Simplified-expenses for sole traders: what you need to know
If you run a small unincorporated business, you may be able to use simplified-expenses when preparing your tax return using the cash basis.
The rule change that introduced allows HMRC to accept a flat rate or standard deduction for certain costs rather than requiring you to track every penny of actual expense.
In this article we explain when they can be used, how they work, what the current rates are, and how to decide whether they suit your business.
What are simplified-expenses and how do they relate to the cash basis?
When a sole trader opts for the cash basis for calculating taxable profits, income and expenditure are recognised when cash is received or paid out rather than on accrual.
The simplified-expenses regime complements the cash basis by offering a more straightforward method for certain types of costs.
Instead of recording actual costs in full detail, you can use HMRC’s flat rates for specific categories of expenses.
This reduces overall administrative burdens, but it may or may not be financially advantageous depending on your circumstances.
The method typically applies to three categories:
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Business use of home
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Use of business premises for both business and personal purposes
You must still maintain adequate records (e.g. business miles, hours worked at home) to support your claim.
Vehicle mileage
One common use of is the flat rate mileage allowance.
These rates are intended to cover all vehicle running costs (fuel, servicing, insurance, repairs, etc.).
As of the latest HMRC guidance:
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First 10,000 business miles in a tax year: 45p per mile
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Each additional business mile beyond 10,000: 25p per mile
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Motorcycles (business use): 24p per mile
Once you adopt these simplified-expenses rates for a vehicle in your business, you must continue using them for that vehicle for as long as it remains in your business.
You cannot mix actual costs and simplified rates for the same vehicle in the same year.
Other travel costs—such as train tickets, parking, tolls—are not covered by the mileage rates and can still be claimed separately (on actual cost basis) in addition to simplified-expenses mileage.
Note: If instead you choose to claim capital allowances for a car, you cannot also use simplified-expenses for that same vehicle.
Home business use
Another key area to which you can apply is the use of your home for business.
Rather than apportioning actual bills (heating, electricity, insurance, etc.), you may apply a flat monthly deduction based on how many hours per month you work from home.
The current HMRC rates (per month) are:
| Hours worked from home per month | Flat monthly deduction |
|---|---|
| 25 to 50 hours | £10 |
| 51 to 100 hours | £18 |
| 101+ hours | £26 |
You must count only the hours spent wholly and exclusively for trade purposes—or by an employee working from your home premises.
Mixed use of premises and simplified-expenses
If your business premises are partly used for personal purposes, simplified-expenses does not always fully cover the apportionment. In that case you may need to deduct the non-business use portion. That means:
Claim allowable expenses incurred minus non-business use.
To estimate non-business use, HMRC publishes “applicable amounts” per month, depending on how many occupants live in the property (other than in the course of trade):
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1 occupant: £350
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2 occupants: £500
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3 or more: £650
If you use simplified-expenses, these standard figures may apply to apportionment. If your actual non-business proportion is higher (or lower), you might want to compare with claiming actual costs instead of simplified-expenses.
Benefits and limitations of simplified-expenses
Using simplified-expenses can:
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Reduce administrative burden (less tracking of actual bills)
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Speed up your bookkeeping
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Provide certainty (you know your deduction in advance)
However, there are also has drawbacks:
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It may lead to a higher tax liability in cases where your actual costs exceed the flat-rate allowances
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You lose flexibility—once you commit to simplified-expenses for a category (e.g. a vehicle), you cannot switch mid-year
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It does not cover all costs (e.g. certain direct costs, or capital expenditures)
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It may not be worthwhile if your actual costs are high relative to the flat rates
Therefore, before adopting simplified-expenses, you should compare your likely deduction using the flat rates with what you would claim if tracking actual costs.
Recent / upcoming rule changes to simplified-expenses
As of the 2025/26 tax year, simplified-expenses rules remain largely unchanged. However, always check for updates in HMRC guidance each year. A few notes to watch out for:
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Flat rate amounts (mileage, home use) are periodically reviewed and may adjust
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If your business becomes large (i.e. no longer qualifies for the cash basis), you cannot use simplified-expenses
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If you switch accounting basis (from accrual to cash basis or vice versa), the eligibility for simplified-expenses may change
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HMRC tends to scrutinise flat-rate claims if they appear significantly out of line with industry norms
If your situation is borderline (e.g. high home running costs or high vehicle maintenance), it may be safer to keep detailed records and compare before deciding.
How Trueman Brown can help you with simplified-expenses and more
If you’d like assistance in determining whether simplified-expenses is right for your business, Trueman Brown can help. We can:
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Analyse your actual costs vs potential flat-rate simplified-expenses deductions
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Advise on whether adopting simplified-expenses is optimal
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Help with recordkeeping to support whichever method you choose
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Prepare your self-assessment return and ensure your claim is correct
To discuss your business, please get in touch with us:
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Email: mark@truemanbrown.co.uk
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Phone: 01708 397262
We’d be pleased to guide you through whether simplified-expenses makes sense for you.
FAQ: simplified-expenses for sole traders
Q: Who is eligible to use simplified-expenses?
A: You must be a sole trader (or in a partnership) using the cash basis for your business. If your business profits are above or expected to surpass certain thresholds, or if you don’t qualify for the cash basis, you may not be able to use simplified-expenses.
Q: Can I mix simplified-expenses with actual cost claims?
A: Not for the same item in the same tax year. If you start claiming simplified-expenses for, say, vehicle mileage, you must continue doing so for that vehicle. But for other categories (e.g. travel or materials) you can still claim actual costs.
Q: Are flat rates (for home use or mileage) guaranteed?
A: HMRC sets them annually, and they may change. You should check the current rates for the relevant tax year before you claim.
Q: What if my actual home costs are higher than the simplified-expenses flat rate?
A: In that case, the simplified approach might not benefit you. You could consider switching to claiming actual expenses (apportioned) if that yields a larger deduction. But then you’d need to maintain detailed records.
Q: What records do I need if I use simplified-expenses?
A: You still need to keep basic supporting records: business miles for vehicles, hours worked at home, number of household occupants, and general business invoices/receipts.
Q: Can I stop using simplified-expenses once I start?
A: You can choose (in a new accounting period) to revert to actual costs instead of simplified-expenses, but you must do so consistently for that category within a year once chosen.
Q: How do I decide which method is best?
A: You should project your actual costs vs what you would get under simplified-expenses, factor in the administrative burden, and possibly seek professional advice (such as from us at Trueman Brown) before committing.
If you have further questions about simplified-expenses, or want help assessing your situation, feel free to contact us at mark@truemanbrown.co.uk or call 01708 397262.
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