If you are a sole trader or partnership, there are 2 ways that you can calculate business expenses for vehicles, working from home and living on your business premises.

You can use simplified expenses or calculate your expenses by working out their actual cost.

*Please note that simplified expenses cannot be used by limited companies or business partnerships involving a limited company*

What are simplified expenses?

Simplified expenses are a way of calculating some of your business expenses using flat rates instead of working out your actual business costs. You are not required to use simplified expenses, so only use it if you think that it would suit your business.

You can use flat rates for:

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

All other expenses must be calculated by working out the actual costs.

How do you use simplified expenses?

  1. Keep records for your business miles for vehicles, hours you work at home and how many people live at your business premises over the year.
  2. At the end of the tax year use the flat rates for vehicle mileage, working from home, and living at your business premises to work out your expenses.
  3. Include these amounts in the total for your expenses in your self-assessment tax return.

You can use the 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 to work out if simplified expenses suits your business.

What are the flat rates for vehicles?

Calculate your vehicle expenses using a flat rate for mileage instead of the actual costs of buying and running your vehicle, for example insurance, repairs, servicing, fuel.

You can use simplified expenses for:

  • cars (except cars designed for commercial use, for example black cabs or dual control driving instructors’ cars)
  • goods vehicles (for example, vans)
  • motorcycles
Vehicle Flat rate per mile with simplified expenses
Cars & goods vehicles first 10,000 miles 45p
Cars & 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

 

What are the flat rates for working from home?

Using flat rates for working from home means that you do not have to work out the proportion of personal and business use for your home, for example how much of your utility bills are for your business. However, the flat rates do not include telephone or internet expenses.

*please also note 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 40 hours from home for 10 months, but worked 60 hours during 2 particular months:

10 months x £10 = £100
2 months x £18 = £36

Total you can claim = £136

 

What are the flat rates for living in your business premises?

A small number of businesses use their business premises as their home, for example 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 and claim the rest as your business expenses.

 

Number of people Flat rate per month
1 £350
2 £500
3+ £650

 

Example

You and your partner run a bed and breakfast and live there the entire year. Your overall business premises expenses are £15,000.

Calculation:

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

You can claim:
£15,000 – £6,000 = £9,000

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

Example

You and your partner run a bed and breakfast and live there the entire year. Your child is at university for 9 months a year but comes back to live at home for 3 months in the summer.

Calculation:

Flat rate: 9 months x £500 per month = £4,500
Flat rate: 3 months x £650 per month = £1,950
Total = £6,450

You can claim:
£15,000 – £6,450 = £8,550

If you have any questions relating to the content in this article, please contact your usual Partner or Manager who will be happy to help.