Simplified expenses for sole traders
Simplified expenses are a way of working out the cost of your allowable expenses using a flat rate instead of working out your actual business costs. Choosing this option will save you time and avoid the stress and complications of working out every single business cost.
Simplified expenses can be used by sole traders, and partnerships but not limited companies and business partnerships that involve limited companies.
If you prefer to work out each and every business expense individually, you can simply choose that option instead.
What can simplified expenses be used to calculate?
Simplified expenses can be used to calculate how much you can claim for the following business expenses;
1. Working from home
If you work from home, you can offset your costs and you can work out how much you can claim using a simplified HMRC rate.
With the simplified expenses option you claim the relevant set monthly rate depending on how many hours you work from home.
- If you work from home 25 to 50 hours and you claim £10 per month
- 51 to 100 hours and you can claim £18 per month, and
- More than 101 hours entitles you to claim £26 per month.
This rate does not include internet or telephone costs – these are claimed separately.
Alternatively, you can apportion your home running costs by working out which rooms in your home you use for business, and the percentage of time you spend in them. This is clearly much more complicated and time-consuming, but can be worth it if you spend a lot of time working from home.
2. Vehicles
You can use simplified expenses to calculate vehicle expenses by using a flat rate for mileage. This includes car, motorcycle and van.
You do not have to use a flat rate for every vehicle in your business.
3. Living in your business premises
This is applicable to businesses such as B&Bs and guesthouses.
You work out the total expenses for the premises, then you then subtract the relevant flat rate. If one person is living in the business premises you can claim £350 per month, if two people are living there you can claim £500.
Other allowable business expenses
Other business expenses considered by HMRC to be allowable, but don’t fall into the simplified expenses scheme, so have no flat rate, include:
Employee costs
- Pension contributions
- Salaries
- Employer National Insurance contributions
- Benefits
- Bonuses
- Agency fees
Mobile phone costs
You can claim back some costs if you use a mobile phone for your business. Take a highlighter pen and mark your business use on the itemised bill. Then work out your monthly average cost. Make sure you keep this working out so that HMRC can see evidence if needed.
Business insurance
Business insurance is classified as an allowable expense. This includes professional indemnity insurance and public liability insurance.
Financial and legal expenses
The costs of professionals that you employ to help your business are considered to be allowable:
- Solicitors
- Accountants
- Surveyors
- Architects
Subscriptions and trade bodies
Membership to trade bodies and subscriptions to trade publications and professional memberships are also considered to be allowable expenses.
Office expenses
Computers and printers themselves can also be included, but may be classified as capital allowances. Office stationery, printing costs and postage are allowable expenses.
Clothing
You can’t claim clothing under your expenses unless it is a uniform or protective gear that is essential for work.
For example, a tree surgeon, or a logistics consultant who need to wear protective steel toe-capped boots when working counts as an allowable expense. If you are a self employed business consultant or journalist you can’t claim on your suit.
Stock and materials
Costs from producing your stock can be claimed along with the cost of stock and materials themselves can be claimed as an allowable expense.
Advertising
You can also claim on the cost of advertising