Rent, rates, power and insurance costs
for sole traders

Rent, rates, power and insurance costs is the category for the place you work: rent and business rates on premises, light, heat and power, property insurance and security, and the business share of your home if you work from there. It is box 21 on the full self-employment pages. For home-based sole traders it is usually the working-from-home claim, either a share of household costs or the flat rate.

What goes in this category

• Rent, business rates and water rates for business premises.
• Light, heat, power and property insurance for business premises.
• Security and service charges for business premises.
• The business use of your home: a share of actual costs, or the simplified flat rate.

What does not

• The cost of buying premises, and Stamp Duty on the purchase.
• The private use of premises, including the personal share of your home.
• Mortgage capital repayments.
• Improvements and alterations, which are capital.

Items in this category

Working from home: two methods

You can work out the actual business share of household costs (a share of heating, electricity, Council Tax, insurance and mortgage interest or rent, split by space and time) or use the flat rate of £10, £18 or £26 a month depending on how many hours you work at home. The flat rate is easier; actual costs are usually worth more for a room used as an office every day. Phone and internet are claimed separately either way.

Living at business premises

If you live at your business premises, such as a guesthouse, bed and breakfast or small care home, you can work out total premises costs and deduct a flat amount for personal use instead of apportioning: £350 a month for one person, £500 for two, £650 for three or more. The rest is allowable in this category.

Buying premises is capital

The purchase price of business premises, Stamp Duty and the legal costs of buying are capital, not running costs. They are relieved, if at all, when you sell, through the property's base cost for Capital Gains Tax. The structures and buildings allowance may apply to the construction cost of some non-residential buildings.

Premises and repairs

Repairs and maintenance of business premises have their own category, repairs and maintenance, box 22. Keep them separate from running costs here. Improvements and alterations are capital: for plant installed in a building, capital allowances on traditional accounting, or an expense on the cash basis unless it is part of the building itself.

Security, cleaning and small premises costs

Alarm monitoring, CCTV subscriptions, locks, cleaning of business premises, waste collection and window cleaning are all running costs of the place you work, allowable in this category. Trade waste is a good example: a business must use a licensed waste carrier rather than household collections, and the charge is allowable in full. At home, cleaning and security are personal unless a cost is clearly for the business part, such as a lock on an office used only for work that holds client files. Keep the contracts and invoices, and describe unusual costs clearly in your records so the business purpose is obvious later.

Shared and mixed premises

If you live above a shop or share premises with another business, apportion the costs on a reasonable basis, such as floor area, and keep the calculation. Rent, rates and utilities for the business part go here; the private part is personal, and if your accounts include it, it goes in the disallowable column, box 36.

Worked example: a beautician with a treatment room

A beautician rents a treatment room for £5,400 a year, pays £1,100 in business rates after relief and £780 for electricity and insurance: £7,280 of premises costs. She also does admin at home for about 40 hours a month and claims the £10-a-month flat rate, £120. Her box 21 total is £7,400.

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.

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 the full household bills for a small home office.
• Putting repairs to premises in this box instead of repairs and maintenance.
• Treating the purchase of premises or Stamp Duty as a running cost.

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
• 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
• 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.