Quick answer
Simplified expenses let sole traders claim flat rates instead of tracking actual costs: 45p a mile for the first 10,000 business miles and 25p after, set monthly amounts for working from home, and fixed deductions for living at business premises.
Updated October 2026 · Figures based on 2025/26 rates
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Vehicle mileage
Cars and vans: 45p per mile for the first 10,000 miles each tax year and 25p after that. Motorcycles are 24p a mile. You cannot also claim fuel or running costs for the same vehicle.
Working from home
Flat rates depend on hours worked: £10 a month for 25 to 50 hours, £18 for 51 to 100 hours and £26 for 101 hours or more.
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Living at your business premises
Fixed monthly deductions apply for private use of premises such as a guesthouse, based on how many people live there.
When actual costs are better
Compare both methods. High-value or fuel-efficient vehicles may suit actual costs, and a large share of home bills may beat flat rates.
What simplified expenses cover
Simplified expenses are flat-rate allowances that let sole traders and partnerships claim certain costs without tracking every receipt. They are not available to limited companies. There are three main areas: vehicle mileage, working from home, and, for some people, living at business premises such as a guest house or care home. You choose the method for each area, and in the case of vehicles you should stay with the same method for that vehicle once chosen. Check current HMRC guidance for the exact conditions.
Mileage rates
For a car or van, you can claim 45p per mile for the first 10,000 business miles in the tax year and 25p per mile after that. Under the flat rate, the usual running costs such as fuel, insurance, repairs, servicing and vehicle tax are treated as covered, and you cannot also claim capital allowances for that vehicle. Only business journeys count, so ordinary commuting between home and a regular workplace does not qualify.
Home working flat rates
If you work at home for at least 25 hours a month, you can claim £10 a month for 25 to 50 hours, £18 for 51 to 100 hours and £26 for 101 hours or more, instead of apportioning household bills. Broadband and telephone costs are separate and can still be claimed on a business-use basis.
Worked example: flat rate against actual vehicle costs
This is an illustrative example. A self-employed electrician drives 14,000 business miles in the tax year. Actual costs for the van are fuel £2,600, insurance £700, servicing and repairs £900, and vehicle tax £300, a total of £4,500 before any capital costs. Business use is 80% of all mileage.
| Method | Working | Deduction |
|---|---|---|
| Flat rate | 10,000 x 45p = £4,500, plus 4,000 x 25p = £1,000 | £5,500 |
| Actual costs | £4,500 x 80% business use | £3,600 |
| Actual costs plus capital allowances | £3,600 running costs + £9,600 capital allowance (80% of a £12,000 van, within the £1,000,000 Annual Investment Allowance) | £13,200 in the year of purchase |
In an ordinary year, the flat rate gives the higher claim of £5,500 against £3,600 and needs far less record keeping. In the year of buying a new van, actual costs plus capital allowances could produce a much larger deduction. This is why the choice should be made when the vehicle is first used in the business, with the longer-term picture in mind. At basic rate plus 6% Class 4 NI, each extra £1,000 of deduction saves around £260.
Common mistakes with simplified expenses
- Counting commuting miles as business miles.
- Claiming flat-rate mileage and then adding fuel or insurance for the same vehicle.
- Switching between flat rate and actual costs for the same vehicle without checking the rules.
- Failing to keep a mileage log with date, purpose and distance.
- Claiming the home working flat rate and also a proportion of the same household bills.
- Using the 45p rate for a motorbike or bicycle: separate rates apply, so check current HMRC guidance.
Practical checklist
- Keep a mileage log: date, start, destination, purpose and miles.
- Record hours worked at home each month.
- Compare flat rate and actual costs before the first claim for a vehicle.
- Keep supporting records for five years after the 31 January filing deadline.
- Check whether your business uses cash basis or traditional accounting, since this affects capital allowances.
Read next: the mileage allowance for self-employed people, working from home expenses, cash basis against traditional accounting and how to calculate self-employed profit. See our Self Assessment for sole traders service for the full picture.
SATR is a trading style of Accotax. Our qualified UK accountants will test both methods and file your return online for a fixed fee from £199 + VAT.
This is general information, not personal tax advice.
Keeping simple records that stand up to a query
Flat rates reduce paperwork but do not remove it. HMRC can ask how you arrived at a claim, so the log is your evidence. A simple spreadsheet or mileage app is enough, provided each entry shows the date, where you went, why and how far. For home working, a calendar note of the hours worked each month is sufficient to support the band you claimed. If your business grows or your costs change, review the choice each year, because the method that suited a part-time start may not suit a full-time business. For a vehicle, remember the choice is generally fixed for as long as you use that vehicle in the business.
It is also worth remembering that simplified expenses only change how a cost is calculated, not whether it is allowable. Costs must still be incurred wholly and exclusively for the business, and private use must be excluded.
Frequently asked questions
Can I switch methods?
You choose each tax year, but you generally stay with the same method for a vehicle once chosen.
Do I still need records?
Yes. Keep a mileage log and hours worked to support the figures.
Can I use simplified expenses if I own a limited company?
No. Simplified expenses are for sole traders and partnerships. A company can pay mileage allowances to employees and directors under separate rules.
Do I still need receipts if I use flat rates?
You do not need receipts for the costs covered by the flat rate, but you must keep a mileage log, hours worked and records of other expenses for five years after the 31 January deadline.
Can I change method later?
For vehicles, the method generally applies for as long as you use that vehicle in the business, so choose carefully and check current HMRC guidance before switching.
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Conclusion
Simplified expenses save time by using HMRC flat rates for mileage, home working and living at business premises. Compare flat rates against actual costs for vehicles, keep a mileage log and hours record, and review the choice each year as your business changes.
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