7 Categories of Allowable Expenses:
The key to maximising your profit isn't just about sales; it's about legally reducing your tax bill by claiming every single allowable business expense.
Many eBay sellers, from sole traders using a spare room to established limited companies, miss out on valuable tax deductions simply because they aren't sure what they can claim. This guide will walk you through the expenses HMRC allows you to deduct.
Before we dive into the list, you must understand HMRC's most important rule. For an expense to be tax-deductible, it must be incurred 'wholly and exclusively' for the purposes of your trade.
This means the entire cost must be for your business. If a cost has a dual purpose (part business, part personal), you can only claim the business portion.
Example: You can claim the business percentage of your mobile phone bill, but you can't claim the cost of a new TV for your living room.
How you record your purchases is vital. Getting this wrong can lead to disagreements with HMRC.
All purchase invoices and receipts must be in the registered company's name. They cannot be in your personal name.
You have more flexibility. Invoices can be in your personal name or your trading name (e.g., "Dave's Vintage Wares").
We've broken down the common expenses into logical categories to make them easier to track.
These are the essential costs of the products you sell.
Purchases
The cost of buying the stock that you sell on eBay. This is your single biggest expense.
Direct Labour
If you pay someone to manufacture, modify, or prepare your items for sale.
Other Direct Costs
Any other costs directly tied to getting your product ready, such as import duties or shipping costs to get the stock to you.
The costs associated with the eBay platform and getting your products seen.
Commissions Payable
This includes eBay's final value fees, insertion fees, and any payment processing fees (from eBay Managed Payments or previously PayPal).
Advertising and PR
The cost of promoting your listings, running eBay ad campaigns, or marketing your business on social media.
Postage and Courier Services
The amount you spend on sending items to your customers.
Stationery and Printing
This is a big one for eBay sellers. It includes packaging materials like boxes, jiffy bags, bubble wrap, tape, and the cost of printing postage labels and customer invoices.
Whether you work from a dedicated unit or a corner of your dining room, these costs count.
Use of Home as Office
If you run your eBay business from home, you can claim a proportion of your household costs. You have two options:
Option 1: Simplified Flat Rate
Use HMRC's flat rate based on hours worked from home per month
Option 2: Actual Costs
Calculate a proportion of mortgage interest/rent, council tax, electricity, and gas
Telephone and Internet
You can claim the business use percentage of your landline, mobile, and internet bills.
Software
The cost of any software essential for your business, such as accounting software (like Xero or QuickBooks), inventory management tools, or photo editing software.
Equipment Expensed
Small items of equipment like a label printer, camera, or office chair can often be claimed as a day-to-day running cost. More expensive items like a computer fall under Capital Allowances (explained in section 7).
If you have people helping you, their costs are deductible.
Wages and Salaries
Salaries paid to employees
Employer's NI
National Insurance contributions
Pensions & Bonuses
Pension contributions and bonuses
Subcontractor Costs
Fees for freelancers or services
Staff Training and Welfare
Costs for business-relevant courses (e.g., online marketing course) or staff welfare items
Costs for using your vehicle for business tasks like visiting suppliers or posting parcels.
You can claim these costs in two ways:
Option 1: Simplified Mileage
Claim a flat rate per mile:
45p per mile for the first 10,000 business miles
25p per mile thereafter
Option 2: Actual Costs
Claim business portion of:
• Fuel Expenses
• Motor Insurance
• Repairs and Maintenance
• Road Tax
• Breakdown Cover
Travel and Subsistence
Other travel costs like train tickets to visit a trade show or a wholesaler
Parking
Parking fees incurred while on business trips
The costs of keeping your business compliant and insured.
Accountants Fees
Cost of hiring an accountant (like Taxwise Accountancy!)
Bank Charges
Monthly fees and transaction charges
Interest
Interest on business loans or credit cards
Insurance Costs
Public liability or stock insurance
Legal & Professional
Legal advice or consultancy
Subscriptions
Trade bodies or trade publications
What happens when you buy a significant item for your business, like a new computer, a printer, office furniture, or even a motor vehicle for deliveries?
These larger purchases aren't treated as simple day-to-day running costs. Instead, they are classed as 'assets'. You cannot claim the full purchase price as an expense in the year you buy them.
However, HMRC allows you to claim tax relief through a system called Capital Allowances. This reduces your Income Tax or Corporation Tax bill.
Assets that typically qualify for Capital Allowances include:
The rules around Capital Allowances, especially with schemes like the Annual Investment Allowance (AIA), can be complex. Getting expert advice ensures you claim the maximum relief you're entitled to.
It's just as important to know what HMRC does not consider an allowable expense.
Personal Expenses
Any cost that is not for the business
Entertaining
You cannot claim for entertaining clients, suppliers, or customers
Depreciation and Amortisation
Tax relief is given through the Capital Allowances system, not as a direct expense
Travel to Your Normal Place of Work
Commuting from home to a permanent workplace is not an allowable expense
The key to successfully claiming all your allowable expenses is meticulous record-keeping. Use accounting software, keep all your receipts and invoices, and maintain a separate bank account for your business.
Contact the friendly team at Taxwise Accountancy today, and let us handle the numbers so you can focus on growing your eBay business.
Expert eBay business accounting • Tax planning • Expense maximisation