NOT financial advice - seek advice from a professional for your specific situation

    TaxKilnUK tax guidance
    TaxKilnUK tax guidance

    UK Tax Reliefs for Self-Employed + Ltd Companies

    UK tax reliefs for self-employed people and Ltd Co owners fall into five structural categories: reliefs primarily for sole traders, reliefs primarily for Ltd Companies, capital allowances + property reliefs (available to both), reliefs the owner claims as an individual (separate from their trading entity), and employer-side benefit reliefs + salary sacrifice. The right reliefs combination saves substantial tax, for a typical Ltd Co director extracting £80,000 annually, optimised use of trivial benefits + employer pension contribution + AIA + Marriage Allowance + Tax-Free Childcare can save £8,000–£15,000 per year over a do-nothing baseline. Most relief eligibility runs on statute-specific timing rules, getting the timing right matters as much as picking the right relief.

    Last reviewed:

    Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact HMRC. Read our editorial scope →

    This hub organises UK tax reliefs into five categories. Each relief links through to a statute-cited deep-dive page with worked example, eligibility criteria, common mistakes + audit triggers, and how it interacts with other reliefs. New reliefs land on the hub as they're researched + published.

    Reliefs primarily for sole traders

    Reliefs available specifically to UK self-employed sole traders. Most also work for partnerships; some have parallels for Ltd Co directors. Where a relief is genuinely sole-trader-only, it's noted on the deep-dive page.

    • Trading Allowance

      £1,000 gross trading income tax-free per tax year; no Self Assessment required below threshold.

    • Property Allowance

      £1,000 gross property income tax-free per tax year; separate from Trading Allowance; mutually exclusive with Rent-a-Room per property.

    • Rent-a-Room Scheme

      £7,500/year tax-free for letting furnished accommodation in your main home; £3,750 for joint owners; mutually exclusive with Property Allowance per property.

    • Class 2 NI Voluntary Contributions

      £3.50/week voluntary Class 2 for sole traders with profits below £6,845 SPT, protects State Pension record. Class 2 no longer compulsory from 6 April 2024.

    • Cash Basis Accounting

      Default for sole traders + partnerships from April 2024. Income recognised when received, expenses when paid. Turnover threshold removed entirely, any size business eligible.

    • Simplified Expenses

      HMRC flat rates for WFH (£10-£26/month), vehicle mileage (45p/25p, rising to 55p from April 2026), live-at-business-premises (£350-£650/month). Election per category, annual.

    • Pre-Trading Expenditure

      7-year window for expenses incurred before trading commences. Treated as first-day expenditure. No cap. Revenue under ITTOIA s.57; capital via CAA s.12.

    • Trading Losses (Sole Trader)

      Five relief routes: sideways s.64, capital gains extension s.71, opening-years carry-back s.72, carry-forward s.83, terminal s.89. Sideways cap £50k or 25% of ATI.

    • Making Tax Digital for Income Tax (MTD-ITSA)

      Phase 1 from 6 April 2026 mandates sole traders + landlords with combined gross income >£50,000 to file quarterly digital updates + annual declaration via HMRC-compatible software.

    Reliefs primarily for Limited Companies

    Reliefs specifically structured for incorporated businesses paying Corporation Tax. Some are claimed via CT600 directly; others reduce profits before tax is calculated. Director extraction is covered in 'Owner-as-Individual' and 'Employer-Side' categories.

    • R&D Tax Credits (Merged Scheme) (Merged R&D)

      20% above-the-line credit on qualifying R&D expenditure; merged scheme effective for accounting periods beginning on or after 1 April 2024.

    • Employment Allowance

      Up to £10,500/year reduction on employer Class 1 NI for eligible employers; £100k upper threshold removed from April 2025; sole-director companies excluded.

    • Corporation Tax Marginal Relief

      Prevents 19%→25% cliff for profits £50,000-£250,000. Effective marginal rate 26.5% on the band. 3/200 fraction applied to standard formula.

    • Patent Box

      Effective 10% CT rate on qualifying patent income, vs 25% main rate. Modified nexus approach since July 2016. Election within 2 years of end of accounting period.

    • Enhanced R&D Intensive Support (ERIS)

      27p per £1 R&D spend (vs 16.2p Merged Scheme) for loss-making SMEs with ≥30% R&D intensity. 86% enhanced deduction + 14.5% payable credit on surrendered loss.

    • Creative Industry Tax Reliefs (AVEC + VGEC + Cultural)

      AVEC 34%/39%/53% expenditure credits for film/TV/animation/games; cultural reliefs TTR/OTR/MGETR 40%/45% additional deduction. Replaced legacy reliefs from 1 January 2024.

    • CT Trading Losses (Carry-Forward + Group Relief)

      Current-year + 12-month carry-back + carry-forward + group relief mechanics. Post-April 2017 carry-forward losses can offset total profits (relaxation); 50% restriction above £5m.

    • Substantial Shareholdings Exemption (SSE)

      Exempts Ltd Co from CT on capital gains on disposal of ≥10%-held trading-company shares. 12-month qualifying period in prior 6 years. Losses on SSE-qualifying disposals not allowable.

    • Director's Loan Account + s.455 Charge

      Overdrawn DLAs at year-end trigger 33.75% s.455 charge (refunded when loan repaid). BIK on interest below HMRC rate. 30-day anti-avoidance + £10k de minimis interest threshold.

    • Enterprise Management Incentives (EMI)

      UK flagship start-up share option scheme. £250k per employee + £3m → £6m company cap from April 2026. CGT only on disposal + BADR-eligible 14%/18% with NO 5% shareholding requirement.

    • Company Share Option Plan (CSOP)

      Discretionary tax-advantaged share option scheme, any company size + any trade. £60,000 individual cap (DOUBLED from £30,000 April 2023). 3-year minimum hold for income-tax-free exercise.

    • Save As You Earn (Sharesave) (SAYE)

      All-employee monthly savings + share option scheme. £500/month savings cap. 3 or 5 year contracts. Up to 20% option-price discount. No downside risk to employee.

    • Share Incentive Plan (SIP)

      All-employee 4-mechanism share scheme via trust. Free Shares £3,600/year + Partnership Shares £1,800/year + Matching Shares (up to 2:1) + Dividend Shares. 5-year holding for full tax efficiency.

    • IR35 / Off-Payroll Working

      Chapter 8 (worker-assessed, 2000) + Chapter 10 (client-assessed, 2017/2021). Finance Act 2024 set-off mechanism. April 2026 small-business threshold change reverts ~132k clients to Chapter 8.

    Capital allowances + property reliefs

    Reliefs covering plant, machinery, vehicles, structures, and property. Available to both sole traders and Ltd Cos (with some differences, Full Expensing is Ltd Co only).

    • Annual Investment Allowance (AIA)

      100% upfront deduction on plant + machinery up to £1,000,000 per year; available to both sole traders and Ltd Cos.

    • Full Expensing

      100% first-year allowance on new + unused main-rate plant & machinery; 50% on special-rate; Ltd Co only; permanent since April 2023.

    • Section 24, Mortgage Interest Restriction

      Individual landlords get 20% basic-rate tax credit on mortgage interest instead of full deduction. Higher-rate landlords pay 50%+ more effective tax. Ltd Cos unaffected.

    • Furnished Holiday Let (FHL) Abolition

      FHL regime abolished from 6 April 2025. Former FHL properties now treated as ordinary residential rental, Section 24 applies, BADR lost, capital allowances replaced by Replacement of Domestic Items relief.

    • Writing Down Allowances (WDA)

      Main pool 18% reducing balance (REDUCES to 14% from April 2026); special rate pool 6% unchanged. Applies to plant + machinery not covered by AIA / Full Expensing / FYA.

    • Small Pools Allowance

      Write off entire remaining main pool / special rate pool balance if tax written-down value ≤£1,000 (pro-rated for shorter periods). Avoids continuing 18%/6% WDA at trivial scale.

    • EV First-Year Allowance

      100% FYA on new + unused zero-emission cars + EV charging points. Extended to 31 March 2027 (CT) / 5 April 2027 (IT). Used EVs go to main pool at 18%/14% instead.

    • Structures and Buildings Allowance (SBA)

      3% straight-line p.a. on non-residential commercial buildings. 33⅓-year allowance period. Written allowance statement required. No balancing adjustments on disposal.

    • Land Remediation Relief (LRR)

      150% CT deduction on qualifying contaminated land remediation. Ltd Co only. 7-year lease minimum. Loss-making companies surrender for 16% payable credit. 2025 consultation under review.

    • Replacement of Domestic Items Relief

      Residential landlords deduct cost of replacing furniture / white goods / carpets / curtains. Like-for-like only, initial fit-out + upgrades excluded. Available for ex-FHLs from April 2025.

    • 60-Day CGT Reporting (Residential Property)

      Individuals disposing of UK residential property with taxable gain must report + pay CGT within 60 days of completion. Penalties from day 1. Not a relief but critical compliance.

    • Private Residence Relief + Letting Relief

      PRR exempts main-home gain (last 9 months auto + actual occupation periods). Letting Relief effectively abolished from April 2020, now shared-occupancy only.

    • Stamp Duty Land Tax (SDLT)

      Residential property purchase tax (England + NI). Nil-rate £125k from April 2025 (reverted from £250k). FTB relief £300k threshold. HRAD surcharge 5% (was 3%). Company purchase 17% above £500k.

    Reliefs the owner claims as an individual

    Personal-side reliefs that apply to the business owner separately from their trading entity. Includes exit reliefs (BADR + Investors' Relief), investment-side reliefs (SEIS/EIS/VCT), pension relief, and personal allowances.

    • Business Asset Disposal Relief (BADR)

      CGT at 14% (2025/26 → 18% from April 2026) on qualifying exit gains up to £1 million lifetime limit.

    • Marriage Allowance

      £1,260 transfer of Personal Allowance from lower-earning spouse to basic-rate-taxpayer partner; up to £252/year saving; backdatable 4 years.

    • Seed Enterprise Investment Scheme (SEIS)

      50% income tax relief on early-stage investment up to £200,000/year; CGT exemption after 3 years; reinvestment relief permanently exempts 50% of qualifying gains.

    • Enterprise Investment Scheme (EIS)

      30% income tax relief on investments up to £1m/year (£2m KIC); CGT deferral; IHT Business Relief after 2 years (£2.5m combined cap from April 2026).

    • Venture Capital Trusts (VCT)

      30% income tax relief on new VCT shares up to £200,000/year (drops to 20% from April 2026) + tax-free dividends + no CGT on disposal.

    • Investors' Relief

      CGT 14% (2025/26) → 18% (April 2026) on qualifying external-investor disposals up to £1m lifetime; 3-year hold; investor must NOT be officer/employee.

    • Pension Annual Allowance (AA)

      £60,000 standard AA from April 2023; tapered to £10,000 minimum for adjusted income £360,000+. Tax-free pension contributions within AA + 100% UK earnings cap.

    • Pension Carry Forward

      Use unused AA from 3 previous tax years on top of current £60,000, up to £220,000 of historic allowance in 2025/26. Earliest year used first; UK pension scheme membership required each year.

    • Tax-Free Childcare (TFC)

      Government top-up £2,000/year per child (£4,000 disabled), 25% on first £8,000/year deposit. Self-employed eligible. Hard £100,000 adjusted net income cliff per parent.

    • High Income Child Benefit Charge (HICBC)

      Child Benefit clawback for higher earner with adjusted net income £60,000-£80,000 (1% per £200 over £60,000; full clawback at £80,000). Threshold raised from £50,000 in April 2024.

    • Lump Sum Allowance (LSA)

      £268,275 lifetime tax-free cash cap from all pensions. Replaced LTA from 6 April 2024. Excess taxed as income at marginal rate (not LTA-style charge). Transitional reduction for pre-April 2024 LTA use.

    • Lump Sum and Death Benefit Allowance (LSDBA)

      £1,073,100 lifetime cap on tax-free lump sums in life + certain death benefits pre-75. Companion to LSA. Replaced LTA's death-benefit role from 6 April 2024.

    • Personal Savings Allowance (PSA)

      £1,000 basic / £500 higher / £0 additional rate nil-band on savings interest. Plus £5,000 Starting Savings Rate for income <£17,570. Reduced PSA for higher earners reflects 2016 reform.

    • Dividend Allowance

      £500 nil-band on dividend income (down from £1,000 April 2023, £2,000 April 2018, £5,000 April 2016). Dividends above allowance: 8.75% basic / 33.75% higher / 39.35% additional rate.

    • CGT Annual Exempt Amount (AEA)

      £3,000 tax-free CGT band 2025/26 (reduced from £12,300 in April 2020 + £6,000 April 2023). Per individual per year. Joint owners each get own AEA against their share of gain.

    • Gift Aid

      Charity claims 25p per £1 donated; higher-rate / additional-rate donors claim back 20p / 25p personally via SA. Donations extend basic-rate band, useful for HICBC / PA-taper planning.

    • Personal Allowance + UK Income Tax Bands

      £12,570 Personal Allowance + 20% / 40% / 45% rate bands + £100k PA-taper to nil at £125,140. Plus Scottish income tax distinction + NI band cross-reference.

    • Inheritance Tax + April 2026 BR/APR Reform

      £325k NRB (frozen to 2031) + £175k RNRB + spouse exemption + 40%/36% rates. April 2026 BR/APR combined £2.5m cap (was unlimited 100%). AIM shares flat 50% from April 2026. April 2027 pensions in IHT estate.

    Employer-side benefit reliefs + salary sacrifice

    Reliefs that Ltd Co directors can use to extract value from the company efficiently, OR that any employer can offer employees. Includes trivial benefits, salary sacrifice for EV, Cycle to Work, workplace pension contributions.

    • Trivial Benefits

      £50 per occasion / £300 director annual cap; tax-free + NI-free + no P11D reporting under ITEPA 2003 s.323A.

    • Approved Mileage Allowance Payments (AMAP)

      55p/mile first 10,000 miles (from 6 April 2026; was 45p) + 25p above; tax-free + NI-free for employees + directors using own vehicle for business travel.

    • Workplace Pension Contributions (Employer Side)

      CT-deductible employer pension contributions for directors + employees. Zero employer NI (15%), zero employee NI, no PA-taper impact. AA £60,000 + Carry Forward. Highest-value extraction route for owner-directors.

    • EV Salary Sacrifice

      Pure-EV BIK 3% (2025/26) rising to 7% by 2028/29. OpRA-exempt for cars ≤75g/km CO₂. Net savings £200-£400/month basic rate; more for higher rate. Petrol/diesel above 75g/km lost OpRA exemption.

    • Cycle to Work Scheme

      Government-backed salary sacrifice for cycles + safety equipment under ITEPA 2003 s.244. OpRA-exempt by statute. £1,000 cap lifted 2019. Combined 28% / 42% / 47% employee tax + NI saving.

    • Workplace Nursery Exemption

      Full tax + NI exemption on workplace nursery cost (ITEPA 2003 ss.318-318C) IF strict conditions met. Employer must accept material financial responsibility + genuine management involvement. HMRC July 2024 warning targets third-party-marketed schemes.

    • Mobile Phone Exemption

      One handset / SIM per employee tax-free under ITEPA 2003 s.319. Contract in employer's name. Smartphones qualify; tablets do not. Salary sacrifice (OpRA) fails the exemption.

    • Relevant Life Policy + Group Income Protection (PHI) (RLP / GIP)

      Life + sickness cover via Ltd Co. RLP (ITEPA s.307): CT-deductible, no BIK, IHT-free payouts via discretionary trust. GIP: CT-deductible premiums; payouts taxed as PAYE income. Salary-sacrifice GIP double-tax risk from January 2024.

    • Travel & Subsistence Allowances

      HMRC benchmark scale rates (no receipts needed from April 2019): £5 / £10 / £25 by absence duration. Director permanent-workplace trap means home-based directors often can't claim ordinary commuting.

    • Annual Events Exemption

      £150/head cliff for annual staff events (Christmas party, summer BBQ, virtual quiz). Above £150 by £1 = entire amount taxable. Calculated on attendees. Sole director + employee-spouse can claim.

    • Long-Service Awards

      Non-cash awards only. 20+ years continuous service minimum. £50/year of service cap (e.g. 20 yrs = £1,000). No previous award within 10 years. Modest but useful for long-tenure directors.

    Frequently asked questions

    What happens if I miss the Self Assessment deadline?+
    The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.
    Do I need an accountant or can I file Self Assessment myself?+
    Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.
    How do payments on account work?+
    When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.
    Can I claim the same expense under multiple reliefs at once?+
    Generally no, reliefs are usually mutually exclusive on the same expenditure. AIA + Full Expensing can't both apply to the same asset. Trading Allowance + actual expenses can't both apply to the same trade. The exception is when reliefs operate on different dimensions: for example, a Ltd Co can claim AIA on plant + machinery (asset relief) AND R&D Tax Credits on the labour cost of using that plant for R&D activity (cost relief), different relief mechanisms attaching to different aspects of the same project. Always check whether reliefs are alternative (choose one) or complementary (claim both) on each specific scenario.
    Do I need an accountant to claim these reliefs or can I claim them myself?+
    Most reliefs are claimable directly on Self Assessment or CT600 without accountant involvement, Trading Allowance, AIA, Marriage Allowance, Trivial Benefits, basic pension contribution relief all fit within standard return forms. Complex reliefs (R&D Tax Credits, Patent Box, Creative Industry Reliefs, BADR exit-timing under anti-forestalling rules) typically pay for the accountant's fees several times over because the claim mechanics are technical AND the audit-defence requirements are exacting. Rule of thumb: if a relief has a specific HMRC scheme name (e.g. R&D, BADR, EIS) it's worth professional advice; if it's a standard allowance built into the return forms it's straightforward to claim yourself.
    How do tax reliefs interact with HMRC's Connect system?+
    HMRC's Connect system cross-references third-party data (banks, platforms, Companies House, Land Registry, employer payroll, DAC7 platform reports) against Self Assessment + CT600 filings. Most relief claims don't trigger Connect alerts because they're declared on the return + match the underlying data. Triggers come from inconsistencies: claiming Trading Allowance full relief when platform data shows above-£1,000 income; claiming BADR without the underlying share structure or 24-month qualifying period; claiming R&D Tax Credits without the accompanying payroll cost data. The defensive pattern is documentation: keep the evidence supporting each relief claim for 6 years (HMRC's standard enquiry window) and 20 years for deliberate-behaviour cases.
    Will any of these reliefs be abolished or reduced soon?+
    Tax relief landscape is under continuous reform pressure. Known scheduled changes (as at 2025/26): BADR rate rises from 14% to 18% from April 2026; Investors' Relief tracks BADR on the same schedule; FHL regime abolished from 6 April 2025; AMAP mileage rate rises to 55p/25p from 6 April 2026; R&D Merged Scheme replaced the SME-RDEC split from accounting periods beginning on/after 1 April 2024. Speculation (not yet enacted): Self Assessment registration threshold may rise to £3,000 within parliament. The TaxKiln rate-sweep at lastReviewed dates on each page reflects the position at publication; check gov.uk for current-day rates before acting on any relief claim near a threshold.

    Last reviewed: