Simplified Expenses Explained for the Self-Employed
HMRC simplified expenses let self-employed people use flat rates for vehicles, home working, and business premises. Compare rates vs actual costs here.
Key Actions
- Use HMRC's simplified expenses checker to compare flat rates with your actual costs
- Decide which categories to use simplified expenses for (vehicles, home, premises)
- Track your monthly working-from-home hours if using the home flat rate
- Keep a mileage log if using vehicle flat rates
- Review your choice at the start of each tax year to check it still works for you
Simplified expenses are flat-rate amounts set by HMRC that self-employed people can use instead of calculating actual business costs. They cover three categories — vehicles, working from home, and living at business premises — and are designed to make record keeping simpler by replacing detailed receipts and calculations with fixed rates.
This guide explains how simplified expenses work, the current flat rates for each category, and how to decide whether they give you a bigger or smaller deduction than claiming actual costs.
Who Can Use Simplified Expenses?
Simplified expenses are available to sole traders and certain business partnerships — but not limited companies. Here's the full eligibility breakdown:
- Sole traders (self-employed individuals)
- Business partnerships where all partners are individuals (no company partners)
You cannot use simplified expenses if you:
- Run a limited company
- Are in a partnership that includes a limited company
You don't have to use simplified expenses — they're optional. You can choose to use them for some categories and actual costs for others. For example, you might use mileage rates for your vehicle but calculate actual costs for working from home.
Simplified Expenses Categories: Vehicles, Home, and Premises
1. Vehicles: Flat Rate Mileage
Instead of tracking fuel, insurance, road tax, MOT, servicing, and repairs, you claim a flat rate per business mile driven.
| Vehicle type | First 10,000 miles | Over 10,000 miles |
|---|---|---|
| Cars and goods vehicles (vans) | 45p per mile | 25p per mile |
| Motorcycles | 24p per mile | 24p per mile |
The mileage rate covers all running costs. You cannot claim fuel, insurance, or repairs on top.
You can still claim separately:
- Parking fees for business trips
- Congestion charges and road tolls
Example: Sarah drives 8,000 business miles in the 2025/26 tax year.
- 8,000 × 45p = £3,600 claim
If her actual vehicle costs (fuel, insurance, tax, servicing) total £2,800 for the year and 70% of her driving is business use, her actual cost claim would be £1,960. In this case, simplified mileage gives Sarah an extra £1,640 deduction.
Key restriction: Once you use mileage rates for a vehicle, you cannot switch to actual costs for that same vehicle. And if you've previously claimed capital allowances on a vehicle, you cannot use simplified rates for it.
For a full comparison of both methods, see our vehicle and mileage claims guide.
2. Working From Home: Monthly Flat Rates
If you work from home for at least 25 hours per month, you can claim a flat monthly amount instead of calculating the business proportion of your household bills.
| Hours worked from home per month | Monthly amount |
|---|---|
| 25–50 hours | £10 |
| 51–100 hours | £18 |
| 101+ hours | £26 |
These rates cover household costs like heating, electricity, and water. They do not include telephone or internet costs — you claim the business proportion of these separately on top.
The rate can vary month to month. If you work 120 hours from home in January (£26) but only 30 hours in February (£10), you claim the appropriate rate for each month.
Example: In the 2025/26 tax year, James works from home full-time as a web developer — around 140 hours per month, 11 months of the year (he takes a month off).
- 11 months × £26 = £286 annual claim (plus business phone/internet costs claimed separately)
If his actual household bills total £1,800 for the year and his home office represents 20% of his home, his actual cost claim would be £360. In this case, actual costs give James a higher deduction.
Important: You need to work at least 25 hours from home in a month to claim anything for that month. Months with fewer than 25 hours get no flat rate claim.
For a detailed comparison of both methods, see our working from home expenses guide.
3. Living at Business Premises: Personal Use Deduction
If you live at your business premises — for example, above a shop, in a guesthouse, or in a bed and breakfast — you can use flat rates to account for the personal portion of your bills.
| Number of people living at the premises | Monthly flat rate |
|---|---|
| 1 person | £350 |
| 2 people | £500 |
| 3 or more people | £650 |
This works differently from the other two categories. Instead of claiming a flat rate as your expense, you deduct the flat rate from your total premises costs to arrive at the business portion.
Example: In the 2025/26 tax year, Tom runs a B&B and lives on the premises with his partner. His total annual premises costs (utilities, insurance, maintenance) are £18,000.
- Personal use deduction: 12 months × £500 = £6,000
- Business expense claim: £18,000 − £6,000 = £12,000
If someone lives at the premises for only part of the year, they only count for the months they're there.
Simplified vs Actual Costs: How to Choose
Simplified expenses use HMRC's fixed flat rates, while actual costs require you to calculate the real business proportion of each expense. The right method depends on your specific numbers. Here's a general guide:
| Category | Simplified tends to be better when... | Actual costs tend to be better when... |
|---|---|---|
| Vehicles | Low running costs, older vehicle, moderate mileage | Expensive vehicle, high running costs, low personal use |
| Working from home | You work fewer hours from home, low household bills | You have a dedicated office, high utility costs |
| Business premises | Low personal occupancy (1 person), high total costs | High personal occupancy (3+ people), lower total costs |
You can mix methods across categories. Using mileage rates for your vehicle doesn't stop you from claiming actual costs for working from home. Each category is independent.
You can change methods between tax years — except for vehicles. If you start using mileage rates for a specific vehicle, you're locked into that method for that vehicle for as long as you use it in your business.
HMRC provides a free simplified expenses checker tool that compares both methods based on your numbers. It takes a few minutes and covers all three categories.
Record Keeping for Simplified Expenses
Simplified expenses reduce your paperwork, but you still need to keep records:
| Category | What to record |
|---|---|
| Vehicles | A mileage log: date, destination, purpose, and miles for each business journey |
| Working from home | Hours worked from home each month |
| Business premises | Number of people living at the premises each month, plus total premises costs |
Under Making Tax Digital (from April 2026 for qualifying income over £50,000), these records need to be kept digitally in MTD-compatible software or a spreadsheet with bridging software.
For more on what records HMRC expects, see our record keeping guide.
How to Report Simplified Expenses on Your Tax Return
Simplified expenses go on the same Self Assessment form as other business expenses — there is no separate section for them. The SA103S (short self-employment pages) or SA103F (full pages) have boxes for total expenses.
If you use mileage rates, enter the calculated mileage amount (e.g., £5,000 for 12,000 miles) rather than individual fuel or insurance figures.
If you use the working-from-home flat rate, enter the annual total (e.g., £312 for 12 months at £26) plus any separate phone and internet claims.
Frequently Asked Questions
Can I use simplified expenses for some categories and actual costs for others?
Yes. You choose independently for each of the three categories. For example, you can use mileage rates for your vehicle, actual costs for working from home, and flat rates for business premises — all in the same tax year.
Do I have to use simplified expenses every year?
No. You can switch between simplified and actual costs each tax year for working from home and business premises. The exception is vehicles — once you start using mileage rates for a specific vehicle, you cannot switch to actual costs for that vehicle.
Are simplified expenses worth it?
It depends on your costs. For many self-employed people, mileage rates give a higher claim than actual vehicle costs, especially with older, cheaper-to-run vehicles. But the working-from-home flat rates (£10–£26 per month) are often lower than actual proportional costs, particularly if you have a dedicated office and high utility bills. Use HMRC's checker tool to compare before deciding.
Can I use simplified expenses with Making Tax Digital?
Yes. MTD changes how you submit your figures (quarterly digital updates instead of one annual return), but it doesn't change which expense methods are available. You can still use simplified expenses under MTD — you'll just need to keep your mileage log and hours record in digital format.
This guide is for informational purposes only and does not constitute tax, legal, or financial advice. Tax rules change frequently. Always verify current requirements on GOV.UK or consult a qualified accountant for your specific situation.
Official Sources
- Simplified expenses if you're self-employed - GOV.UK
- Simplified expenses: vehicles - GOV.UK
- Simplified expenses: working from home - GOV.UK
- Simplified expenses checker - GOV.UK