SA103S Expense Categories Explained — What Goes Where on Your Tax Return

Published April 2026 · 8 min read · By Solofold

If you're a UK sole trader, freelancer, or coach filing Self Assessment, your expenses go on the SA103S form (the short version for businesses with turnover under £85,000). HMRC organises expenses into 8 specific categories — and getting them right matters, because every misplaced or missed expense is tax you didn't need to pay.

This guide walks through each category in plain English, with real examples for coaches, consultants, and freelancers. No jargon, no waffle.

The golden rule: "wholly and exclusively"

HMRC's test for any business expense is simple: was it spent wholly and exclusively for the purposes of your trade? If a cost has both personal and business use (like your phone bill or car), you can only claim the business portion.

Some costs have HMRC-approved flat rates that simplify this calculation (more on those below). For everything else, you need records to justify the split.

Category 1: Cost of goods sold

This covers the direct cost of anything you sell. For most service-based sole traders (coaches, consultants, freelancers), this is often £0 — you're selling your time, not physical products.

Examples: Raw materials if you make physical products, stock purchased for resale, subcontractor costs directly tied to delivering a client project (though some accountants put subcontractors under "other allowable expenses" instead).

Not this category: Your laptop, office supplies, or software subscriptions — those go in other categories below.

Category 2: Car, van, and travel expenses

Two options here, and you must pick one — you can't mix them:

Option A — Simplified mileage rate (recommended for most): Claim 45p per mile for the first 10,000 business miles, then 25p per mile after that. Just track your business mileage. No need to keep petrol receipts or calculate depreciation.

Option B — Actual costs: Claim the business proportion of fuel, insurance, repairs, road tax, MOT, and depreciation. More complex, sometimes more beneficial for high-mileage or expensive vehicles.

Also in this category: Train fares to client meetings, bus tickets, parking fees, congestion charges, hotel stays for overnight business trips, and flight costs for business travel.

Not this category: Your daily commute to a regular workplace. HMRC treats this as personal travel, even if you're self-employed.

Category 3: Wages, salaries, and other staff costs

Examples: Wages paid to employees, employer's National Insurance contributions, pension contributions for staff, subcontractor payments (if not in cost of goods sold), freelance help (e.g., a VA you hire for admin), and agency fees.

Not this category: Your own salary or drawings. As a sole trader, money you take from the business is not an expense — it's simply you accessing your profits.

Category 4: Premises costs

If you rent business premises (an office, studio, co-working space), the rent and associated costs go here.

Working from home? You can use HMRC's flat-rate simplified expenses instead of calculating actual costs:

No receipts needed for the flat rate — just a record of the hours you worked from home each month. Most full-time freelancers working from home will claim the £26/month band, giving them £312 per year with zero paperwork.

Category 5: Repairs

Examples: Laptop repairs, replacing a broken phone screen, fixing business equipment, repainting business premises, plumbing or electrical repairs at your business premises.

Not this category: Improvements or upgrades. If you replace a laptop with a newer, better model, that's capital expenditure (potentially a capital allowance), not a repair. The distinction matters: a repair restores something to its original condition; an improvement makes it better than before.

Category 6: General administrative expenses

This is the catch-all for running your business day-to-day. For most service-based sole traders, this is where the bulk of your expenses live.

Examples: Phone bills (business proportion), internet (business proportion), postage, stationery, printer ink, computer software and subscriptions (Zoom, Canva, accounting software), bank charges on your business account, business insurance (professional indemnity, public liability), and professional memberships (ICF, CIPD, professional bodies).

Category 7: Advertising and marketing

Examples: Website hosting and domain costs, Google Ads or Facebook Ads, business cards, flyers, social media marketing tools, email marketing platform (Brevo, Mailchimp), networking event tickets, professional photography for your website, and sponsorship costs directly related to promoting your business.

Not this category: Client entertainment. HMRC does not allow you to deduct the cost of entertaining clients (meals, drinks, event tickets for clients) as a business expense, even if the purpose is to win or retain business. This is one of the most commonly misunderstood rules in UK tax.

Category 8: Interest and bank charges

Examples: Interest on business loans, overdraft interest on your business account, hire purchase interest, credit card interest on business purchases. Note: if you're a landlord, mortgage interest is handled differently under Section 24 — it's no longer a deductible expense but a 20% tax credit. See our rental tax calculator for the full impact.

Other allowable expenses (the overflow)

The SA103S has a final line for "other allowable business expenses" that don't fit the 8 categories above. This includes training courses that maintain or update skills related to your current trade, relevant books and publications, accountancy fees, and legal costs related to your business.

Training note: HMRC allows training costs that update or maintain your existing skills — but not training for a completely new trade. A coach taking an advanced coaching qualification can claim it. A coach training to become an accountant cannot.

The common mistakes

After working with hundreds of UK sole traders' records, the same errors come up again and again:

1. Missing the use-of-home allowance. If you work from home at all, you're almost certainly entitled to £120-312 per year with no receipts needed. Many freelancers don't claim it because they don't know it exists.

2. Not tracking mileage. At 45p per mile, even modest business travel adds up. A coach driving 3,000 business miles per year can claim £1,350 — but only if they kept a mileage log.

3. Claiming client entertainment. It feels like a business expense, but HMRC says no. Don't include it or your return could be queried.

4. Lumping everything into one category. This makes your accountant's job harder (and more expensive). Properly categorised expenses mean lower accountant fees.

How to keep this organised all year

The best time to categorise an expense is when you incur it — not in January when you're scrambling for receipts. A simple system where you log each expense into the right HMRC category as it happens saves hours (and hundreds of pounds in accountant fees) at year end.

Related resources

→ Payments on Account Explained — Why Your Second Year Self-Employed Hits Harder

→ Free UK Rental Tax Calculator

→ All Solofold products