Recently we published a post on allowable self-employed business expenses, an article that’s of particular use if you’re recently self-employed, as understanding the differences between allowable and non-allowable self-employed expenses can cause some frustration.
This week we’re looking at simplified expenses; a way of calculating certain business expenses using flat rates. You can apply simplified expenses if you’re a sole trader or you’re in a business partnership without any companies as partners.
Flat rates can be used for calculating three areas of your business expenses: vehicle costs, the cost of working from home, and the cost of living in your business premises.
Rather than working out the exact cost of purchasing and running your car, van, or motorcycle (by adding up the cost of purchase, vehicle insurance, petrol, and repairs), simplified vehicle expenses allow you to claim a flat rate for the mileage of your vehicle.
Cars, vans, and other goods vehicles can claim £0.45 a mile for the first 10,000 miles per year, followed by £0.25 for any mile thereafter. Motorcycles can claim £0.24 a mile.
Only vehicles that you’ve not previously claimed capital allowances for are eligible for simplified expenses, and once you start using the flat rate for any particular vehicle you must continue using it for that vehicle while it’s used within your business. You can, however, choose to claim standard expenses and capital allowances on certain business vehicles, while using the flat rate for others.
Other travel expenses (such as bus and train tickets) can be claimed for in the usual way, as described in the previous article.
Working From Home Expenses
If you work from home, working out your expenses based on the proportion of your home you use for work can be incredibly frustrating. When you opt to calculate your allowable working from home expenses using a flat rate the only number you need to add up is the number of hours you work from home each month.
If you work from home for 25 to 50 hours a month, you’ll receive a flat rate of £10.00 per month. If you work between 51 and 100 hours you’ll receive £18.00, and if you work 101 hours or more you’ll receive £26.00.
For example, if you work from home for 120 hours a month for nine months, then just 30 hours a month for three months, you should claim for £264.00 (£26.00 x 9 = £234.00 + £10.00 x 3 = £30.00).
Living in Your Business Premises Expenses
If you live in your business premises (for example, you run a bed and breakfast), using simplified expenses spares you the headache of having to calculate what parts of your premises are used for business vs. private use.
Firstly, you should calculate the total expenses for your entire premises as a whole. Then you have to use the predefined flat rates to minus an amount based on your personal use of the premises. In the bed and breakfast example you’ll have to subtract £350.00 from your monthly expenses to count as your own, personal use. If two people live there you subtract £500.00, and if three or more people live there you subtract £650.00.
If the overall expenses of your bed and breakfast are £25,000 over a particular business year, and you and your husband or wife live in these premises, you’ll have to subtract the flat rate of £500.00 per month for twelve months (£6,000) from this figure, meaning you can now claim £19,000 for your business premises expenses.
Experienced Accounting Professionals
If you’re eligible for simplified expenses click here to see if you’d save money by switching to these flat rates, or to speak with a professional to discuss whether simplified expenses are right for you, contact us today on 020 7129 1199 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.