Wages, salaries and other staff costs
for sole traders

Wages, salaries and other staff costs is the category for the people who work for you: employees' pay, bonuses and pensions, employer's National Insurance, benefits and agency fees, and the cost of subcontract labour other than construction subcontractors under the Construction Industry Scheme. It is box 19 on the full self-employment pages. It never includes anything you pay yourself.

What goes in this category

• Wages, salaries, bonuses and overtime for employees, including family members at a commercial rate.
• Employer’s National Insurance and employer pension contributions.
• Benefits for employees, staff entertainment and small staff gifts.
• Agency fees and subcontract labour, other than CIS subcontractors.

What does not

• Your own drawings, National Insurance and pension contributions.
• Payments to construction subcontractors under CIS, which go in box 18.
• Childcare and domestic help, such as nannies.
• Employment costs not paid within nine months of the year end, for that year.

Items in this category

Employing people for the first time

Before paying your first employee, register as an employer with HMRC and set up payroll software. Each time you pay someone, you report it to HMRC through Real Time Information and pay the PAYE and National Insurance due. You also need employer's liability insurance, and must enrol eligible employees into a workplace pension. All of these costs are allowable.

Family members

Paying a spouse, partner or child is allowable when the work is real and the pay reflects it. HMRC's manual says equal pay for equal value is fully allowable, whatever the relationship. The pay must actually be paid, and above the relevant thresholds it goes through payroll like any other employee.

Subcontractors and agency workers

Payments to self-employed subcontractors for labour, outside the Construction Industry Scheme, go here too, as do fees for agency temps. Construction businesses report payments to subcontractors under the Construction Industry Scheme separately, in box 18. Check whether a subcontractor is genuinely self-employed; if they are really an employee, PAYE applies.

Benefits and entertaining staff

Staff benefits, including health insurance, staff parties and gifts, are allowable. Whether the employee pays tax on them is a separate question: annual events under £150 a head and trivial benefits under £50 are tax-free, while other benefits are reported on form P11D or payrolled, with Class 1A National Insurance for you.

Timing: the nine-month rule

Wages and bonuses are deducted in the accounting period in which the work was done only if they are paid within nine months of the end of that period. A year-end bonus that is paid later is deducted in the period it is actually paid. The SA103F notes say that if you include late-paid amounts in box 19, you must also add them to the disallowable column, box 34. On the cash basis, wages are simply deducted when paid.

Employer’s National Insurance and the Employment Allowance

Employer's National Insurance is 15% of each employee's earnings above £5,000 a year, with lower rates for employees under 21 and apprentices under 25. Eligible employers can reduce the bill by up to £10,500 a year through the Employment Allowance, claimed in payroll software. Only what you actually pay after the allowance goes in box 19.

Employment status

Whether someone is your employee or a self-employed contractor depends on the reality of the arrangement, not the label: who controls how the work is done, whether they can send a substitute, and whether they carry financial risk. HMRC's Check Employment Status for Tax tool gives a view. Getting it wrong can leave you owing PAYE and National Insurance that should have been deducted, with interest and penalties, which are not allowable.

Your own pay and pension

A sole trader has no salary. What you take out is drawings, and you are taxed on the business profit. Your own pension contributions get tax relief through the scheme and your return, and your Class 4 National Insurance is worked out on the return. None of these belong in box 19.

Worked example: a small bakery’s staff costs

A baker employs two part-time assistants at £14,000 each and pays employer's National Insurance of £1,350 on each (after the £5,000 threshold), minus the Employment Allowance, which covers it all. Employer pension contributions are £520, a Christmas meal £240 and agency cover during holidays £900. Her box 19 total is £29,660.

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

• Including your own drawings in wages.
• Putting CIS subcontractor payments here instead of box 18.
• Recording family wages that were never paid, or that exceed the value of the work.

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
• 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
• 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.