SIMPLIFIED EXPENSES FOR THE SELF EMPLOYED

Simplified expenses can be used by sole traders or partnerships that have no companies as partners. They cannot be used by limited companies or business partnerships involving limited companies.

Simplified expenses are a way of calculating certain business expenses using flat rates rather than working out your actual business costs. You can choose whether or not you would like to use simplified expenses depending on whether they would suit your business.

Types of simplified expenses

Only certain expenses can be simplified using flat rates including working from home, business costs for vehicles, living in your business premises. You must calculate all other expenses by using the actual costs.

Vehicles

You can calculate your car, van or motorcycle expenses using a flat rate for mileage instead of using actual costs of buying and running your vehicle.

For example, if you have driven 12,000 business miles over the year:

10,000 x 45p = £4,500

2000 x 25p = £500

You would there fore claim £5,000 for business mileage.

You don’t have to use flat rates for all vehicles. Although if you use the fat rates for a vehicle you must continue to do so for as long as you use that vehicle for business purposes. You cannot claim simplified expenses for a vehicle you’ve already claimed capital allowance for, or you’ve included as an expense when you worked out your business profits.

Working from Home

Calculate your allowable expenses using a flat rate based on the hours you work from home each month. This means you don’t have to work out the proportion of personal and business use for your home. E.g.) how much of your utility bills are for business. The flat rate cannot include telephone or internet expenses. You can only use simplified expenses if you work for 25 hours or more a month from home.

Living at your busines premises

A minority of business use their business premises as their home including guest homes, Bed and breakfasts or small care homes. You can use simplified expenses instead of calculating the split between your expenses for private and business use of the premises. With Simplified expenses you calculate the total expenses for the premises. Then use the flat rates to subtract an amount for your personal use of the premises, based on the number of people living on the premises and claim the rest as business expenses.

For example, if you and your partner run a bed and breakfast and live there the entire year. Your overall business premises expenses are £15,000.

Calculation:

Flat rate: 12 months x £500 per month = £6,000

You can claim:
£15,000 – £6,000 = £9,000

You can use the simplified expenses checker to compare what you can claim. https://www.gov.uk/simplified-expenses-checker

If you require any help with your expenses, please call our experts on 0113 2864486.