Can I claim stolen tools as a business expense?

Yes, replacing stolen tools is a business cost. On the cash basis, standard since 6 April 2024, you claim the new tools when you pay for them, and an insurance payout for the old ones usually counts as business income.

A van break-in is one of the worst days a tradesperson can have. The tax side is simpler than it looks: claim what you spend putting things right, and count any insurance money as business income. How it works depends on whether you use the cash basis or traditional accounting. GOV.UK says the cash basis is the standard way to record income and expenses if you are a sole trader.

Replacing the tools

GOV.UK says that for equipment you keep to use in your business, you claim:

• allowable expenses, if you use cash basis accounting
• capital allowances, if you use traditional accounting

So on the cash basis, new tools bought to replace stolen ones are an expense in the tax year you pay for them. Under traditional accounting, GOV.UK says that in most cases you can deduct the full cost of items you keep to use in your business using the annual investment allowance, explained in our guide to the annual investment allowance. Our tools and workwear guide covers buying tools in more detail.

The tools that were stolen

On the cash basis you claimed the old tools when you bought them. In our reading, there is nothing more to claim when they are stolen, because their cost has already reduced your profit. The tax return notes also say allowable expenses do not include losses on assets.

Under traditional accounting, HMRC's Capital Allowances Manual lists permanent loss of possession of an asset as a disposal event. You bring in a disposal value for the old tools, which for a permanent loss is any insurance money received and any other capital compensation. The disposal value is normally limited to what the tools cost you. In our reading, if there is no insurance money or other compensation, the disposal value is nil.

Insurance payouts

HMRC's manual says that while you use the cash basis, insurance money received for an asset whose cost you claimed is a receipt of the business. If you only claimed part of the cost, for example because of personal use, the receipt is reduced in proportion. The tax return notes say box 16, any other business income, is for trading income not included in your turnover. In our reading, an insurance payout for tools fits there.

Under traditional accounting, the payout is the disposal value for capital allowances described above and, in our reading, not a separate receipt.

Stolen materials, stock and cash

HMRC's manual says the loss of stock or cash in hand by burglary or theft is, in the ordinary course of events, an allowable deduction, to the extent it is not covered by insurance. It also says insurance recoveries for such losses are taxable. On the cash basis, in our reading, materials were already claimed when you paid for them, so replacements are simply claimed when you buy them. Our guide to claiming materials you buy for jobs explains how materials are claimed.

Damage to the van

HMRC's manual says the cost of making good damage or loss by repair may be an allowable deduction, and that insurance money recovered for a cost you deducted is taxable, up to the amount of the deduction. In our reading, a broken lock or window you pay to repair is claimed, and the insurer's payment for it counts as income. If the van itself is stolen, see our guide on what happens to tax when you sell your van.

A worked example

A self-employed plumber on the cash basis bought tools for £2,400 in 2024-25 and claimed them that year. In August 2026 the tools are stolen from the van. The insurer pays £1,500, and the plumber buys replacement tools for £2,100 in September 2026. The plumber pays £180 to repair the van's lock, and the insurer pays that back too.

The expenses come to £2,280 (£2,100 + £180) and the insurance income to £1,680 (£1,500 + £180). The plumber's profit for 2026-27 is £600 lower than it would have been (£2,280 − £1,680). This is an example only.

What this means for you

You do not lose out twice. The cost of putting things right reduces your profit, and any insurance money is counted as income against it. If you use the £1,000 trading allowance instead of claiming expenses, you cannot also claim the replacements: GOV.UK says the allowance is used instead of deducting expenses.

Steps after a theft

1. Report the theft to the police and keep the crime reference number with your business records.
2. Keep receipts for the replacement tools and repairs, and the insurer's letters showing what they paid.
3. On the cash basis, record the replacements as expenses when you pay for them.
4. Record any insurance payout as business income when you receive it, in our reading in box 16.
5. Under traditional accounting, claim capital allowances on the replacements and bring the insurance money in as the disposal value of the old tools.
6. If your turnover is below £90,000, the 2025-26 tax return notes let you put your total expenses in box 31 instead of a breakdown.

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