Can you claim business taxes and licence fees as a freelancer? Business licences, permits, property taxes and business rates, tax on your own profits, sales tax, VAT and GST/HST, fines and where it goes under the IRS, HMRC and CRA rules (US, UK, Canada)

A city business licence, a trade permit, a vehicle registration, business rates on a workspace: running a freelance business can come with taxes and fees that aren't about your profits at all. Here's what the IRS, HMRC and the CRA say about claiming them, which taxes they leave out, how sales tax, VAT and GST/HST fit in, and where each country puts them.

General information, not tax, legal or accounting advice. Not written or reviewed by a lawyer or an accountant. The short answer, the side-by-side summary, the steps, the checklist, the wording to copy and all the other wording are ours; the official items come from the US, UK and Canadian government pages linked below. This page is about a self-employed person (a sole proprietor or sole trader) paying taxes, licences and permit fees for their business. It doesn't tell you which licences you need, what share of a mixed cost is business, or which line or box applies to you, and it doesn't cover getting a licence, taxes you pay as an employer, US states, Canadian provinces, Quebec, partnerships or companies, or other countries. Business rates in detail, memberships, vehicle costs, self-employment tax and VAT or GST/HST registration are in our separate guides. Rules change; check the current official pages before you claim. Official pages were read on 2026-10-21.

The short answer

1. US: the Schedule C instructions say, under Line 23, "You can deduct the following taxes and licenses on this line." The list includes yearly licenses and regulatory fees, and a second list says what not to deduct, starting with federal income tax; see sections one and two.
2. UK: HMRC's manual says "Business rates are therefore usually an allowable deduction in computing trading profits or property income." Your own tax and National Insurance, fines, and interest and penalties on tax are left out; see sections three and four.
3. Canada: the CRA says "You can deduct all annual licence fees and some business taxes you incur to run your business." Interest and penalties on your income tax are left out; see sections five and six.
4. Sales tax, VAT and GST/HST: each country treats tax on what you buy, and tax you collect from clients, differently; it depends on your registration and your accounting.

On this page

• 1. United States: the taxes and licenses line
• 2. United States: income tax, sales tax and fines
• 3. United Kingdom: business rates, licences and VAT
• 4. United Kingdom: your own tax, penalties and fines
• 5. Canada: the business taxes and licences line
• 6. Canada: what to leave out and GST/HST
• 7. Side by side
• 8. Step by step
• 9. Wording to copy
• 10. Checklist
• Free tools and kits
• Where the sources differ
• When to get advice
• Related
• Sources

1. United States: the taxes and licenses line

• What you can deduct: under Line 23, "You can deduct the following taxes and licenses on this line."
  • State and local sales taxes imposed on you as the seller of goods or services. If you collected this tax from the buyer, you must also include the amount collected in gross receipts or sales on line 1.
  • Real estate and personal property taxes on business assets.
  • Licenses and regulatory fees for your trade or business paid each year to state or local governments. But some licenses, such as liquor licenses, may have to be amortized. See the Instructions for Form 4562 for more information on amortization.
  The list goes on with taxes you pay as an employer, which this page doesn't cover.
• What you can't: "Do not deduct the following."
  • Federal income taxes, including your self-employment tax. However, you can deduct one-half of your self-employment tax on Schedule 1 (Form 1040), line 15 (but if filing Form 1040-NR, then only when covered under the U.S. social security system due to an international social security agreement).
  • Estate and gift taxes.
  • Taxes assessed to pay for improvements, such as paving and sewers.
  • Taxes on your home or personal use property.
  • State and local sales taxes on property purchased for use in your business. Instead, treat these taxes as part of the cost of the property.
  • State and local sales taxes imposed on the buyer that you were required to collect and pay over to state or local governments. These taxes are not included in gross receipts or sales nor are they a deductible expense. However, if the state or local government allowed you to retain any part of the sales tax you collected, you must include that amount as income on line 6.
  • Other taxes and license fees not related to your business.
  (IRS: Instructions for Schedule C (Form 1040) (2025), page date 30-Apr-2026).

The half of self-employment tax you claim elsewhere is explained in the self-employment tax section of our US estimated tax guide, and the other expense lines are in the expense categories of our Schedule C guide.

2. United States: income tax, sales tax and fines

• Taxes: "You can deduct on Schedule C (Form 1040) various federal, state, local, and foreign taxes directly attributable to your business."
• Income taxes: "You can deduct on Schedule C (Form 1040) a state tax on gross income (as distinguished from net income) directly attributable to your business. You can deduct other state and local income taxes on Schedule A (Form 1040) if you itemize your deductions. Do not deduct federal income tax."
• Personal property tax: "You can deduct on Schedule C (Form 1040) any tax imposed by a state or local government on personal property used in your business." "You can also deduct registration fees for the right to use property within a state or local area."
• Sales tax: "Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost."
• Expenses You Cannot Deduct: the list includes "Penalties and fines you pay to a governmental agency or instrumentality because you broke the law." (IRS: Publication 334 (2025), Tax Guide for Small Business, page date 30-Apr-2026).

Vehicle costs, including registration, are in our business travel guide and the mileage logs it links to; they aren't repeated here.

3. United Kingdom: business rates, licences and VAT

• The general rule: GOV.UK's helpsheet says "Not all expenses are allowed for tax." (GOV.UK: HS222 How to calculate your taxable profits (2026), page date 2026-04-07).
• Business rates: "Business rates are therefore usually an allowable deduction in computing trading profits or property income." "If, exceptionally, the premises, or those parts of the premises, chargeable to business rates are in fact used for non-business purposes, a proportion of the expenditure should be disallowed." (HMRC: BIM46835 - Specific deductions: rent and rates: business rates, page date 2016-04-01).
• Licences: the return notes name vehicle licence fees in the car, van and travel box; our business travel guide quotes that box. The pages we read don't name other licences; see "Where the sources differ".
• Value Added Tax (VAT): "If you’re VAT registered and using traditional accounting basis, details of your income and deductions would typically exclude VAT, unless VAT is not recoverable." "If you’re VAT registered and using cash basis, details of your income and expenses would typically include VAT." "If you choose to include VAT when completing your return, either:"
  • put your net VAT payment to us as an expense in box 30
  • put any net VAT repayment you received from us in box 16
  (HMRC: Self-employment (full) notes, Tax year 6 April 2025 to 5 April 2026 (2025–26), PDF).

Business rates sit in the rent, rates, power and insurance costs box with rent; our office rent guide quotes that box and HMRC's introduction to rent and rates. When you have to register for VAT is in our VAT registration guide, and the expense boxes on both versions of the pages are in our UK Self Assessment guide.

4. United Kingdom: your own tax, penalties and fines

• Your own National Insurance: the notes for the full self-employment pages say, under Box 19 Wages, salaries and other staff costs, "Do not include payments to yourself, your own pension payments or NICs." (HMRC: Self-employment (full) notes, Tax year 6 April 2025 to 5 April 2026 (2025–26), PDF).
• Tax on your profits: HMRC's manual quotes a court on a tax charged on traders: "He pays as an individual, like any other individual, tax on the sum which he has earned as a trader." It also quotes the rule that "an expense is not deductible if it falls on a trader in some other character other than that of trader." (HMRC: BIM37060 - Wholly and exclusively: how to establish purpose: purpose is a question of fact, page date 2024-10-02).
• Interest and penalties on tax: "No deduction is allowed in computing the taxable profits of a trade for any of the following:" The table that follows lists interest, penalties and surcharges on UK taxes, including Income Tax and VAT (HMRC: BIM42520 - Specific deductions: administration: interest, penalties and surcharges on UK taxes, page date 2019-03-07). Under Interest on late paid Income Tax and Capital Gains Tax: "Such interest is not deductible." (HMRC: BIM45740 - Specific deductions - interest: On late paid tax, NIC and contract settlements, page date 2021-10-06).
• Fines: the helpsheet's table of expenses lists "Fines for breaking the law." among the costs that aren't allowable (GOV.UK: HS222 How to calculate your taxable profits (2026), page date 2026-04-07).

5. Canada: the business taxes and licences line

• The line: "You can deduct all annual licence fees and some business taxes you incur to run your business."
• Licence fees: "Some examples of licence fees are:"
  • beverage licenses
  • business charges
  • trade licences
  • motor vehicle licenses
  • motor vehicle registration permits
• Business taxes: "Some examples of business taxes that may be deductible are:"
  • municipal taxes
  • land transfer taxes
  • gross receipt tax
  • health and education tax
  • hospital tax
  (CRA: Line 8760 – Business taxes, licenses, and memberships, page date 2026-08-31).

The same line covers trade association dues and subscriptions to publications; our training costs guide quotes that part, so it isn't repeated here. The other expense lines are in the expenses section of our guide for Canadian freelancers.

6. Canada: what to leave out and GST/HST

• The general rule: "Generally, you can deduct any reasonable current expense you incur to earn business income." "However, since you cannot deduct personal expenses, enter only the business part of expenses on the Form T2125, Statement of Business or Professional Activities." (CRA: Expenses section of Form T2125, page date 2026-08-31).
• What to leave out: "Do not include any of the following in your expenses:" The list includes
  • interest and penalties you paid on your income tax
  • most fines and penalties imposed, under the law of Canada or a province or a foreign country
• GST/HST: "When you claim the GST/HST you paid or owe on your business expenses as an input tax credit, reduce the amounts of the business expenses by the amount of the input tax credit." (CRA: Guide Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 3 – Expenses, page date 2026-04-16).

When you have to register for GST/HST and how to set money aside for it are in our GST/HST guide.

7. Side by side

Our summary of sections one to six, not official wording.

8. Step by step

Our order of steps, based on sections one to six — not an official checklist.

1. List every tax, licence and permit fee your business paid in the year, with the date and who you paid.
2. Keep the receipt, bill or renewal notice for each one.
3. Note what each one is for and whether it relates only to your business.
4. Leave out tax on your own profits, such as income tax and your own National Insurance or self-employment tax.
5. Leave out fines and penalties, including interest and penalties on late tax.
6. For sales tax, VAT or GST/HST, check whether it was part of a purchase, collected from your clients or claimed back, before you count it.
7. If a cost is partly personal, such as a vehicle you also use privately, work out the business part.
8. If a licence covers more than one year or was bought rather than renewed, check whether it has to be spread over time.
9. Put each cost on the line or box that fits it, and use the same approach each year.
10. Ask the tax office or an adviser if a tax or fee doesn’t clearly fit.

9. Wording to copy

Fill in everything in [brackets]. This is ours, not from any agency, and it's not tax, legal or accounting advice. It doesn't take the place of the receipts, notices and records your tax office may ask for.

A record for each tax or licence fee

Business taxes and licence fees record (my own records, not an official document)
Tax year: [year or period]
What was paid: [licence, permit, registration or tax]
Paid to: [government office, council or agency]
Period it covers: [dates]
Date paid and how: [date, method]
Amount paid: [amount]
Business or mixed: [business only / mixed, business part worked out as: method]
Tax on my own profits: [no / yes, left out]
Fine or penalty: [no / yes, left out]
Sales tax, VAT or GST/HST: [none / part of a purchase / collected from clients / claimed back]
Line or box used: [line or box]
Receipt or notice kept at: [where]

A request to a licensing office or council for a receipt

Hi [office or council name],

I paid [licence, permit or tax] on [date] under reference [reference]. Could you send a receipt or statement showing what it was for, the period it covers, the date paid and the amount?

I need it for my business records. Thanks,
[your name]

10. Checklist

Our summary of the official pages above, not an official checklist.

• A list of every tax, licence and permit fee paid in the year
• A receipt or notice for each one
• What each one was for
• Tax on your own profits left out
• Fines and penalties left out
• Sales tax, VAT or GST/HST handled the way your return and your registration need
• The business part worked out for anything also used privately
• Licences covering more than a year checked
• The line or box you used on your return
• Anything you’re not sure about, checked with the tax office or an adviser

Free tools and kits

• Our free expense tracking guide shows a simple way to keep business cost records.
• Our free expense and receipt log keeps the details for each bill.
• Our paid Freelance Billing Kit by Small Rows (US$12, one-time) can log each tax, licence or permit fee: the Expenses tab has a date, a category, a description, the amount paid, the sales tax in that amount and a "Deductible? (your call)" column, and the category drop-down lets you pick the taxes and licenses line from the US list, or the rent, rates, power and insurance costs box, the car, van and travel expenses box or the other business expenses box from the UK list, or Other from the kit's own list, or type your own. Each row counts in full in the year of its date. It doesn't decide which taxes or fees count, spread a licence over more than one year, decide which line or box it goes on or file anything.
• All three kits together: the All-Kits Bundle by Small Rows (US$24, one-time).

Where the sources differ

• Your own income tax in the UK and Canada: the US instructions and publication say outright not to deduct federal income tax. The UK notes leave your own National Insurance out of staff costs and HMRC's manual quotes a court on tax paid as an individual; the CRA's guide leaves out interest and penalties on your income tax. Neither the UK nor the Canadian pages we read say in so many words that the tax itself isn't an expense. Our reading is that tax on your own profits isn't a business expense in any of the three countries; check with the tax office or an adviser if you're unsure.
• Other licences in the UK: the return notes name vehicle licence fees, and the pages we read for this guide don't name other licences or permits. Our reading is that a licence your trade needs to run, paid from year to year, is a business cost that goes in the box that fits it or in other business expenses, but check with HMRC before you claim one you bought outright or that lasts several years.
• Licences that last more than a year: the US line names licenses paid each year and says some must be amortized, and the CRA line names annual licence fees. Our reading is that a yearly renewal is the simple case in both, and a licence that lasts several years or that you buy may have to be spread over time or treated as a capital cost; ask before you claim it all at once.
• Sales tax, VAT and GST/HST: the US says sales tax you pay on a purchase is part of its cost and tax imposed on buyers isn't income or an expense, the UK notes let a cash basis business include VAT and claim a net VAT payment, and the CRA says to reduce an expense by any input tax credit. Our reading is that what you can claim depends on who the tax is charged to, whether you're registered and how you keep your books, so match the official page for your situation.
• US state income taxes: the publication says a state tax on gross income goes on Schedule C and other state and local income taxes go on the itemized deductions schedule. Our reading is that it depends on the kind of tax your state charges; we didn't check state rules.
• Page dates and editions: the IRS publication and instructions are the editions for the latest tax year, and the CRA pages and GOV.UK's helpsheet were updated recently, but the HMRC manual pages carry older page dates. Our reading is that the rules above are current, but check the live pages and later editions before you file.
• What we did not check: which licences or permits you need and how to get them; taxes you pay as an employer; payroll; US state and local rules; Canadian provincial rules and Quebec; Council Tax and working from home (see the home office sections of our country guides); the cash basis line by line; VAT and GST/HST returns; partnerships and companies; other countries' rules.

When to get advice

• you bought a licence outright, or one that lasts several years;
• you pay property taxes or business rates on a place you also live in;
• you collect sales tax, VAT or GST/HST, or you're not sure whether you should;
• you've been charged a penalty, a fine or interest on late tax;
• you pay taxes as an employer;
• you're not sure which line or box a tax or fee belongs on, or you have a partner or a company.

Talk to an accountant or a tax adviser in your country. This page is general information only.

Related

• Coworking, office rent and business premises
• Training and course costs
• US quarterly estimated tax
• UK VAT registration threshold
• GST/HST and setting tax aside in Canada
• Freelance expense tracking
• Schedule C for US freelancers
• UK Self Assessment for freelancers
• Canadian self-employment statement for freelancers

Sources

• United States: IRS: Instructions for Schedule C (Form 1040) (2025), page date 30-Apr-2026 · IRS: Publication 334 (2025), Tax Guide for Small Business, page date 30-Apr-2026
• United Kingdom: HMRC: Self-employment (full) notes (Tax year 6 April 2025 to 5 April 2026 (2025–26), PDF) · GOV.UK: HS222 How to calculate your taxable profits (2026), page date 2026-04-07 · HMRC: BIM46835 - Specific deductions: rent and rates: business rates, page date 2016-04-01 · HMRC: BIM42520 - Specific deductions: administration: interest, penalties and surcharges on UK taxes, page date 2019-03-07 · HMRC: BIM45740 - Specific deductions - interest: On late paid tax, NIC and contract settlements, page date 2021-10-06 · HMRC: BIM37060 - Wholly and exclusively: how to establish purpose: purpose is a question of fact, page date 2024-10-02
• Canada: CRA: Line 8760 – Business taxes, licenses, and memberships, page date 2026-08-31 · CRA: Guide Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 3 – Expenses, page date 2026-04-16 · CRA: Expenses section of Form T2125, page date 2026-08-31

Checked 2026-10-21. Found a mistake? Tell us via Support.