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Simplified expenses for the self-employed

Simplified expenses are a way of calculating some of your business expenses using flat rates instead of working out your actual business costs.

You don’t have to use simplified expenses. You have the choice to decide if it suits your business.

Who can use simplified expenses

Simplified expenses can be used by:

  • Sole traders
  • Business partnerships that have no companies as partners

Simplified expenses can’t be used by limited companies or business partnerships involving a limited company.

 

Types of expenses

You can use flat rates for:

  • Business costs for vehicles
  • Working from home
  • Living in your business premises

You must calculate all other expenses by working out the actual costs.

Using simplified expenses

  • Record your business miles for vehicles; hours you work at home and how many people live at your business premises over the year.
  • At the end of the tax year use the flat rates for vehicles, working from home and living in your business premisesto work out your expenses.
  • Include these amounts in the total for your expenses in your Self Assessment tax return. You can use theHMRC simplified expenses checker to compare what you can claim using simplified expenses with what you can claim by working out the actual costs. This will help you work out if simplified expenses suit your business.

Vehicles 

You can calculate your car, van or motorcycle expenses using a flat rate for mileage instead of the actual costs of buying and running your vehicle, e.g. insurance, repairs, servicing, fuel.

Note: You cannot claim simplified expenses for a vehicle you’ve already claimed capital allowances for (capital allowances include purchased assets that you keep to use in your business), or you’ve included as an expense when you worked out your business profits.

 

Vehicle Tax Relief

Vehicle

Flat rate per mile with simplified expenses

Cars and goods vehicles first 10,000 miles

45p

Cars and goods vehicles after 10,000 miles

25p

Motorcycles

24p

 

Example

You’ve driven 11,500 business miles over the year.

Calculation:

10,000 miles x 45p = £4,500
1, 500 miles x 25p = £375
Total you can claim = £4,875

You don’t have to use flat rates for all your vehicles. Once you use the flat rates for a vehicle, you must continue to do so as long as you use that vehicle for your business.

All other travel expenses can be claimed. This includes, but is not limited to, train journeys and parking on top of your vehicle expenses.

Working from home

Calculate your allowable expenses using a flat rate based on the hours you work from home each month.

This means you don’t have to work out the proportion of personal and business use for your home, e.g. how much of your utility bills are for business.

The flat rate doesn’t include telephone or Internet expenses. You can claim the business element of these bills by working out the actual costs.

You can only use simplified expenses if you work for 25 hours or more a month from home.

Working from home Tax Relief

Hours of business use per month

Flat rate per month

25 to 50

£10

51 to 100

£18

101 and more

£26

 

Example

You worked 45 hours from home for 9 months, but worked 70 hours during 3 particular months:

10 months x £10 = £100 
2 months x £18 = £54

You can claim a Total = £154

Living at your business premises

A small number of businesses use their business premises as their home. For example a bed and breakfast/guesthouse, or a small care home.

You can use simplified expenses instead of working out the split between what you spend for your private and business use of the premises.

With simplified expenses you calculate the total expenses for the premises.

Then use the flat rates to subtract an amount for your personal use of the premises, based on the number of people living on the premises and claim the rest as your business expenses.

Business Premises Tax Relief

Number of people

Flat rate per month

1

£350

2

£500

3+

£650

Example 1

Lets say that you and your partner run a bed and breakfast and live there the entire year. Your overall business premises expenses are £16,000.

Calculation:

Flat rate: 12 months x £500 per month = £6,000

You can claim: 
£16,000 - £6,000 = £10,000

If someone else lives at your business premises for part of the year, you can deduct only the relevant flat rate for the months they lived there.

Example 2

In this example you and your partner run a bed and breakfast and live there the entire year. Your child studies at university for 9 months a year but comes back to live at home for summer for a total of 3 months.

Calculation:

Flat rate: 8 months x £500 per month = £4,000
Flat rate: 4 months x £650 per month = £2,600
Total = £6,600

You can claim: 
£16,000 - £6,600 = £9,400