HMRC’s simplified expenses scheme lets self-employed individuals and partnerships use flat rates for certain costs instead of calculating actual expenses. This reduces record keeping and makes tax returns simpler — but it is not always the best financial choice. This guide covers all three simplified expense categories and when each makes sense.
The Three Simplified Expense Categories
1. Working from Home
Instead of calculating the business proportion of your household bills, claim a flat rate based on hours worked from home. Rates: £10/month (25-50 hours), £18/month (51-100 hours), £26/month (101+ hours). Maximum £312/year. See our detailed comparison of flat rate vs actual costs for working from home.
2. Business Mileage
Instead of tracking actual vehicle costs (fuel, insurance, repairs, depreciation), claim HMRC’s mileage rate: 45p/mile for the first 10,000 business miles, 25p/mile thereafter. You still need to keep a mileage log.
3. Living at Your Business Premises
If you live at your place of business (e.g., a B&B, pub, or care home), you can use flat rates based on occupancy instead of calculating the personal-use proportion of premises costs. Rates range from £350/month for one occupant to £500/month for three or more.
When to Use Simplified Expenses
- Use flat rates when: Your actual costs are low, you want minimal record keeping, or the flat rate gives a comparable deduction
- Use actual costs when: Your expenses are significant (especially home office and vehicle costs), you are comfortable keeping detailed records, and the actual calculation gives a substantially higher deduction
Key restriction: You cannot mix methods for the same expense category. For vehicles, once you choose simplified expenses for a particular vehicle, you must use it for the life of that vehicle in your business. For home office, once you choose simplified, you stay on simplified until you stop that business.
Who Cannot Use Simplified Expenses
- Limited companies and LLPs
- Businesses that have already claimed capital allowances on their vehicle
- Car leasing businesses
For the full list of deductible expenses, see self-employed expenses UK. For record keeping rules, see HMRC record keeping requirements.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified accountant or tax adviser for your specific situation.
