Every allowable expense for restaurants, pubs and cafes, written by chartered accountants.
Most operators miss several legitimate deductions every year because nobody told them what to claim. This guide covers all 10 expense categories, the AIA capital allowances rules, the most commonly overlooked claims, what HMRC will refuse, and the section references behind each one. Built for the 2025/26 tax year, last reviewed 10 May 2026.
Sole trader restaurants with combined gross income above £50,000 must now keep digital records in MTD-compatible software and submit four quarterly updates plus a final declaration each year. First Q1 deadline (covering 6 April to 5 July 2026) is 7 August 2026. Good expense capture is no longer optional, it is mandatory infrastructure.
Every tax deduction available to restaurant owners.
Ten expense categories covering the full range of allowable claims under the wholly-and-exclusively rule (section 34 ITTOIA 2005 for sole traders, section 54 CTA 2009 for companies). Tap any category to expand.
The five hospitality deductions almost everyone misses.
These are the deductions we find most frequently when reviewing new hospitality clients' historical accounts. If your current accountant has not flagged them, you may be overpaying tax.
Capital allowances on fit-out costs
Many operators spend tens of thousands on kitchen refits and restaurant fit-outs without claiming the Annual Investment Allowance properly. Up to £1 million of qualifying capital expenditure can be written off at 100% in the year of purchase. The qualifying-vs-non-qualifying split for integral features and fit-out elements is technical and frequently misapplied by generalist accountants.
Delivery platform commissions netted instead of recorded gross
Deliveroo, Uber Eats and Just Eat charge significant commissions, often 25% to 35% of the order value. Many operators net these off against income instead of recording them as separate deductible expenses. This understates both turnover and expenses, creates inaccuracies in your accounts, and (since DAC7 reporting started in 2024) creates a mismatch with what HMRC has on file. See our delivery platform accounting service for the proper treatment.
Music licensing fees (PPL + PRS)
PPL and PRS for Music licence fees are fully deductible business expenses, but they are among the most frequently overlooked deductions in hospitality. If you play background music, show live sport on TV, or host live entertainment, these fees are genuine business costs that reduce your taxable profit. Same for the TV Licence used for showing customers entertainment or sport.
Staff uniforms and protective clothing
Chef whites, branded uniforms, non-slip safety shoes, aprons, oven gloves and heat-resistant clothing are all deductible. Many owners absorb these costs personally without recording them as separate claimable expenses, particularly when they are purchased informally or paid for in cash. Get the receipts into the books and claim the deduction.
Pre-trading expenses for new restaurants
Under section 57 ITTOIA 2005 (and the equivalent for companies), costs incurred up to 7 years before your restaurant starts trading can be claimed as if they occurred on the first day of trading. This includes rent during fit-out, licensing fees, staff training, menu development, food safety registrations, marketing before opening and other qualifying expenditure. New operators almost always miss this and leave material deductions on the table in their first set of accounts.
How many of these are you missing?
Most hospitality operators we review have at least three unclaimed deductions sitting in their accounts. A free 15-minute tax savings review identifies exactly what you could be claiming and how much you could save.
Expenses you cannot claim.
Getting these wrong can trigger an HMRC enquiry. Five of the most common categories that look deductible but aren't.
Personal expenses with mixed business use
Any expense that has a personal element (using your restaurant for a private family event, mixed-use phone bills, household utilities for the residential portion of mixed premises) cannot be claimed in full. HMRC expects clear separation. The wholly-and-exclusively rule under s.34 ITTOIA 2005 means even partly-personal use disqualifies the whole expense unless it can be cleanly apportioned.
Client and business entertaining
Unlike many other countries, UK tax law does not allow a deduction for business entertaining. Taking clients to dinner, hosting launch events, providing hospitality to suppliers, all not deductible (s.45 ITTOIA 2005, s.1298 CTA 2009). Staff entertaining is treated separately and the £150 per head annual party limit can apply.
Everyday clothing
Clothing that could be worn outside work is not deductible, even if you only wear it at the restaurant. Only branded uniforms, protective clothing, and items that are clearly not suitable for everyday wear qualify. Black trousers and a white shirt for the front-of-house, even if you only wear them at work, are not deductible.
Fines and penalties
HMRC penalties, parking fines, late licensing fees, food hygiene improvement notices that include a fine, all not deductible. Interest on unpaid tax is also not deductible. The legal cost of defending a regulatory action may be deductible depending on the circumstances; the fine itself is not.
Capital expenditure as a revenue claim
Buying a new oven for £4,000 is capital expenditure, not a revenue expense. It cannot be deducted from profit in one go through the P&L, but it qualifies for capital allowances (typically 100% AIA up to £1m). Trying to expense capital items as repairs is one of the most common reasons HMRC challenges restaurant accounts.
Owner's drawings and personal salary
For sole traders and partners, drawings from the business are not a deductible expense. They are an allocation of profit, not a cost. Limited company directors paying themselves a salary through PAYE can deduct the salary as a Corporation Tax expense, but dividends are paid from post-tax profit and are not deductible.
Capital allowances for restaurant equipment.
Capital allowances are typically the single largest tax-saving opportunity for hospitality businesses. Understanding the rules properly is the difference between paying for a kitchen refit out of post-tax profit and paying for it out of pre-tax cash.
Annual Investment Allowance
The AIA allows you to claim 100% tax relief on qualifying capital expenditure up to £1 million per year. For most restaurants, this covers the full cost of kitchen equipment, EPOS systems, furniture, heating and cooling systems and fit-out costs in the year they are purchased.
AIA is available to both sole traders and limited companies. Qualifying items include ovens, fryers, refrigeration units, dishwashers, extraction systems, card terminals, tables, chairs, bar equipment and commercial lighting.
What does and doesn't qualify
Qualifies for AIA: kitchen equipment and appliances, EPOS and payment systems, restaurant furniture, heating, ventilation and air conditioning, commercial refrigeration, extraction and ventilation, signage and external lighting, security systems, and most plant and machinery elements of interior fit-out.
Does not qualify for AIA: the building structure itself, land, doors, walls, ceilings and floors. Integral features (electrical systems, hot and cold water systems, space and water heating, lifts) attract the special rate Writing Down Allowance of 6% rather than AIA in many cases, although they can still go into AIA up to the £1m cap. Each project needs individual assessment, which is what we do.
★ Plan major purchases carefully
Capital allowances are claimed in the accounting period the asset is brought into use, not when the contract is signed or the deposit is paid. If you have a £200,000 kitchen refit planned, the year it is fitted determines the year you get the relief. For a sole trader straddling tax years, this can be the difference between deducting against a £60,000-profit year vs an £85,000-profit year. We model the timing for major projects as part of the planning, not after the fact.
The full London restaurant accounting library.
This deductions guide sits alongside five other specialist resources. Tap any to dive deeper.
Restaurant tax deduction questions we answer every week.
Ten direct answers covering the main rules, the AIA cap, pre-trading expenses, the 4-year overpayment relief window and what records you need to keep.
Restaurant owners can claim a wide range of business expenses including food and drink purchased for resale, staff wages, uniforms and training, premises costs (rent, business rates, utilities), kitchen equipment through capital allowances (Annual Investment Allowance up to £1 million), technology and software subscriptions, marketing costs, professional fees, licences (premises, music, TV), transport costs, and finance charges. The fundamental rule under section 34 ITTOIA 2005 is that expenses must be incurred wholly and exclusively for business purposes. A specialist hospitality accountant can typically identify several additional deductions that generalist accountants miss.
Refurbishment costs are treated differently depending on whether they are repairs or improvements. Like-for-like repairs (replacing a broken oven with a similar one, repainting walls, fixing plumbing) are fully deductible as revenue expenses in the year they occur. Improvements and new installations are capital expenditure and qualify for capital allowances. Under the Annual Investment Allowance, you can claim 100% tax relief on qualifying capital expenditure up to £1 million in the year of purchase, covering kitchen equipment, EPOS systems, furniture, HVAC and certain fit-out costs. The capital vs revenue distinction is one of the most commonly mishandled areas in restaurant accounting.
Yes. Commissions charged by Deliveroo, Uber Eats, Just Eat and other delivery platforms are fully deductible business expenses. They should be recorded as a separate expense line rather than netted off against income. Netting off is a common (and expensive) mistake that can create inaccuracies in your accounts and may also lead to incorrect VAT treatment. Since 1 January 2024, the platforms also report your gross sales directly to HMRC under DAC7, so accurate gross-revenue recording with commissions as a separate expense is now compliance critical. See our delivery platform accounting service.
Staff meals can be deductible provided certain conditions are met. The meals must be available to all staff on a consistent basis under a formal policy (not just provided to selected individuals), the cost must be reasonable relative to your operation, and the provision must be primarily for business purposes such as keeping staff on-site during service. If these conditions are met, the cost of food used for staff meals is an allowable business expense and the benefit is also tax-free for the staff member under section 317 ITEPA 2003. HMRC may challenge staff meal deductions if the policy appears selective or costs seem excessive.
The Annual Investment Allowance (AIA) allows restaurants to claim 100% tax relief on qualifying capital expenditure up to £1 million per year. The £1 million cap is permanent. This covers kitchen equipment (ovens, fryers, refrigeration, dishwashers, extraction), EPOS systems and card terminals, restaurant furniture, heating and cooling systems, commercial lighting and other plant and machinery. AIA is available to both sole traders and limited companies. The building structure itself does not qualify, although certain integral features within the building may attract specific reliefs. Capital allowances claims should be planned around the timing of major purchases to maximise relief in the right tax year.
Yes. Under section 57 of the Income Tax (Trading and Other Income) Act 2005 (and the equivalent provision in CTA 2009 for companies), pre-trading expenses incurred up to 7 years before your restaurant starts trading can be claimed as if they were incurred on the first day of trading. This includes rent paid during the fit-out period, professional fees for licensing and planning applications, staff training and recruitment before opening, menu development and testing, marketing and launch costs and other qualifying expenditure. This is one of the most commonly missed deductions for new restaurant owners and the amounts involved can be substantial.
Yes. PPL and PRS music licence fees are fully deductible business expenses for any hospitality venue that plays music to customers. TV licensing fees for showing sport or entertainment to customers are also deductible. These are among the most frequently overlooked deductions in hospitality because many owners simply forget to include them or do not realise they qualify. If you are paying for music licences and not claiming them as a business expense, you are overpaying tax.
You can amend a Self Assessment tax return up to 12 months after the original 31 January filing deadline. So a 2024/25 return filed by 31 January 2026 can be amended until 31 January 2027. Beyond that, you can claim overpayment relief under Schedule 1AB Taxes Management Act 1970 for up to 4 years from the end of the relevant tax year. If your previous accountant consistently missed deductions, it is worth having a specialist review your last 4 years of returns. LOYALS offers a free tax savings review for new hospitality clients to identify any recoverable overpayments.
HMRC requires VAT-registered businesses to keep records of all income and expenses for at least 6 years. Sole traders must keep Self Assessment records for 5 years after the 31 January submission deadline. Records include purchase invoices and receipts, bank and credit card statements, payroll records, mileage logs for business travel, contracts and lease agreements, and supporting documentation for expense claims. With MTD ITSA Phase 1 LIVE since 6 April 2026, sole traders and landlords with combined gross income above £50,000 must maintain digital records in MTD-compatible software. Good record-keeping not only ensures you claim every deduction but also protects you if HMRC opens an enquiry.
Several common expense types are not allowable for tax purposes. Business entertaining (taking clients to dinner, hosting launch events) is not deductible under section 45 ITTOIA 2005 (sole traders) or section 1298 CTA 2009 (companies), even though staff entertaining within the £150 per head annual party limit is. Personal expenses with mixed use cannot be claimed in full. Everyday clothing that could be worn outside work is not deductible (only branded uniforms and protective clothing qualify). HMRC penalties, parking fines and other fines are not deductible. Capital expenditure is not deductible as a revenue expense but qualifies for capital allowances instead.
Stop leaving money on the table.
If your current accountant has not flagged the deductions on this page, it is worth a free 15-minute review. We look at your last return, identify missed deductions, and show you exactly what you could be claiming. No obligation, transparent pricing, payment plans available for any historical correction work. Mon to Sat 10am to 7pm with Sundays for emergencies.
Book my free tax savings review →Serving restaurants, takeaways, dark kitchens, cafes, pubs and bars across all 32 London boroughs and the City of London from our King's Cross office.