Self-employed workers have the option of using simplified expenses in order to calculate their business expenses. Using simplified expenses utilises flat rates as opposed to working out actual business costs, therefore tends to make the process much easier.
Flat rates can currently be used for business costs for vehicles; working from home; and for living in your business premises. All other business expenses must be calculated by working out the actual costs.
Who Is Eligible to Use Simplified Expenses?
Simplified expenses can be used by sole traders and partnerships. Limited companies and business partnerships that involve limited companies are not eligible.
If you are eligible to use this method of calculating business expenses, it is merely an option. If you decide that it doesn’t suit your business, you can still work out your actual business costs instead of using flat rates. You may find it beneficial to 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.
Simplified expenses can be used to calculate car, van or motorcycle expenses using a flat rate for mileage.
Under the simplified expenses flat rate, cars and goods vehicles can claim a flat rate of 45p per mile for the first 10,000 miles. They can claim a further 25p per mile after 10,000 miles. Motorcycles can claim 24p per mile under simplified expenses.
If you use the flat rate on a vehicle, you must continue to use it for that vehicle for the remainder of the time it is used for business purposes. If you use more than one vehicle for business, you do not have to use the flat rate for all of these.
Working from Home
The flat rate you can claim for working from home depends on the number of hours you use your home for business each month. Many self-employed workers find this much easier than calculating the business portion of their home expenditure.
Simplified expenses can only be used if you work from home more than 25 hours per month. In a month, if you work from home 25 to 50 hours, you can claim £10 per month. If you work from home 51 to 100 hours per month, you can claim £18 per month. Working from home for more than 101 hours per month entitles you to claim the flat rate of £26 per month.
The flat rate for working from home does not include telephone and internet costs. The business proportion of these bills can be claimed separately.
Living in Business Premises
If you use your business premises as your home, you can use simplified expenses instead of working out the split between private and business costs. This is mostly applicable to businesses such as guesthouses and B&B’s.
Using the flat rate, you need to calculate the total expenses for the premises – you then subtract the relevant flat rate. If 1 person is living in the property, you can claim £350 per month. If 2 people live in the property, you can claim £500 per month. If 3 or more people live in the property, you can claim £650 per month.