Understanding what you can and cannot claim as a business expense is one of the trickier parts of being self-employed.
The rules are designed to ensure that only genuine business costs are deducted, but determining exact amounts can take time.
For certain costs, HMRC allows you to use fixed monthly or mileage rates instead of calculating actual expenditure.
This is the simplified expenses method.
It can save time and reduce the risk of errors on your tax return.
For a full list of what you can claim outside the flat-rate rules, see our guide to what expenses you can claim as a sole trader and HMRC’s overview of simplified expenses here.
Who can use simplified expenses?
- Sole traders
- Ordinary business partnerships, as long as none of the partners is a limited company
You cannot use simplified expenses if you operate through a limited company or a partnership that includes a corporate member. You can still calculate actual costs instead of using the flat rates if that gives a better result.
What simplified expenses cover
The flat-rate method applies to three specific areas. Other costs are claimed in the normal way and, where relevant, may fall under capital allowances.
1. Working from home
If you run your business from home, you can either apportion actual costs or use HMRC’s fixed monthly rate based on hours worked at home.
| Hours worked at home per month | Flat monthly rate |
|---|---|
| 25 to 50 hours | £10 |
| 51 to 100 hours | £18 |
| 101 hours or more | £26 |
The flat rate covers heat, light and power. It does not include telephone or internet, which must be calculated separately.
If you work from home extensively or have higher running costs, the whole apportionment route may produce a larger claim.
For methods and examples, see our home office expenses guide and HMRC’s manual on apportioning household costs BIM47800.
Edge case: If you split your time between home and another rented workspace, you can still use the flat rate for the hours worked at home. Track those hours separately and be consistent.
2. Vehicles
Instead of tracking fuel, servicing and insurance, you can use HMRC’s mileage rates.
- Cars and vans: 45p per mile for the first 10,000 miles in the tax year, then 25p per mile after that
- Motorcycles: 24p per mile
Once you choose the mileage method for a vehicle, you must stick with it for as long as you use that vehicle in the business.
You cannot switch back and forth for the same vehicle each tax year.
See our guide to the mileage allowance for sole traders for logs, what counts as business mileage and common pitfalls. Remember that ordinary commuting is private use and not allowable.
3. Living in your business premises
If you both run and live in the business premises, such as a B&B or guesthouse, you claim all running costs and then deduct a flat amount each month to reflect personal use.
| People living on the premises | Monthly deduction |
|---|---|
| 1 person | £350 |
| 2 people | £500 |
| 3 or more people | £650 |
When simplified expenses are worth it
The flat rates tend to suit part-time home working, modest business mileage, or situations where you want a straightforward adjustment for living on the premises.
If you work from home full-time in a larger property or if your actual vehicle costs are high, the actual cost method may result in a larger deduction.
It is sensible to run the numbers both ways in your first year, then pick the method that suits your pattern of costs.
Quick example for home working. Full apportionment of £90 per month for utilities, at 50 per cent business use, gives £45 per month. The HMRC flat rate for 101 or more hours is £26 per month. In this case, the full calculation gives the larger claim.
Switching between methods
For home working and living on premises, you can change between actual costs and simplified expenses at the start of a new tax year. For vehicles, the method you choose for a specific vehicle must be used for as long as you use that vehicle in the business.
Record keeping and Making Tax Digital
- Home working keep a simple monthly note of hours worked at home
- Vehicles keep a mileage log with date, journey and miles
- Living on premises note who lives there and for how long
From April 2026, most sole traders with income over £50,000 will need to comply with Making Tax Digital for Income Tax. Using the flat-rate method can simplify quarterly updates, but you still need basic records to support your claims.
How an accountant can help
An experienced accountant can model both methods for you, so you are not left to guess which one yields the better result.
They can set up simple templates for tracking home-working hours and mileage, verify that your mixed-use calculations are reasonable and consistent, and ensure that you do not miss claims that fall under capital allowances.
If you are weighing up whether you need one, read our guide do you need an accountant as a self-employed person.
Expenses not covered by simplified expenses
All other business costs are claimed in the usual way. Here are some useful guides:
- What expenses you can claim as a sole trader
- Subsistence expenses and when meals and hotels are allowable
- Clothing expenses and HMRC’s rules on uniforms and protective gear
- Capital allowances for equipment and vehicles
- Broadband and phone costs where most people have mixed personal and business use.
- Personal expenses and your tax return if you are unsure how to separate private use
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