As a self-employed person, calculating your profit can be confusing and more importantly time-consuming. To make it easier HMRC have created a way to simplify your expenses. It uses flat rates to work out certain business costs.
If you’re a sole trader of a business partnership without a company as a partner you can use this method to calculate costs for the following.
COST OF USING YOUR VEHICLE
Use a flat rate of pence per mile instead of calculating all of the costs of running your vehicle separately. Each mile must be used for business purposes only.
You can claim 45p for the first 10,000 miles and 25p for any mileage above. For example, if you drove 12,000 miles in a business year you can claim £5,000 as a business expense – 10,000 at 45p plus 2,000 at 25p.
Note: you can not use the mileage scheme if you’ve already claimed capital allowances on the vehicle You must remember to keep accurate records of the miles claimed during the year.
WORKING FROM HOME
When you work from home you incur costs for utilities. HMRC allow sole traders to claim an amount based on the number of hours worked at home per month.
- 25 to 50 hours – £10 per month
- 51 to 100 hours – £18 per month
- 101 and more hours – £26 per month
Note: other home expenditure such as internet and telephone can be claimed as well as the simplified method.
LIVING AT YOUR BUSINESS PREMISES
Some businesses use their business premises as their homes, such as a bed and breakfast (B&B). You can use a flat rate to deduct an amount from your total expenditure.
- 1 person – £350 per month
- 2 people – £500 per month
- 3 or more people – £650
If you run a B&B and your total expenses are £10,000. Your total allowable expenses are £5,800 (£10,000 – 4,200 (350*12)
Note: you don’t have to use the simplified expenses if you don’t want to but they’re an option if you want to reduce the time spent working out your expenses!
Get in touch today to find out if the simplified expenses are right for you.