Simplified expenses for self employed individuals

If you are a sole trader or partnership there are now two options available on how to calculate business expenses for some costs.  These options are:

  • Simplified expenses which is a flat rate deduction
  •  Calculate your expenses by working out the actual costs

 

Types of expenses

The expenses eligible for use of flat rate deductions are:

  • business costs for vehicles
  • working from home
  • living in your business premises

 

Vehicles

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.

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 11,000 business miles over the year.

Calculation:

10,000 miles x 45p = £4,500
1,000 miles x 25p = £250
Total you can claim = £4,750

You don’t have to use flat rates for all your vehicles, but, 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.

The only exception to the use of flat rate deductions is that you can’t claim simplified expenses for a vehicle you’ve already claimed capital allowances for, or you’ve included as an expense when you worked out your business profits.

 

Working from home

Calculate your allowable expenses using a flat rate cost based on the hours you work from home each month.  Meaning, you don’t have to work out the proportion of personal and business use for your home, for example, what percentage of the utility bills are for business.

The flat rate doesn’t include telephone or internet expenses.  These can be claimed for the business proportion of these bills by working out the actual costs, on top of the flat rate deduction.

The key exception is that you can only use simplified expenses if you work for 25 hours or more a month from home.

 

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 30 hours from home for 9 months, but worked 55 hours during 3 particular months:

9 months x £10 = £90
3 months x £18 = £54

Total you can claim = £144

 

Living at your business premises

A small number of businesses use their business premises as their home, e.g. a guesthouse, bed and breakfast or 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.

 

Number of people

Flat rate per month

1 £350
2 £500
3+ £650