Sole trader simplified expenses: when they save you money

The short answer

Simplified expenses let you claim flat-rate deductions instead of tracking every receipt. For vehicles HMRC's rate is 45p per mile for the first 10,000 business miles, then 25p per mile above that. Working from home is £10 to £26 a month, and living on your business premises deducts £350 to £650. Once you choose the flat rate for a vehicle, you are locked in for that vehicle.

What are simplified expenses?

Simplified expenses are flat-rate deductions that HMRC lets sole traders and partnerships claim instead of calculating actual business costs. They cover three areas: vehicles, working from home, and living in your business premises. Instead of tracking every receipt and splitting costs between business and personal use, you claim a fixed amount per mile, per month, or per person.

Many sole traders like simplified expenses because they cut the admin burden. Keeping meticulous records of every cost is time-consuming and stressful, especially when you are balancing running a business. But it is important to know when these flat rates help and when calculating actual costs saves you more.

Vehicle expenses: flat rate or actual costs?

The simplified expenses rate for business mileage is:

• 45p per mile for the first 10,000 business miles in a year

• 25p per mile for each business mile above 10,000

This flat rate covers fuel, insurance, road tax, servicing, repairs and depreciation. You cannot claim any of those separately if you use it. You can still claim parking fees and congestion charges on top.

Which is better? It depends on your vehicle costs and mileage. A tradesperson driving a new van with high running costs, such as insurance, servicing and depreciation, will usually save more by claiming actual costs plus capital allowances. Someone driving an older, cheap-to-run van with fewer miles may find the flat rate gives a bigger deduction. Use the mileage calculator to compare both methods for your situation.

How to calculate actual vehicle costs

Calculating actual costs takes more record keeping but can yield real savings. Follow this process:

Many UK tradespeople also find it helpful to review allowable expenses for the self-employed at this stage.

1. Keep all receipts for fuel, servicing, repairs, insurance, tax and MOT

2. Maintain a mileage log that records the purpose, date and distance of each journey

3. Work out your business mileage. If you drive 12,000 miles and 9,000 are for work, your business proportion is 75%

4. Apply that percentage to all vehicle costs. If your total costs are £4,000, you can claim £3,000

5. Claim capital allowances where they apply, which can cut your taxable income in year one of a new van purchase

Working from home: what can I claim?

If you work from home for at least 25 hours a month on business administration such as invoicing, quoting, record keeping and scheduling, you can claim a simplified rate:

• 25 to 50 hours per month: £10

• 51 to 100 hours per month: £18

• 101+ hours per month: £26

These amounts are small but need no evidence of actual costs. The alternative is calculating the actual proportion of your household costs, including rent or mortgage interest, council tax, electricity, gas, broadband and water, that relates to business use. That is more work but usually gives a bigger deduction.

For most tradespeople who do admin in the evenings and at weekends, the flat rate gives an annual deduction of £120 to £312. Actual costs typically produce £500 to £1,500, depending on your home and how much space you use for business. If you have a dedicated office, calculating actual costs is often worth the effort.

Living on your business premises: what are the rates?

If you live above your shop or in a property that is mainly your business premises, you can claim a flat-rate deduction for private use instead of splitting every cost. The rate depends on the number of people who live there:

If you are sorting this alongside other compliance work, read claiming mileage as a tradesperson.

• 1 occupant: £350 per month

• 2 occupants: £500 per month

• 3 or more occupants: £650 per month

This deduction suits those who combine living and working space. It simplifies the process so you do not have to allocate costs between personal and business use.

Can you switch between simplified and actual costs?

Once you use simplified expenses for a vehicle, you must keep using them for that vehicle for as long as you use it in your business. You cannot switch to actual costs partway through. This matters because capital allowances, especially the Annual Investment Allowance on a new van, can give a much bigger deduction in year one than the mileage rate.

For working from home, you can switch between simplified and actual costs each tax year. There is no lock-in, so you can adapt as your circumstances change.

How do simplified expenses fit with Making Tax Digital?

Making Tax Digital for Income Tax arrives for self-employed sole traders with income over £50,000 from 6 April 2026, then over £30,000 from 2027 and over £20,000 from 2028. You will need digital records and quarterly summaries, so your expense method has to be trackable. Simplified expenses are easy to record, but you still need a mileage log and clear figures. Keep your records digital from the first invoice and MTD becomes simple (gov.uk MTD guidance).

Related: see working-from-home expenses for practical next steps.

Other obligations sit alongside expenses. You must register for VAT once taxable turnover goes over £90,000, and construction subcontractors face CIS deductions of 20% if registered or 30% if not (CIS guidance, VAT registration). Self-employed National Insurance is 6% Class 4 on profits over £12,570 up to £50,270, and 2% above that.

Who do simplified expenses suit best?

Simplified expenses work well if you:

• Drive an older, low-value vehicle with modest running costs

• Do relatively low business mileage, under 10,000 miles

• Want to spend minimal time on record keeping

• Use cash basis accounting, which pairs naturally with flat rates

They suit you less if you have a new or expensive vehicle, do high mileage, or want to claim the Annual Investment Allowance on a van purchase. If you drive a lot between jobs, like many electricians and other UK tradespeople, run the numbers for your own situation before you decide.

Whatever method you choose, good records keep your tax simple and your MTD filing smooth. InvoiceAdept invoicing logs every job you bill, the MTD-ready records keep your digital books up to date, and the CIS invoice feature shows deductions on each invoice.

FAQs

Can I use simplified expenses for my van and actual costs for working from home?

Yes. You can mix and match between the three categories. Use simplified for vehicles and actual for working from home, or any other combination that maximises your deduction.

Worth pairing this with our guide to self-employed mileage allowance.

Do I need to keep mileage records with simplified expenses?

Yes. Even with simplified expenses, you must keep a record of your business miles to support the claim. Log the date, destination, purpose and miles for each business journey.

Can a partnership use simplified expenses?

Yes, but vehicle expenses are claimed per partner, not per partnership. Each partner claims for their own vehicle. Working from home is also per partner, while living on business premises is claimed once for the partnership.

How do simplified expenses affect my tax return?

Simplified expenses are reported on your Self Assessment tax return. They reduce the need for detailed records, so annual filing is quicker and your tax bill can be lower.

Ready to make tax admin simpler? Start free in 30 seconds and see how InvoiceAdept keeps your records MTD-ready, with no credit card required.