--- title: "Pre-Trade Expenses 2026/27: A UK Guide to Claiming Start-Up Costs" description: Starting a new business inevitably involves spending money before you make your first sale. From marketing and professional fees to setting up a website, these initial outlays are essential. Fortunately, UK tax law allows you to claim tax relief on… url: "https://www.accountingfirms.co.uk/knowledge-bank/pre-trade-expenses/" updated: "2026-08-11" category: Self Employed Tax --- # Pre-Trade Expenses 2026/27: A UK Guide to Claiming Start-Up Costs Starting a new business inevitably involves spending money before you make your first sale. From marketing and professional fees to setting up a website, these initial outlays are essential. Fortunately, UK tax law allows you to claim tax relief on many of these "pre-trade expenses," reducing your tax liability in your first year of business. This guide explains the rules for claiming pre-trade expenses for the 2026/27 [tax year](https://www.accountingfirms.co.uk/blog/good-timing-can-save-a-lot-of-tax/), covering what qualifies, the time limits, and how to make a claim. ## What Are Pre-Trade Expenses? Pre-trade expenses are allowable business costs that you incur before your business officially starts trading. They are treated for tax purposes as if they were incurred on the very first day your business begins operating. For an expense to qualify for this relief, it must meet three key conditions: 1. **It must have been incurred within seven years of the date you start trading.**. This provides a generous window to claim costs associated with a long-term business set-up. 2. **It must be a revenue expense, not a capital expense.**. This means it relates to the day-to-day running costs of the business, rather than the purchase of long-lasting assets. 3. **It would have been an allowable deduction if you had incurred it after trading began.**. This means the expense must satisfy the fundamental "wholly and exclusively" test for business purposes. ## How the Relief Works The legislation for pre-trade expenses allows you to pool all qualifying costs and treat them as a single expense incurred on your first day of trading. This means the total amount is deducted from your income when calculating the profit or loss for your first period of account, which will feature in your first [Self Assessment](https://www.accountingfirms.co.uk/blog/balanced-workload-during-tax-season/) or Company Tax Return. ### **Example:** You plan to start trading as a self-employed consultant on 1 May 2026. - In October 2025, you spend £500 on market research. - In February 2026, you pay £1,000 for a website and initial online advertising. - In April 2026, you pay £300 for professional indemnity insurance. All these costs were incurred within seven years of your start date and would be allowable trading expenses. You can treat the total of £1,800 as an expense incurred on 1 May 2026, reducing the [taxable profit](https://www.accountingfirms.co.uk/blog/in-with-the-new-basis-period-rules/) of your new business in its first accounting period. ## What Can You Claim? The types of pre-trade expenses you can claim are varied, but they must be directly related to the trade you are setting up. | Allowable Pre-Trade Expenses (Revenue) | Generally Not Allowable as Pre-Trade Expenses | | --- | --- | | • Accountancy and legal fees | • **Capital Expenditure:** Costs of buying assets like vans, computers, or machinery. Relief for these is claimed through [Capital Allowances](https://www.accountingfirms.co.uk/blog/vat-electric-cars-and-hybrid-cars/) instead. | | • Advertising and marketing costs. | • **Trading Stock:** The cost of buying goods for resale is not a pre-trade expense, as it will be [accounted for as 'cost](https://www.accountingfirms.co.uk/blog/trade-offs-vs-opportunity-costs/) of sales' when you start trading. | | • Business insurance premiums | • **Expenditure Not Wholly & Exclusively for Business:** Costs with a dual personal and business purpose. | | • Staff costs (e.g., salaries paid to staff for pre-launch activities) | • **Expenses if Claiming the Trading Allowance:** If you are a sole trader and claim the £1,000 tax-free trading allowance, you cannot deduct any pre-trading expenses. | | • Rent for business premises | | | • Website design and hosting fees | | ## Capital Expenditure vs. Revenue Expenditure It is crucial to distinguish between revenue and capital expenses, as only revenue costs qualify for pre-trade expense relief. - **Revenue Expenses:** Costs related to the daily running of the business (e.g., rent, marketing, insurance). These are what the pre-trade expense rules cover. - **Capital Expenditure:** Money spent on buying or improving fixed assets that you will keep in the business for a long time (e.g., equipment, property, vehicles). While you cannot claim pre-trade expense relief for capital costs, you can still get [tax relief](https://www.accountingfirms.co.uk/blog/impact-of-tax-planning-on-business-growth/) through the Capital Allowances system. Special rules treat pre-trading capital expenditure as being incurred on the first day of trading, allowing you to claim allowances from day one. ## Key Considerations - **Who Can Claim?** Relief is only available to the person who incurred the expense and who then starts to carry on the trade. - **Record Keeping:** Keep meticulous records and receipts for all pre-trade expenditure. Clearly note what each expense was for and when it was incurred to support your claim. - **Creative Industries:** Specific rules apply to sectors like television and animation production, but they follow the same principle of treating pre-trading costs as incurred on day one of the separate trade.   *For further detailed guidance, you can refer to HMRC’s [Business Income Manual](https://www.accountingfirms.co.uk/blog/tax-deductions-for-businesses-is-the-remuneration-excessive/), specifically from BIM46350 onwards, which covers the rules for pre-trading expenditure. The primary legislation is found in section 57 of the Income Tax (Trading and Other Income) Act 2005 for unincorporated businesses and section 61 of the [Corporation Tax Act 2009 for companies](https://www.accountingfirms.co.uk/blog/tell-hmrc-that-your-company-is-dormant/).* ## References 1. [Business Income Manual - BIM46351 - Specific deductions: pre-trading expenditure: scope at 1](https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46351#:~:text=Business%20Income%20Manual%20BIM46351%20%2D,g&text=Business%20Income%20Manual%20BIM46351%20%2D,for%20a%20period&text=Specific%20deductions,g&text=Specific%20deductions,for%20a%20period) 2. [Business Income Manual - BIM46355 - Specific deductions: pre-trading expenditure: relief at 1](https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46355#:~:text=Business%20Income%20Manual%20BIM46355%20%2D,CFM32110%20and%20CFM51095%20Previous%20page&text=Business%20Income%20Manual%20BIM46355%20%2D,2020%2C%20see%20also&text=Specific%20deductions,CFM32110%20and%20CFM51095%20Previous%20page&text=Specific%20deductions,2020%2C%20see%20also)