How to Claim Pre-Trading Expenses in Your First Year of Self-Employment (2026/27)

This guide is general information, not advice.

This is for anyone who spent money getting a business ready before the first sale: adverts, business cards, a phone line, tools. It shows how those costs get into your first Self Assessment return instead of being lost.

By the end you will know which pre-start costs count, which go through capital allowances instead, where they go on the self-employment pages, and when the £1,000 trading allowance is the better choice. The full list of what counts as an allowable expense is in the self-employed allowable expenses guide; this guide is only about timing.

Before you start

Have these ready:

• your trading start date - the day you first carried on the business, which is the day section 57 moves your pre-trading costs to
• receipts, invoices and bank statements for every cost from the previous 7 years you want to claim
• a note of what each cost was for and, where it was partly personal (a phone contract, say), how you split the business share
• whether you use cash basis or traditional accounting - it changes how equipment is claimed
• your Unique Taxpayer Reference; if you do not have one yet, see how to register for Self Assessment

Step-by-step

1. Check each cost against the 7-year window. Section 57(1) of the Income Tax (Trading and Other Income) Act 2005, headed “Pre-trading expenses”, applies to expenses incurred for the purposes of a trade “before (but not more than 7 years before)” the date you start to carry it on. Drop anything older.

2. Ask whether the cost would be allowable if you had paid it on day one. Section 57(2) moves an expense to your start date only if no deduction would otherwise be allowed but one would be allowed had it been incurred on the start date. HMRC’s BIM46351 spells out that the wholly and exclusively test still applies. So use GOV.UK’s allowable expenses list - office costs, travel, advertising or marketing, financial costs such as insurance, training related to your business and so on - and claim only the business share of anything used privately as well. One exclusion matters most before launch: GOV.UK says you “cannot claim for training courses that help you start a new business” (GOV.UK: training courses), so a course you take to get ready to trade is not a pre-trading expense.

3. Take out stock and anything paid in advance. BIM46351 says an advance purchase of trading stock does not qualify under section 57, because it is deducted anyway once you trade. The same goes for the part of any pre-trading payment that will be deductible for a period after you start, and HMRC gives rent paid in advance as the example. These are still claimable; they just are not pre-trading expenses.

4. Move equipment to capital allowances, or to cash-basis expenses. BIM46351 says section 57 gives no relief for capital spending. What you do instead depends on your accounting method:

   • Traditional accounting. Claim capital allowances. HMRC’s CA23020 treats plant and machinery bought before you start as bought on the first day you trade. For an item you already owned for another reason, GOV.UK says to use its market value, and that annual investment allowance is not available on it - you claim writing down allowances instead.
   • Cash basis. GOV.UK’s cash basis guide says equipment you buy to keep and use in the business is claimed as a normal allowable expense rather than a capital allowance (cars excepted), and the SA103S notes say cash-basis expenses include capital spending unless it is specifically disallowed. HMRC’s pre-trading pages do not address cash basis directly, and neither page covers an item you owned privately before starting, so ask HMRC before claiming a large one.

5. Decide between expenses and the trading allowance. HMRC’s trading allowance guidance says you can deduct up to £1,000 instead of expenses, but “you cannot deduct any other expenses or allowances if you claim the allowances”. GOV.UK’s expenses guide says the same, and adds that you cannot claim capital allowances either. Add your pre-trading and first-year costs; if they beat £1,000, claim them.

6. Enter the total in your first year’s expenses. There is no pre-trading box. On the 2025-26 SA103S, the latest published, boxes 11 to 19 take expenses by category, and a business with turnover below £90,000 “may just put your total expenses in box 20”. Box 5 asks for the date the business started, and box 8 is where you say you used traditional accounting. Capital allowances go in boxes 23 to 25.2, and the notes say to leave boxes 11 to 20 empty if you claim the trading allowance in box 10.1. The form for the year you start may be renumbered; check the current version before you file.

Deadlines and what happens next

There is no separate claim or deadline for pre-trading expenses. BIM46355 says they are treated as incurred on the day the trade is first carried on, enter the profit or loss for the first tax year of trading, and need no separate claim for loss relief. They go in the return for that first year, which follows the normal Self Assessment timetable set out in how to register for Self Assessment.

BIM46355 also says the relief is only available to the person who incurred the expenditure and starts the trade. Costs your partner or a friend paid are not yours to claim.

Keep the evidence. GOV.UK’s records guide says you must keep records for at least 5 years after the 31 January submission deadline of the relevant tax year. Pre-trading costs belong to your first year’s return, so keep their receipts for as long as that return’s records, even if you paid them years before you started.

Common mistakes

• Leaving them out. Pre-trading costs are easy to forget because they predate your business bank account and bookkeeping.
• Claiming the course that got you started. Training that helps you start a new business is excluded by GOV.UK, before or after your start date.
• Claiming capital items as pre-trading expenses. Equipment goes through capital allowances (traditional accounting) or the cash-basis rules, not section 57.
• Claiming a personal asset at what you paid for it. Under capital allowances GOV.UK says to use market value for something you owned before using it in the business.
• Claiming the trading allowance as well. It replaces all expenses.
• Claiming costs from over 7 years before the start date. Section 57 does not reach them.

Worked example

Illustration only; the figures are invented to show the mechanics.

A sole trader starts trading on 1 August 2026, using cash basis. Before that date they paid for:

Cost	When	Business amount	Pre-trading expense?
Online adverts	June and July 2026	£300	Yes - advertising
Business cards and flyers	May 2026	£90	Yes - advertising
Business share of mobile bills	May to July 2026	£45	Yes - phone, business share only
Stock to sell	July 2026	£800	No - deducted as stock, BIM46351

The three qualifying items, £435, are treated as paid on 1 August 2026. The stock is still deductible, in the ordinary way. From 1 August 2026 to 5 April 2027 they have turnover of £9,000 and further allowable expenses of £1,500.

	Claim expenses	Claim trading allowance
Turnover	£9,000	£9,000
Pre-trading expenses	£435	not allowed
Stock	£800	not allowed
Other expenses	£1,500	not allowed
Trading allowance	-	£1,000
Profit	£6,265	£8,000

Claiming expenses gives a profit £1,735 lower. On the short form, they would enter £2,735 of total expenses (£435 + £800 + £1,500) in box 20.

Related reading

• Self-employed allowable expenses master guide - what counts as an allowable expense, category by category.
• Self-employed first-year setup - registration, business name and bookkeeping for the first year.
• How to register for Self Assessment - getting the UTR you need before you can file.