Is fines and penalties
tax deductible?

No. Fines for breaking the law, such as parking, speeding and other penalty notices, are never an allowable expense for a sole trader (GOV.UK). HMRC's manual explains that a fine is meant to punish, so it is not a cost of the trade (HMRC BIM42515). Compensatory damages, as opposed to fines, can be allowable.

Parking tickets are the most common fine a sole trader gets, and they often feel like part of the job, especially for tradespeople and couriers. The law does not see it that way. A fine punishes you for breaking the law, and letting you deduct it would share the punishment with other taxpayers.

Is fines and penalties tax deductible?

The HMRC rule

Fines and penalty charges, including parking fines and fines for breaking the law, are not allowable. The rule comes from Car, van and travel expenses, HMRC Business Income Manual BIM42515: fines, Legal and financial costs.

GOV.UK says you cannot claim fines for breaking the law (legal and financial costs). HMRC's manual explains that a fine for a trader's infraction of the law is not allowable, because its purpose is to punish, but that damages which are compensatory rather than punitive can be. It also explains that an employer who pays an employee's fine, taxed as the employee's income, can deduct it (BIM42515).

When you can claim it

• Parking charges you pay to park, as a parking expense, not a fine.
• Compensatory damages to a customer for a business breach.
• Employees’ fines you pay that are taxed as their employment income.
• Legal fees for challenging a penalty that is then cancelled, in some cases.

When you cannot

• Parking tickets and penalty charge notices incurred by you.
• Speeding, bus lane and congestion charge penalties.
• Regulatory fines for breaking trading or safety laws.
• Tax penalties and interest.

What to claim instead

Pay for parking, and claim that as a business travel cost. For congestion and clean air zones, the daily charge you pay is allowable if the trip is for business; the penalty for not paying is not.

How to decide if you can claim it

1. Was it for the business? A cost is only allowable if you incur it wholly and exclusively for the business. If it also serves a personal purpose that cannot be separated, such as clothing that keeps you warm or a meal that keeps you going, HMRC disallows it.
2. Is part of it personal? Where a cost has a business part you can identify, such as the business calls on a phone bill or the business miles in a car, you claim that part and leave the rest out, on a reasonable basis you can explain.
3. Is it a running cost or something you keep? It is not a cost of running the business at all, so the accounting basis makes no difference: it never goes in your expenses, although it may have a relief of its own elsewhere on the return.
4. Is there a specific rule? For fines and penalties, the deciding rule is fines and penalties: fines and penalty charges, including parking fines and fines for breaking the law, are not allowable.

Worked example: a plumber in the city

A plumber pays £1,200 a year in parking charges at jobs and £400 in ULEZ and congestion charges for business trips. He also gets three parking tickets totalling £210. The £1,600 of charges is allowable; the £210 of fines is not.

Charges versus fines

The difference is between paying for something and being punished. Parking fees, tolls, congestion charges and clean air zone charges are payments for use, allowable for business trips. Penalty charge notices, fixed penalties and court fines are punishments, and never allowable.

Private parking charges

Charges issued by private car park operators for breaching their terms are contractual, not criminal fines, but their character is still punitive. Most advisers treat them as not allowable. The fee you pay to park is allowable.

Employees’ fines

If an employee incurs a fine and you pay it, and the fine is the employee's own liability, the payment is taxable income for them and allowable for you as part of their pay. If the fine is your liability, for example because the vehicle is registered to you and the notice was not handed to the driver, it remains non-deductible.

Damages and compensation

Paying a customer compensation because your work was faulty, or settling a business claim, is compensatory and usually allowable. Regulatory fines, such as for breaching data protection or health and safety law, are punitive and not.

Tax penalties

Penalties for late filing, late payment and inaccuracies are not deductible, and neither is interest on late-paid tax. Make sure your filing and payment dates are in your diary; our late filing and late payment calculators show what the charges would be.

Recording fines

If a fine is paid from the business account, record it as drawings or non-business spending. If your accounts include it as an expense, add the same amount to the disallowable column, box 45 on the full self-employment pages, for other business expenses, so the tax calculation adds it back.

If you are a landlord

Landlords cannot deduct fines either, such as fines for failing to meet licensing, safety or deposit protection rules. Costs of complying with those rules, such as gas safety certificates and licence fees, are allowable.

Where it goes on your return and in MTD

It is not an allowable expense, so it does not reduce your profit. Where your bookkeeping shows it as a business payment, record it as drawings, or include it and add it back as a disallowable expense on the full self-employment pages.

A landlord cannot deduct it from rental income either, so it stays out of the property expense boxes.

If your turnover was under £90,000, you can use the short self-employment pages (SA103S), which ask for a single figure for total allowable expenses rather than a box-by-box breakdown, and the full pages let you give just a total in box 31 too. The category still matters for your own records and for Making Tax Digital, where each quarterly update uses the same categories unless you choose to send one consolidated figure.

The accounting basis changes when a cost counts. On the cash basis, the default for sole traders since 2024/25, it counts when you pay it; on traditional accounting, when you incur it, with things you keep claimed through capital allowances.

How much an allowable cost saves

An allowable expense does not come back to you in full: it reduces your profit, so it saves tax at your marginal rate. For a sole trader in England, Wales or Northern Ireland that is 26p in the pound at the basic rate (20% Income Tax plus 6% Class 4 National Insurance) and 42p at the higher rate. The sole trader tax calculator works out the figure for your own profit.

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 a note of any fines paid from the business account so they can be excluded, and records of parking and road charges that are allowable.

If Making Tax Digital for Income Tax applies to you (qualifying income over £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028), the records must be digital, and each quarter's costs go into a quarterly update. Check your date with the MTD requirement checker.

Common mistakes

• Claiming parking tickets as travel costs.
• Claiming penalties for missing a congestion charge payment.
• Claiming tax penalties.

Related expenses

This item sits in the other business expenses category, alongside art and collectibles, care home fees, charity donations, clothing and workwear, cryptocurrency, funeral costs, furniture and glasses and eye tests. The A to Z of expenses answers the same question for every other cost.

If you record your costs in TapTax, each one lands in the HMRC category it belongs to, with its receipt attached, so your quarterly updates and year-end return use the same figures.