Depreciation and loss or profit on sale of assets
for sole traders

Depreciation and loss or profit on sale of assets is box 29 on the full self-employment pages, used only with traditional accounting. Nothing in it is allowable: depreciation and losses on sales are added back in box 44, and relief for assets comes through capital allowances instead. On the cash basis, this box is not used.

What goes in this category

• Depreciation of equipment, vehicles and fittings in your accounts.
• Losses on the sale of assets.
• Profits on the sale of assets, as a negative figure.
• Only for traditional accounting.

What does not

• Capital allowances, which have their own boxes.
• Anything on the cash basis.
• Repairs and running costs.
• Stock losses, which are part of cost of goods.

Items in this category

Why the box exists

The box lets your return match your accounts, which include depreciation. The same figure goes in box 44, so it is added back and has no effect on your taxable profit. Capital allowances are then claimed in their own boxes.

The Annual Investment Allowance

The Annual Investment Allowance gives 100% relief on most plant and machinery, up to £1 million a year, in the year of purchase. Cars are excluded. For most sole traders, it covers everything they buy.

Writing down allowances

Spending not covered by the AIA, and cars, goes into pools. The main pool gets 14% a year from April 2026 (18% before), the special rate pool 6%. Assets with private use go in single asset pools with the allowance reduced for private use.

Cars

Cars never qualify for the AIA. New zero-emission cars get a 100% first-year allowance. Others go in the main pool if emissions are 50g/km or less, or the special rate pool above that. Sole traders can use mileage rates instead.

Selling assets

When you sell an asset, the proceeds, up to original cost, are deducted from the pool. If the pool goes negative, there is a balancing charge, which is taxable. When a single asset pool closes, a balancing allowance can arise.

The cash basis

On the cash basis, most assets are expenses when bought, so there is no depreciation or capital allowances for them. Cars still go through capital allowances. Sale proceeds of assets that were expensed are income.

Moving between bases

If you move between the cash basis and traditional accounting, transitional rules make sure assets are relieved once. Unrelieved capital allowance pools carry into the cash basis as an expense for assets that would have been deductible.

Structures and buildings

The structures and buildings allowance gives 3% a year on the construction cost of qualifying non-residential buildings. It is separate from plant and machinery allowances and does not apply to land or homes.

Choosing traditional accounting

Most sole traders now use the cash basis by default, and it avoids depreciation and capital allowances for most assets. Traditional accounting may suit you if you hold significant stock, want to claim bad debts, or have large capital purchases you would prefer to spread. If you opt out of the cash basis, you prepare accounts with depreciation and claim capital allowances in the tax computation.

Small pools and write-offs

If the balance on your main or special rate pool falls to £1,000 or less, you can claim it all as a small pools allowance and clear the pool. That avoids carrying tiny balances for years. When the business ends, a final balancing allowance or charge closes all the pools.

The 40% first-year allowance

From 1 January 2026, a 40% first-year allowance is available for new main rate plant and machinery, not including cars, which can help when spending exceeds the Annual Investment Allowance. For most sole traders, the AIA already gives 100% relief, so it rarely matters in practice.

Assets you already owned

If you bring an asset you already owned into the business, such as a computer or tools, it enters the capital allowances pool at its market value on the day it is brought in, not at what you paid for it. On the cash basis, the same market value can be deducted. Record the value you used and how you arrived at it.

Part private use

Assets you use privately as well as for the business, such as a van used at weekends or a laptop shared with the family, each go in a single asset pool. Allowances are worked out in full and then reduced by the private use percentage. On sale, any balancing adjustment is reduced in the same proportion.

Records to keep

Keep an asset register with purchase dates, costs, capital allowance claims and disposal proceeds. Keep the capital allowances pool calculations year by year.

Worked example: equipment on traditional accounting

A printer's accounts show £4,000 of depreciation and a £500 loss on selling an old press. She puts £4,500 in box 29 and the same in box 44. She claims the AIA on £9,000 of new equipment, and the £1,500 she got for the old press reduces her pool.

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 depreciation without adding it back.
• Using this box on the cash basis.
• Forgetting disposal proceeds in the pool.

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
• Business entertainment, SA103F box 24, disallowed in box 39
• 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
• 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.