Construction industry payments to subcontractors, SA103F box 18
• Wages, salaries and other staff costs, SA103F box 19
• Car, van and travel expenses, SA103F box 20
• Rent, rates, power and insurance costs, SA103F box 21
• Repairs and maintenance of property and equipment, SA103F box 22
• Phone, stationery and other office costs, SA103F box 23
• Advertising costs, SA103F box 24
• Interest on bank and other loans, SA103F box 25
• Bank, credit card and other financial charges, SA103F box 26
• Irrecoverable debts written off, SA103F box 27
• Accountancy, legal and other professional fees, SA103F box 28
• Depreciation and loss or profit on sale of assets, SA103F box 29, disallowed in box 44
• Other business expenses, SA103F box 30

The A to Z of expenses lists every item and all 23 categories: the 15 self-employment categories and the 8 for UK property.