Is tools and equipment
tax deductible?

Yes. Tools and equipment you keep to use in the business are allowable: as an expense in the year you pay if you use the cash basis, or through capital allowances, usually the Annual Investment Allowance, on traditional accounting (GOV.UK). If you use them privately too, you claim only the business share (GOV.UK).

A drill, a laptop, a sewing machine, a pressure washer: the things you buy to keep and use in your work. Either way you get relief for the cost; the question is how. For most sole traders on the cash basis, it is simply an expense. On traditional accounting, it goes through capital allowances, and the Annual Investment Allowance usually gives the full amount in the same year.

Is tools and equipment tax deductible?

The HMRC rule

Claim equipment you keep as an allowable expense on the cash basis, or as capital allowances on traditional accounting. The rule comes from Office, property and equipment, Claim capital allowances.

GOV.UK says that for equipment you keep to use in your business, you claim allowable expenses if you use cash basis accounting, and capital allowances if you use traditional accounting (office, property and equipment). The Annual Investment Allowance gives 100% relief on most plant and machinery up to £1 million a year (AIA). If you use an item partly privately, you reduce the claim to the business share (capital allowances). On the cash basis, cars, land and some other items are excluded (BIM72035).

When you can claim it

• Hand and power tools, ladders and machinery.
• Computers, printers, phones and cameras used for the business.
• Specialist equipment, such as salon chairs or a coffee machine.
• Repairs, servicing and replacement parts.

When you cannot

• The private share of equipment used personally.
• Cars as an expense on the cash basis.
• Equipment you owned before starting and bring into the business, as an expense (it gets relief at market value instead).
• Depreciation, which is replaced by capital allowances.

What to claim instead

If you already owned tools before you started trading and now use them in the business, you can claim relief based on their market value when you brought them in, on either basis. For cars, use capital allowances or the mileage rate.

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? Whether it is a running cost or something you keep depends on what you buy. Items used up within two years, and regular renewals, are running costs; things you keep are relieved through capital allowances on traditional accounting and as expenses on the cash basis.
4. Is there a specific rule? For tools and equipment, the deciding rule is equipment you keep, such as a computer: claim equipment you keep as an allowable expense on the cash basis, or as capital allowances on traditional accounting.

Worked example: a new electrician’s kit

A newly self-employed electrician spends £2,800 on tools and test equipment and £1,200 on a laptop he uses 70% for work. On the cash basis he claims £2,800 plus £840 as expenses in the year he pays. On traditional accounting, he claims the same £3,640 through the Annual Investment Allowance.

Cash basis or capital allowances

The cash basis treats most capital spending as an expense when paid, except cars, land and buildings, and a few other exclusions. On traditional accounting, the same items go through capital allowances. With the Annual Investment Allowance at £1 million, most sole traders get the full cost relieved in the year of purchase either way.

Private use

If you use equipment personally as well, such as a laptop or a camera, claim the business share. On traditional accounting, items with private use go in a single asset pool, and the allowance is reduced for the private use. Keep a note of how you estimated the business share.

Tools you already owned

If you bring tools you already owned into the business, you can claim relief based on their market value at the time, not what you originally paid. Make a list with a sensible value for each item on the day you started trading.

Selling or scrapping equipment

When you sell equipment you have claimed for, the sale proceeds are taken into account: on the cash basis, as income; on traditional accounting, as a disposal in the capital allowances pool, which can create a balancing charge. Scrapping an item for nothing has no such effect.

Repairs and small tools

Repairs, servicing and replacement parts for equipment are running costs, allowable whatever your accounting basis. Many small tools with a short life, such as drill bits and blades, are consumables and are simply expenses.

Leasing and hire purchase

Leased equipment is not yours: the lease payments are the expense. On hire purchase, the item is treated as yours from the start, so it gets capital allowances or a cash basis deduction, and the interest part of the payments is a finance cost.

Where it goes

On the cash basis, equipment goes in other business expenses, box 30, or office costs for small office equipment. On traditional accounting, capital allowances go in box 49 or 50 of the full self-employment pages. Repairs go in box 22.

Where it goes on your return and in MTD

For a sole trader, the allowable part goes under other business expenses (SA103F box 30 on the full self-employment pages). Under Making Tax Digital for Income Tax, it goes in the same category of your quarterly update, which is the category TapTax files it under when you record the cost.

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.

Most sole traders now use the cash basis, the default from the 2024/25 tax year, which counts a cost when you pay it. On traditional accounting you count it when you incur it, and equipment you keep goes through capital allowances rather than expenses.

How much an allowable cost saves

The value of a deduction is the tax it removes from your profit, not the cost itself. At the basic rate a sole trader saves 26p for every pound of allowable expense, at the higher rate 42p, and in the personal allowance taper between £100,000 and £125,140 as much as 62p. Landlords pay no Class 4 on rental profit, so they save 20p or 40p.

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 purchase invoices with the date and cost, a list of the equipment you own for the business, and a note of any personal use. When you sell or scrap an item, record what you received, because it affects capital allowances or, on the cash basis, counts as income. Records must be kept for at least five years after the 31 January deadline for the tax year.

From 6 April 2026, sole traders and landlords with qualifying income over £50,000 keep these records digitally and send quarterly updates under Making Tax Digital, falling to £30,000 from April 2027 and £20,000 from April 2028. The MTD requirement checker shows when it applies to you.

Common mistakes

• Claiming a car as an expense on the cash basis.
• Claiming depreciation and capital allowances.
• Forgetting to include sale proceeds of equipment.

Related expenses

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

TapTax sorts each cost into the right category as you record it, applies the business share where you set one, and keeps the receipts with the figures, ready for your quarterly updates and final return.