What are simplified expenses?
Simplified expenses are flat-rate allowances HMRC lets self-employed people use instead of calculating actual costs. You claim a fixed amount based on usage (hours worked from home, miles driven), without needing receipts for every expense.
Simplified expenses cover:
- Working from home costs (heating, lighting, broadband)
- Vehicle costs (fuel, insurance, servicing, depreciation)
- Living in your business premises (if you run a shop, pub, or B&B and live there)
They are available to sole traders and partnerships. Limited company directors cannot use simplified expenses (they claim expenses through the company or via their tax return using actual costs).
Working from home simplified expenses
If you work from home, you can claim a flat rate based on how many hours per month you work from home:
| Hours per month | Flat rate per month | Annual rate |
|---|---|---|
| 25 to 50 hours | £26 | £312 |
| 51 to 100 hours | £78 | £936 |
| 101 hours or more | £113 | £1,356 |
Example: You work from home 120 hours per month (about 30 hours per week). You claim £113 per month, or £1,356 per year. This covers heating, electricity, broadband, water, and council tax (business proportion).
You do not need to work the same hours every month. Calculate hours monthly, then use the appropriate rate for each month. If you work 60 hours in January (£78) and 110 hours in February (£113), claim £191 for those two months.
What counts as working from home?
Count hours when you:
- Do business admin, accounts, invoicing
- Make business phone calls
- Prepare for meetings or client work
- Write proposals, reports, or content
Do not count:
- Time spent at client sites or your business premises
- Lunch breaks, personal time
- Travel time
Vehicle costs simplified expenses
Claim a flat rate per business mile driven:
| Vehicle type | First 10,000 miles | Over 10,000 miles |
|---|---|---|
| Cars and vans | 45p per mile | 25p per mile |
| Motorcycles | 24p per mile | 24p per mile |
Example: You drive 12,000 business miles in your car. You claim:
- First 10,000 miles: 10,000 × 45p = £4,500
- Next 2,000 miles: 2,000 × 25p = £500
- Total: £5,000
This covers fuel, insurance, servicing, MOT, road tax, and depreciation. You do not claim these separately when using simplified expenses.
What counts as business mileage?
Business mileage includes:
- Travel to client sites
- Trips to suppliers or wholesalers
- Travel between two or more business locations
- Bank or post office visits for business
Personal mileage includes:
- Travel from home to your usual place of work (if you have one)
- Shopping, holidays, visiting friends
- Commuting to a fixed workplace
Keep a mileage log showing date, start and end location, purpose, and miles driven.
Can you claim capital allowances on vehicles if you use simplified expenses?
No. If you use the simplified mileage rate, you cannot claim:
- Capital allowances on the vehicle purchase
- Actual running costs (fuel, insurance, repairs)
- Depreciation or finance interest
The 45p/25p rate covers all vehicle costs. However, you can still claim:
- Parking fees and tolls (business journeys)
- Congestion charges and ferry crossings
Living in business premises
If you run a business from premises you also live in (shop with flat above, B&B, pub), simplified expenses let you claim a fixed adjustment for the personal use of business utilities (heating, lighting, water).
You claim business costs for the whole building (rent, utilities, council tax), then reduce the claim by a fixed amount to account for personal use:
| Number of people living there | Adjustment per month |
|---|---|
| 1 person | £350 |
| 2 people | £500 |
| 3 or more people | £650 |
Example: You run a B&B. Your annual utility bills are £6,000. You and your partner live there (2 people). Your adjustment is £500 per month (£6,000 per year). You claim £6,000 (business cost) minus £6,000 (personal adjustment) = £0. If your bills were £10,000, you'd claim £10,000 - £6,000 = £4,000.
Simplified expenses vs actual costs
You can choose simplified expenses or actual costs. You cannot mix methods for the same expense type in the same tax year.
Use simplified expenses if:
- Your actual costs are low
- You do not want to track receipts
- You do not have significant capital expenditure (new vehicle, expensive office equipment)
Use actual costs if:
- Your home office costs are high (dedicated room, high bills)
- You bought an expensive vehicle and want to claim capital allowances
- You have evidence of high running costs
Example (working from home):
- Simplified: Work 120 hours/month from home = £1,356/year
- Actual: Your mortgage interest, council tax, utilities, and broadband total £15,000. Your office is 10% of your home. Claim £1,500 (10% of £15,000).
Actual costs give a higher deduction in this case.
Example (vehicle):
- Simplified: Drive 8,000 business miles = £3,600
- Actual: Fuel £2,000, insurance £800, servicing £400, depreciation £3,000, total £6,200. Your business mileage is 60% of total. Claim £3,720 (60% of £6,200).
Actual costs give a higher deduction here too.
How to claim simplified expenses
Include simplified expenses in your Self Assessment tax return:
- Log in to your Self Assessment account
- Go to the "Self-employment (full)" section
- Under "Allowable business expenses", select the relevant category
- Enter the simplified expense amount (do not enter actual costs alongside)
For working from home, enter the amount under "Use of home as office". For vehicles, enter total mileage and the software calculates the simplified expense amount.
Can you switch between simplified and actual costs?
Yes, but there are restrictions:
Switching from actual to simplified (vehicles)
If you previously claimed capital allowances on a vehicle, switching to simplified expenses triggers a balancing adjustment. You must calculate the market value of the vehicle and add back any unclaimed capital allowances to your profit.
Switching from simplified to actual (vehicles)
You cannot claim capital allowances on a vehicle you previously used under simplified expenses. You can only claim actual running costs going forward.
Switching for working from home
No restrictions. You can switch freely each year depending on which method gives a higher deduction.
Do you need receipts for simplified expenses?
No. You do not need receipts for utilities, fuel, or other costs covered by the flat rate. You must keep:
- Working from home: A record of hours worked at home each month (diary, timesheet, calendar entries)
- Vehicle mileage: A mileage log (date, journey, miles, purpose)
- Living in business premises: Number of people living there and total utility bills
Keep these records for at least 5 years after the 31 January Self Assessment deadline. HMRC can query claims and ask to see your log.
Simplified expenses for partnerships
Partnerships can use simplified expenses. Each partner claims their share of the flat-rate expenses based on their profit-sharing ratio.
Example: A two-partner business uses simplified vehicle expenses. Partner A drives 10,000 business miles (£4,500). Partner B drives 5,000 miles (£2,250). The partnership claims £6,750 total, split 50:50 (£3,375 each if profit share is equal).