Accountancy, legal and other professional fees
for sole traders

Accountancy, legal and other professional fees is the category for paid advisers: accountants, bookkeepers, solicitors, surveyors, architects and consultants, plus professional indemnity insurance premiums. It is box 28 on the full self-employment pages. Most fees are allowable; the exceptions are costs of buying capital assets, settling tax disputes and personal matters.

What goes in this category

• Accountants’ and bookkeepers’ fees for business accounts.
• Solicitors’ fees for business matters, such as debt recovery and contracts.
• Surveyors, architects and consultants hired for business reasons.
• Professional indemnity insurance premiums.

What does not

• Legal costs of buying property and large equipment, which are capital.
• Costs of settling tax disputes.
• Fines for breaking the law.
• Personal legal or tax work, such as Capital Gains Tax computations.

Items in this category

Revenue or capital

The main question for a professional fee is whether it relates to running the business or to acquiring something you keep. A surveyor's report on the condition of premises you rent is a running cost; a survey on premises you are buying is part of the purchase. Legal costs follow the same line.

Tax fees

GOV.UK and HMRC's manual say the strict position is that completing your personal tax return is not allowable. In practice, under long-standing Statement of Practice SP16/91, normal recurring fees for accounts and agreeing the tax on trading profits are allowed, and the personal part is minimal for simple affairs. Fees in an enquiry that finds careless or deliberate errors are not allowable, and neither is insurance covering them.

Consultants and specialists

Fees for business consultants, marketing agencies, IT support, HR advisers and other specialists are allowable when hired for the business. If the consultant is really doing the ongoing work of an employee, check their employment status. Design and architect fees for building work follow the nature of the work: repairs are revenue, new building is capital.

Professional indemnity

Professional indemnity insurance premiums go in this box rather than with other insurance, according to the SA103F notes. Excesses paid on claims, and damages for business mistakes, are generally allowable. Tax investigation insurance is the notable exception among professional-style insurances.

Fees before you start trading

Professional fees you pay before the business starts, such as an accountant's advice on registering or a solicitor's review of your first client contract, can be treated as incurred on the first day of trading if they were incurred within seven years before it and would have been allowable once trading. Fees for setting up the business structure itself, such as forming a partnership agreement, are more likely to be capital. Keep the invoices dated before you started, because they are easy to forget when you prepare your first accounts.

Fees that mix business and personal work

A single bill often covers business accounts, your personal tax return, advice on a pension and perhaps a property sale. Ask for an itemised invoice, and claim only the business work. For most sole traders, the only personal element is the non-trading part of the tax return, which HMRC's manual accepts is usually minimal. Capital Gains Tax work, inheritance planning and advice on personal investments are clearly personal and belong outside the business accounts altogether.

Professional fees on the cash basis

On the cash basis, most sole traders' default since April 2024, professional fees are deducted when paid, so the accountant's fee for one year's accounts often falls into the next year. Legal costs of buying equipment can be deducted with the equipment on the cash basis, except for cars, while legal costs of buying land and buildings are never deductible. On traditional accounting, the fee for a year's accounts is accrued into that year.

VAT on professional fees

If you are VAT registered, you reclaim the VAT on business professional fees as input tax, and claim the net fee as the expense. If you are not registered, the whole fee including VAT is the expense. On the Flat Rate Scheme, VAT is not reclaimed on most purchases, so the gross fee is claimed. Landlords, whose residential rents are exempt from VAT, usually cannot reclaim VAT on letting fees at all, so they claim the gross amount.

Landlords

Landlords use box 27 of the UK property pages for legal, management and other professional fees, including letting agent fees, accountant's fees and legal fees for short lets and lease renewals under 50 years. Purchase costs and lease extensions are capital.

Worked example: a consultant’s professional fees

A marketing consultant pays £700 for her accounts and tax, £350 to a solicitor for a client contract template, £420 for professional indemnity insurance and £150 for fee protection insurance. The first three, £1,470, are allowable in box 28. The fee protection premium is disallowable and, if included, also goes in box 43.

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 purchase legal fees as running costs.
• Claiming fee protection insurance.
• Claiming personal tax work, such as Capital Gains Tax computations.

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
• 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.