What expenses can I claim when starting a new business?

Understanding what “claimable expenses” really means

When you’re starting a new business, money tends to leave your bank account faster than it arrives. You pay for gear, software, advice, marketing, travel, prototypes, and dozens of little “one-off” costs that somehow keep happening. One of the best ways to protect your cash flow is to understand which expenses you can claim, how they’re treated for tax purposes, and how to keep records so you don’t miss legitimate deductions.

In plain terms, a claimable expense is a cost that relates to running your business and is considered allowable by the tax rules that apply to you. While the exact rules vary by country, most systems share the same foundation: costs must be incurred wholly and exclusively (or primarily) for business purposes, must be properly evidenced, and must not be capitalized incorrectly (meaning some costs are deducted immediately while others are spread over time through depreciation or similar mechanisms).

This article walks through the typical expense categories you may be able to claim when starting a business, the difference between startup costs and ongoing costs, what counts as “capital” versus “revenue,” and how to avoid the most common mistakes founders make in the early months.

Two big buckets: startup costs vs ongoing operating expenses

It helps to think in two stages. First, there are startup costs—expenses incurred before you begin trading or before you start actively selling your product or service. Second, there are operating expenses—costs you incur once the business is up and running.

Many tax systems allow you to claim some pre-trading or pre-opening expenses once the business begins trading, often if the costs were incurred within a certain window (for example, within the previous few years) and would have been allowable had the business already been operating. The main idea is that you shouldn’t be penalized for spending money to get ready to trade, but you also can’t claim everything you’ve ever spent that might vaguely relate to a future business idea.

Operating expenses are more straightforward. If you’re already trading, you generally claim allowable expenses in the period they’re incurred. But “straightforward” doesn’t mean “simple,” because you still need to classify costs correctly and separate personal spending from business spending.

Revenue expenses vs capital expenses: why the distinction matters

One of the most confusing parts of expenses is the difference between revenue expenses (often deducted in full in the year you incur them) and capital expenses (often not deducted immediately, but instead written off over time through depreciation, capital allowances, amortization, or similar rules).

As a rule of thumb, revenue expenses are the day-to-day costs of running the business: subscriptions, rent, utilities, routine advertising, travel to client meetings, office supplies, and similar items. Capital expenses are costs that create or improve a long-term asset: equipment, vehicles, computers, major renovations, or in some cases substantial software builds or intellectual property development.

Why do you care? Because a founder who mistakenly treats a capital purchase as an immediate deduction may overclaim in the first year and face an adjustment later. The opposite error is common too: founders underclaim because they assume “that big purchase doesn’t count.” In reality, many jurisdictions provide specific relief for capital expenditure, sometimes allowing accelerated deductions for qualifying equipment. The key is to identify what you bought, how it will be used, how long it will benefit the business, and how the relevant rules treat that type of asset.

Business formation and professional fees

In the earliest days, you might spend money simply to get the business legally and practically ready. Common costs include company registration fees, trade name registration, permits, licenses, and professional advice. Some of these may be claimable, but how they’re claimed can vary depending on whether they are treated as startup costs, ongoing admin costs, or capitalized costs.

Typical claimable professional fees may include:

• Accountant fees for setting up accounting systems, advising on bookkeeping, preparing accounts, and filing tax returns.

• Legal fees for drafting standard contracts, reviewing leases, forming a partnership agreement, or incorporating a company.

• Consultancy fees related to business planning, operational setup, and compliance.

Be careful with fees that relate to acquiring a long-term asset (for example, legal costs associated with buying property). These are often treated as part of the capital cost of that asset rather than a normal operating expense.

Banking, payment processing, and finance costs

Once you open a business bank account or start taking payments, you’ll likely pay bank charges, transaction fees, and possibly loan interest. These can often be allowable expenses if they relate to business financing and business transactions.

Common claimable finance-related expenses include:

• Business bank account fees and service charges.

• Payment processor fees (card processing, online checkout fees, marketplace fees).

• Interest on business loans and business credit used for business purposes.

• Invoice financing fees, merchant cash advance fees, or similar financing costs (subject to local rules).

However, repayments of the principal amount of a loan are not usually treated as an expense. Interest is typically an expense; principal is a balance sheet item. If you use a personal credit card for business spending, the portion of interest that relates to business purchases may be treated differently depending on the regime, and it’s usually much easier to keep things clean with a dedicated business account.

Premises costs: rent, utilities, and working from home

Where you work affects what you can claim. If you rent a commercial space, allowable costs often include rent, utilities, security, cleaning, repairs and maintenance, and sometimes service charges or building management fees. If you work from home, you may be able to claim a reasonable portion of certain household costs that relate to business use, but the method and limits vary.

For commercial premises, typical claimable expenses include:

• Rent and lease payments.

• Business rates or local property taxes (where applicable).

• Electricity, gas, water, and internet for the premises.

• Cleaning, security, and waste disposal.

• Repairs and maintenance (generally routine repairs, not major improvements).

For working from home, you usually have two broad approaches: a simplified method (a flat-rate or fixed allowance) or an actual-cost method (claiming a proportion of real household costs based on space and time used for business). Expenses that may be partially claimable include heating, electricity, internet, and sometimes rent or mortgage interest components. It’s important to keep the calculation reasonable and defensible, and to separate purely personal costs from those that support business activity.

A common mistake is to claim too aggressively for home costs without a clear basis. Another mistake is to claim nothing even when you’re clearly using your home as an office. If your business is home-based during the startup phase, those small claims can add up.

Equipment and assets: computers, tools, machinery, and furniture

Most new businesses need equipment. This could be a laptop, a phone used for business, a camera, power tools, manufacturing machinery, a POS system, or even a desk and chair. Whether you can claim these costs often depends on whether they’re treated as capital assets.

Typical equipment you may be able to claim (often through depreciation/capital allowances) includes:

• Computers, monitors, printers, and peripherals.

• Phones and tablets used for business.

• Tools and specialist instruments.

• Office furniture and fittings.

• Manufacturing and production equipment.

If an item is used partly for personal reasons, you may need to apportion the cost and claim only the business-use portion. For example, if you use a laptop 70% for business and 30% for personal use, you generally claim 70% of allowable costs, subject to local rules. Keeping a short written note of your basis for apportionment helps if you ever need to justify it later.

Don’t forget smaller equipment too. Cables, adapters, storage drives, safety equipment, and basic office accessories often fall into consumables or minor equipment that may be deductible more quickly, depending on thresholds and rules.

Software, subscriptions, and digital services

Modern startups run on subscriptions. Even a simple business might pay for accounting software, email hosting, a CRM, design tools, scheduling software, cloud storage, password managers, and team communication apps.

Common claimable software and digital service costs include:

• Accounting and invoicing software.

• Email hosting and domain management.

• Website hosting, cloud storage, and CDN services.

• Design and productivity tools (design suites, document editors, project management tools).

• CRM, support desk, and marketing automation tools.

• Cybersecurity tools (VPNs, endpoint protection, password managers).

Software can sometimes be treated as a revenue expense (especially SaaS subscriptions) or as a capital expense (especially purchased software licenses or substantial development). The more “long-term asset” the software becomes—such as a bespoke system built to operate your business—the more likely it is to be treated as capital in some regimes. But standard monthly subscriptions are typically treated as ordinary operating expenses.

Website and branding costs

Your brand identity and online presence are often among the first things you invest in. The good news is that many of these costs are commonly considered business expenses when they’re clearly linked to trading activity.

Possible claimable website and branding expenses include:

• Domain registration and renewal fees.

• Website hosting and maintenance.

• Website design costs, including freelancers or agencies.

• Branding design: logos, brand guidelines, packaging design.

• Stock photos, fonts, and design assets licenses.

• Printing costs for business cards, brochures, and signage.

Be mindful of larger website builds. A simple brochure website may be treated as a normal marketing/operating cost. A complex platform that functions as a core asset of the business (for example, a subscription web application) may be treated differently depending on how development is structured, whether it creates an enduring asset, and what accounting standards or tax rules apply to your business structure.

Marketing and advertising costs

Marketing is often one of the biggest early expenses, especially if you’re trying to gain traction fast. Generally, marketing and advertising that’s aimed at generating sales or building awareness can be claimable as a business expense, provided it’s not personal in nature.

Typical claimable marketing expenses include:

• Online ads (search ads, social media ads, display ads).

• Content creation (freelance writing, video editing, photography for campaigns).

• PR and outreach costs, including press release distribution services.

• Email marketing tools and list management services.

• Sponsorships and event marketing (where there’s a clear business purpose).

• Promotional materials and branded merchandise (within reasonable bounds).

Be careful with “dual-purpose” costs. For example, taking a friend out for dinner and calling it “marketing” is unlikely to be acceptable unless you can show a genuine business meeting purpose and appropriate recordkeeping. Some jurisdictions treat client entertainment differently from advertising and may restrict claims for entertainment even when business-related. In general, pure advertising is easier to justify than hospitality.

Travel and vehicle expenses

Many founders travel to meet clients, attend industry events, visit suppliers, or research locations. Business travel expenses are often claimable when they’re necessary for business purposes and properly documented.

Possible claimable travel costs include:

• Train, bus, and airfare for business trips.

• Taxi, rideshare, and parking fees incurred for business journeys.

• Mileage claims for using a personal vehicle for business travel (if your system allows mileage rates).

• Fuel, insurance, servicing, and repairs for a vehicle used for business (usually claimed proportionally if there is personal use).

• Accommodation for overnight business trips.

Travel becomes tricky when a trip includes both business and personal elements. If you extend a conference trip into a weekend holiday, you may need to apportion costs. The business-related portion may be allowable, but the personal add-ons often are not. Keep itineraries, conference tickets, and meeting notes to support the business purpose.

Meals, subsistence, and entertainment: the most misunderstood category

Food costs are one of the most frequently misunderstood areas. Many founders assume that any meal “while working” is a business expense. In many tax systems, ordinary day-to-day meals are considered personal living costs, even if you eat them at your desk while building your business.

However, there are situations where meal-related costs may be claimable, such as:

• Subsistence while traveling for business away from your normal base.

• Meals included as part of a training course or conference package (depending on how it’s billed).

• Staff meals in certain circumstances (varies widely).

Client entertainment often has stricter limits. Even if it’s clearly business-related, some regimes restrict deductions for entertaining clients. This is an area where local rules matter a lot. If you choose to claim meal costs, keep receipts and notes on who attended and the business purpose, and apply a conservative, well-documented approach.

Inventory, raw materials, and cost of goods sold

If you sell products, you’ll have inventory and cost of goods sold (COGS). These are central to your profit calculation and usually include the direct costs of producing or acquiring the items you sell.

Potentially claimable costs related to products include:

• Inventory purchases for resale.

• Raw materials and components.

• Packaging materials and labels.

• Manufacturing and production supplies.

• Direct labor costs (if you employ staff or pay contractors directly tied to production).

• Freight and shipping costs to bring goods into your possession (inbound shipping).

How these costs are claimed may depend on inventory accounting rules. Often you don’t “expense” inventory immediately when purchased; instead, it becomes an asset and is recognized as an expense when the inventory is sold. That’s why good inventory tracking matters, even for small businesses. If you’re selling digital products or services, your “direct costs” may look different—hosting, transaction fees, and contractor costs could function like COGS in practice.

Shipping, postage, and fulfillment costs

For e-commerce and product businesses, fulfillment costs can quickly become significant. These expenses are usually straightforward and claimable as business costs, provided they relate to customer orders or business operations.

Common claimable fulfillment-related costs include:

• Postage and courier charges (outbound shipping to customers).

• Fulfillment center fees and storage fees.

• Packaging supplies (boxes, mailers, tape, inserts).

• Returns handling costs.

• Insurance for shipped goods (where applicable).

Keep invoices from couriers and fulfillment partners, and track shipping labels and order records so you can reconcile costs to sales.

Employee, contractor, and freelancer costs

Even solo founders often outsource. You might hire a freelance designer, a developer, a virtual assistant, a bookkeeper, or a sales contractor. Payments to workers are often claimable expenses when they are wholly for business purposes and properly documented.

Possible claimable people-related costs include:

• Wages and salaries for employees.

• Employer payroll taxes and contributions (where applicable).

• Contractor and freelancer invoices.

• Recruitment costs and job ads.

• Training costs related to the business.

• Staff equipment and tools provided for work (sometimes capitalized depending on value and rules).

Be careful about worker classification. In some places, misclassifying employees as contractors can create compliance issues. Even if you can claim the cost, you could still face penalties if payroll obligations weren’t handled correctly. Keep contracts, invoices, and proof of payment. A clear paper trail protects you.

Training, education, and subscriptions to professional bodies

Learning is a startup’s superpower, and training costs can sometimes be claimable. The key question is whether the training maintains or improves skills you already use in the business, versus training that creates a new skill or qualifies you for an entirely new trade.

Potentially claimable training and professional costs include:

• Courses that improve skills directly used in your current business.

• Industry certifications required to operate legally or credibly.

• Professional membership fees and trade association dues.

• Industry journals and paid research databases.

Training that is too general or that prepares you for a different career path may be disallowed. If you’re starting a business in a field you already work in, relevant continuing education is more likely to be allowable than a broad “career change” program.

Insurance costs

Insurance is a common and often claimable business expense. In fact, some forms of insurance are required by law or by contracts with clients or landlords.

Typical claimable business insurance includes:

• Public liability insurance.

• Professional indemnity or errors-and-omissions insurance.

• Employers’ liability insurance (where required).

• Business contents insurance for equipment and stock.

• Cyber insurance (increasingly common for digital businesses).

• Commercial vehicle insurance for business vehicles.

Insurance that covers purely personal risk is usually not claimable. If you have a combined policy that includes both business and personal elements, you may need to apportion it.

Telephone, internet, and communication costs

Communication costs are staples for almost every business. These are usually claimable when used for business, but you may need to adjust for personal use if you’re using a personal phone plan or home internet.

Potentially claimable communication expenses include:

• Mobile phone plans and handset costs (business proportion).

• Home or office internet (business proportion).

• VoIP services and business phone numbers.

• Video conferencing subscriptions.

• Messaging and team collaboration tools.

Keep itemized bills if possible, and make a reasonable estimate of business use. For example, if your phone is primarily for client calls and business administration, you may justify a high business-use percentage, but it should still be grounded in reality.

Office supplies and day-to-day consumables

Small costs are easy to overlook, but they add up. Most systems allow you to claim routine office supplies and consumables used in the business.

Common claimable supplies include:

• Stationery, printing, ink, and paper.

• Post-it notes, folders, binders, and storage items.

• Basic kitchen supplies for the workplace (where applicable).

• Protective equipment and safety supplies (especially in physical trades).

• Small tools and consumables (tape measures, drill bits, gloves, etc.).

The line between “supplies” and “equipment” depends on value and longevity. A low-cost mouse is often treated as a supply; a high-end workstation is more likely a capital asset. Use common sense and keep consistent treatment.

Utilities and service costs

Beyond rent, businesses pay for the ongoing services that keep operations running. These are often claimable operating expenses.

Possible claimable service costs include:

• Electricity, water, heating, and waste services.

• Cleaning and maintenance services.

• Security monitoring.

• IT support and managed services.

• Equipment servicing contracts.

Again, if services are partly personal (for example, home utilities when working from home), you typically claim only the business portion.

Research, prototyping, and product development costs

Early-stage businesses often spend heavily on experimentation: prototypes, testing materials, user research incentives, and development tools. Many of these costs can be claimable, but classification matters.

Potentially claimable development-related costs include:

• Prototyping materials and small-batch manufacturing.

• Testing services and lab fees (where relevant).

• User research incentives and survey tools.

• Contractor costs for development work.

• Market research reports and industry data.

Some development costs might be treated as capital expenditure if they create a long-term asset, such as proprietary software or intellectual property. Other costs may be treated as revenue expenses if they are exploratory, routine, or do not result in an identifiable long-term asset. The distinction can be subtle, so maintain good documentation: what the work was, what it produced, and how it relates to trading activity.

Licenses, permits, and regulatory costs

Depending on your industry, you may need certifications, regulatory approvals, and recurring license fees. These are often necessary for operating legally and can be claimable.

Examples include:

• Industry-specific licenses and permits.

• Inspection fees and compliance testing.

• Data protection registrations or filings (where applicable).

• Professional license renewals required to trade.

It’s wise to keep a compliance folder (digital is fine) where you store permits, renewal notices, and payment receipts.

Accounting systems, bookkeeping, and recordkeeping tools

One of the smartest early “expenses” is investing in systems that make tracking everything easier. Bookkeeping isn’t glamorous, but it’s the foundation of maximizing legitimate expense claims and avoiding stress later.

Claimable costs here often include:

• Bookkeeping software subscriptions.

• Receipt scanning apps and document storage.

• Accountant and bookkeeper fees.

• Payroll software and related services.

Many founders wait until tax season to organize records and then discover missing receipts and unclear transactions. A simple routine—monthly reconciliation, keeping digital copies of receipts, and tagging transactions—can protect deductions you’re entitled to and reduce professional fees later.

Bad debts and refunds

Not all sales turn into cash. If you invoice customers and they never pay, some systems allow you to claim relief for bad debts, provided you can show the debt is genuinely irrecoverable and you have taken reasonable steps to collect it.

Similarly, refunds and chargebacks can reduce income and may be reflected in your accounts as offsets to sales or as expenses depending on your accounting method. Keep documentation: invoices, collection attempts, communications, and chargeback notices.

What you usually cannot claim (or must treat carefully)

Knowing what not to claim is just as important as knowing what to claim, because disallowed costs can trigger questions and potentially penalties. While specifics depend on local rules, the following categories are commonly restricted or disallowed:

• Personal living costs: ordinary groceries, normal commuting, personal rent unrelated to business use, and personal clothing (with limited exceptions for protective or specialized uniforms).

• Fines and penalties: parking fines, late filing penalties, and similar charges are often not deductible.

• Purely private entertainment: social events with no clear business purpose.

• Non-business portion of mixed-use costs: if an expense is partly personal, you typically claim only the business percentage.

• Capital drawings or owner withdrawals: taking money out of the business isn’t an expense; it’s a distribution of profit or capital, depending on structure.

Even when a cost has some business relevance, you should ask: would you have incurred this cost if you didn’t have the business? If the answer is yes, it may be personal. If the business is the clear driver of the cost, it’s more likely to be allowable.

How to handle mixed-use expenses fairly

Mixed-use expenses are unavoidable when you’re starting out. You might use your personal phone, your home internet, your car, and your home office for business. The key is apportionment: claim only the portion that relates to business use, and have a method that is reasonable and repeatable.

Examples of apportionment methods include:

• Time-based: claiming internet costs based on the proportion of time it’s used for work versus personal use.

• Space-based: claiming home utility costs based on the percentage of the home used as a workspace and the hours it’s used.

• Usage-based: claiming phone costs based on itemized call logs or a reasonable estimate supported by business activity.

• Mileage-based: claiming vehicle running costs based on business miles divided by total miles driven.

You don’t need perfection, but you do need credibility. Document your approach in a short note and stick to it. If your business usage changes significantly, update the approach rather than quietly drifting into an unrealistic claim.

Keeping records: the habit that protects your deductions

You can only claim what you can substantiate. Good recordkeeping is the difference between confidently claiming legitimate expenses and guessing under pressure. A simple system is enough:

• Keep receipts: take a photo the day you buy something and store it in a dedicated folder or app.

• Use a business bank account: it reduces the number of mixed personal transactions you need to untangle.

• Add notes: for travel, meals, and ambiguous purchases, note the business purpose, who you met, and what it related to.

• Reconcile monthly: match bank transactions to receipts and categorize them while the memory is fresh.

• Keep contracts and invoices: especially for contractors, large purchases, and recurring services.

These habits help you claim everything you’re entitled to and make it far easier to answer questions if you’re ever asked to explain a deduction.

Common first-year expense scenarios and how they’re usually treated

To make this practical, here are a few common startup scenarios and how their costs are typically handled:

• You buy a laptop before your first sale: often treated as equipment, usually a capital asset with relief through depreciation/capital allowances. If you start trading later, it may still be brought into the business with an appropriate approach and business-use apportionment.

• You pay for a logo, brand kit, and basic website: often treated as marketing or professional services, usually deductible as an operating cost, though very large development projects may be treated differently.

• You run social ads to test demand: typically an advertising expense and often deductible, assuming it’s clearly for the business.

• You travel to a trade show: tickets, travel, and accommodation often qualify as business expenses; personal add-ons usually do not. Keep proof of attendance and business purpose.

• You hire a freelancer to build a core software platform: may be treated as capital development depending on the nature of the work and local rules, especially if it creates a long-term intangible asset.

These examples show why classification matters. If you’re unsure, err on the side of careful categorization and keep excellent notes.

Choosing a structure can affect how expenses are claimed

Your business structure—sole trader, partnership, limited company, or another form—can influence how expenses are reported and what forms of documentation you need. It may also affect whether certain costs are treated as owner expenses, reimbursed expenses, or company expenses. For example, in some structures you might reimburse yourself for business costs you initially paid personally, while in others you might treat certain payments as drawings.

Regardless of structure, the core principle stays consistent: the expense must be for business purposes, properly recorded, and claimed in the correct way for your regime. When your structure changes (such as moving from self-employed to incorporated), it’s especially important to plan how ongoing subscriptions, assets, and pre-existing equipment are handled so you don’t lose track of what belongs where.

Practical checklist: expenses new businesses often miss

Founders usually remember the big items like laptops and ads. The missed deductions are often the recurring and “boring” costs. Here’s a checklist of commonly overlooked expenses:

• Domain renewals and small hosting add-ons.

• Payment processor fees and platform commissions.

• Small software subscriptions that start as “trials” and quietly convert to paid plans.

• Bank charges and foreign transaction fees.

• Postage, packaging, and label printer supplies.

• Stationery, printer ink, and basic office consumables.

• Professional memberships and required renewals.

• Insurance add-ons and policy fees.

• Small tools, replacement parts, and consumables used on jobs.

Reviewing your bank statements line by line for the first few months is a surprisingly effective way to catch these.

When to get professional advice

You can do a lot yourself with a solid bookkeeping system, but there are times when professional advice is worth it—especially if you’re investing heavily, have complex development costs, or are unsure how to treat big purchases.

Consider speaking to an accountant or tax adviser if:

• You’re buying significant equipment, vehicles, or property.

• You’re developing proprietary software or other intellectual property.

• You have a mix of personal and business use that’s hard to untangle.

• You’re hiring staff and need payroll compliance.

• You’re trading internationally, dealing with sales tax/VAT/GST, or handling multi-currency income.

A short, targeted consultation early can prevent months of messy corrections later.

Final thoughts: claim what you’re entitled to, and make it easy to prove

Starting a new business is demanding enough without overpaying tax or losing deductions simply because you didn’t track expenses well. The best approach is to be both confident and conservative: claim legitimate business costs, classify them correctly as revenue or capital, apportion mixed-use costs reasonably, and keep tidy records.

If you build simple habits early—separate accounts, digital receipts, monthly reconciliations, and clear notes on anything ambiguous—you’ll not only maximize the expenses you can claim, you’ll also gain a clearer picture of your true business costs. That clarity helps you price properly, plan cash flow, and make smarter decisions as you grow.