Simplified expenses were introduced to make the process of working out how much tax relief you can claim on allowable business costs easier. We explain what simplified expenses are, what you can claim them for, and how to use them.

What are simplified expenses?

Simplified expenses are a way of working out how much tax relief you can claim for business expenses. Rather than calculating your actual costs in detail, using simplified expenses means you’ll work out your claim using flat rates which are set by HMRC. You might also see simplified expenses described as the flat rate method.

You don’t have to use simplified expenses to work out your business expenses. If it’s more beneficial for your business, you can claim tax relief on your actual costs instead.

Who can claim simplified expenses?

One of the benefits of operating as a sole trader or in a partnership is that you can claim simplified expenses. Limited companies (and business partnerships where one of the partners is a limited company) cannot use simplified expenses.

What can I use simplified expenses for?

You can use simplified expenses to work out your tax relief for:

• Using a vehicle in your business
• Costs if you work from home
• Living in the same premises as your business

Simplified expenses for mileage if you use a vehicle for the business

Under simplified expenses you can claim ‘mileage’ by multiplying the number of business miles the vehicle travels by the flat rate the vehicle is eligible for. The rate is designed to include all of the running costs of the vehicle, but it’s still useful to work out your actual costs to make sure you don’t miss out on any tax relief!

The flat rates you can claim are shown in the table below (and still apply even if you use an electric vehicle).
 

 
It’s worth noting that you can apply simplified expenses to one vehicle but use actual business costs for another. Just keep in mind that you can’t swap between systems mid-year.
 

Flat rate expenses for working from home

The flat rate that you can use to work out your expenses for working from home depends on how many hours you actually work from home.

Anything under 25 hours per month and you’re not able to use simplified expenses for your home working costs.

• 25 – 50 hours a month allows you to claim £10 per month
• 51 – 100 hours allows a claim of £18 per month
• Anything over 101 hours per month allows a monthly claim of £26

Limited companies can’t work out a claim using simplified expenses, so you’ll need to use the ‘actual cost’ method to calculate expenses if you operate a limited company from your home.

Claiming when you live at your business premises

Working out the split between personal expenses and business usage can be particularly difficult if you live at your business premises – for instance if you run a Bed & Breakfast from your home – so you are entitled to use simplified expenses instead.

The amount you are able to claim each month partly depends on how many people live on the premises. The flat rate is used to work out how much can be attributed to private use every month.

You’ll need to work out your total costs, then deduct the flat rate and claim whatever is left over as expenses.
 

 
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