Prepare your Tax ReturnIf you are a sole trader preparing to file your tax return did you know that some of your business expenses can be calculated using HMRC's rules for simplified expenses?  This includes motor vehicle costs and working from home which can often be time consuming to keep records of.

Simplified expenses for motor vehicle costs

Instead of including the individual running costs of your car such as fuel, insurance, servicing, etc, you can claim the expense based on the number of business miles you have traveled during the year.  This is easy to keep track of using an app on your phone.  The first 10,000 miles can be claimed at 45p per mile and anything over this is claimed at 25p per mile.  The calculated figure is then included on your tax return.

However if you want to use this method you cannot claim capital allowances on the purchase of your car.  Capital allowances are the proportion of the value of the car which you can claim as an expense each year.  These proportions are set out by HMRC here.

Simplified expenses for working from home

If you work from home you can use a flat rate provided by HMRC to work out how much you can claim rather than working out the proportion of each of your home expenses which relate to business.  HMRC flat rates are

  • £10 per month for 25 to 50 business hours worked at home per month
  • £18 per month for 51 to 100 business hours worked at home per month
  • £26 per month for 101 or more business hours worked at home per month

If you work less than 25 hours per month at home you are not able to use this method.

Simplified expenses if you live and work at your premises

If you live and work at your premises, for example you have a guest house or bed and breakfast, you can deduct a flat rate amount from your total expenses which is dependent on the number of people living at the premises.  Find out more about claiming simplified expenses if you live and work at your premises.

Of course it may be much more beneficial to claim actual expenses incurred and you can use the HMRC tool for simplified expenses to see which option can works best for you and saves you money.  Whatever method you choose to use you must keep appropriate accounting records to show your calculations or receipts if you claim individual expenses.