Simplified Expenses for Sole Traders — Flat-Rate Mileage and Home Costs for UK Trades (2026)

What are simplified expenses?

Simplified expenses are a set of HMRC flat rates you can use instead of working out the actual costs of certain business expenses. Rather than keeping receipts and calculating the business proportion of every fuel fill-up or energy bill, you apply a fixed rate based on a simple measure — miles driven, or hours worked from home — and claim that figure as an allowable expense.

The trade-off is simplicity for precision. You save bookkeeping time, but the flat rate may be higher or lower than what you'd actually claim. The good news is you're free to compare: HMRC even publishes the figures so you can check which method leaves you better off before you commit.

One critical point up front: simplified expenses are only available to sole traders and business partnerships. They are not available to limited companies. If you trade through a limited company, the rules are different (more on that at the end), so make sure you know which structure applies to you before reading on.

The three areas simplified expenses cover

Simplified expenses apply to three specific things: vehicles, working from home, and living on your business premises. You can use the flat rate for one, two or all three — and you can mix and match with actual costs for everything else. Let's take them in turn.

1. Vehicles — the flat-rate mileage method

This is the one most trades use. Instead of totting up fuel, insurance, servicing, repairs, road tax and capital allowances for your van or car and then splitting them between business and private use, you simply claim a flat amount for every business mile you drive.

The flat mileage rates for 2026 are:

• Cars and vans: 45p per mile for the first 10,000 business miles in the tax year, then 25p per mile for every mile after that.
• Motorbikes: 24p per mile (no banded reduction — the same rate applies throughout).

So a sole trader electrician who drives 8,000 business miles in the year claims 8,000 × 45p = £3,600 as an allowable expense, full stop. No fuel receipts, no service invoices to apportion, no capital allowance calculation on the vehicle.

The flat rate is designed to cover all the running and capital costs of the vehicle — fuel, repairs, servicing, insurance and depreciation are all baked in. That means if you use the mileage method, you cannot also claim those actual costs or capital allowances for the same vehicle. You can, however, still separately claim genuinely incremental business costs that the mileage rate doesn't cover, such as parking and toll charges incurred on business journeys.

There is one important rule to remember: once you use the flat mileage rate for a particular vehicle, you must keep using it for that vehicle for as long as you own it. You can't flip to actual costs partway through. So choose your method carefully when you first start claiming for a van or car.

2. Working from home — flat rate by hours

Most tradespeople do at least some work from home: writing quotes, chasing invoices, ordering materials, doing the books, taking customer calls. That use of your home has a cost — heating, lighting, broadband — and you're entitled to claim a proportion of it.

The actual-cost method means working out the business proportion of your household bills (by rooms used and time spent), which is tedious. The simplified alternative is a flat monthly amount based on how many hours a month you work from home:

• 25 to 50 hours a month: a low flat monthly amount.
• 51 to 100 hours a month: a mid flat monthly amount.
• 101 hours or more a month: the highest flat monthly amount.

HMRC sets the exact pound figures for each band, and they can change — so always check the current figures on GOV.UK before you file. As a rough guide, the bands have historically run at around £10, £18 and £26 per month respectively, but treat those as illustrative and confirm the live numbers. Note the flat home-working rate covers heating, electricity and similar running costs but does not cover broadband or phone — you can still claim the business proportion of those separately.

3. Living on your business premises

The third flat rate is the mirror image of working from home: it applies when you live at your business premises — for example, a guest house owner or a publican living above the pub. Here you work out your total premises costs and then deduct a flat amount for your private (living) use, based on how many people live there.

This is rare for trades — very few plumbers, electricians or builders live on their business premises — so for most tradespeople it won't apply. It's worth knowing it exists, but if your workshop or yard isn't also your home, you can move on.

When do flat rates win — and when do actual costs win?

There's no universal answer. The right method depends on your vehicle and how many miles you drive. The general pattern looks like this:

• Flat-rate mileage usually wins when you run a cheap, economical, already-paid-for vehicle and cover a lot of business miles. If your van cost little, sips fuel and is well past its capital-allowance value, the 45p/25p rate often hands you more than the actual costs would.
• Actual costs may win when you run an expensive van — especially a new one bought on finance — with heavy fuel, insurance and servicing bills. A brand-new £35,000 van can generate substantial capital allowances and high running costs that, combined, beat the flat rate, particularly in the first couple of years of ownership.

The same logic applies to home working: if your home-office use is modest and your bills are average, the flat rate is quick and roughly fair. If you run a large dedicated workshop or office space at home with high energy use, an actual-cost apportionment might claim more.

You can mix and match

This is the part people miss. Simplified expenses are not all-or-nothing. You can use the flat mileage rate for your van while still claiming actual costs for everything else in your business — tools, materials, insurance, accountancy fees, phone, and so on. And you could use the flat rate for the van but use actual apportioned bills for your home office, or vice versa.

The only hard constraint is the one-vehicle rule: per vehicle, you pick a method and stick with it. Otherwise, choose whichever combination gives you the best result with the least hassle.

Worked example: a sole trader plumber, 12,000 business miles

Let's compare the two methods for a self-employed plumber who drives 12,000 business miles in the tax year.

Flat-rate mileage method:

• First 10,000 miles × 45p = £4,500
• Next 2,000 miles × 25p = £500
• Total claim: £5,000 — plus any business parking and tolls on top.

Actual-cost method (illustrative figures for a mid-range van used 80% for business):

• Fuel: £3,200
• Insurance: £900
• Servicing, MOT and repairs: £750
• Road tax: £290
• Subtotal running costs: £5,140 × 80% business use = £4,112
• Plus capital allowances on the van (depends on price and writing-down position)

On running costs alone, the actual method gives £4,112 versus the flat rate's £5,000 — so the flat rate is ahead here before you even factor in the bookkeeping you've saved. But add a few thousand pounds of capital allowances for a newly bought van and the actual method could pull in front. The takeaway: run the numbers both ways for your own van before you decide, because the answer genuinely depends on your vehicle.

Records you still need to keep

Simplified expenses cut your bookkeeping, but they don't remove the need for records. To support a flat-rate claim if HMRC ever asks, you must keep:

• A mileage log — the date, journey and business miles for each trip. "I think I did about 12,000" won't cut it; you need a contemporaneous record of your business journeys.
• Hours worked from home — a note of how many hours a month you worked at home, so you can justify which band you claimed.

This is where keeping a simple, ongoing record beats reconstructing everything at year end. Tools like Trade2Base let you log each job and the travel attached to it as you go, so your business mileage builds up automatically across the year instead of being a guess in January. Recording the trip when you do it is far more defensible than estimating months later.

Quick reference: 2026 flat rates

*Home-working bands are fixed pound amounts set by HMRC and can change between tax years. Always confirm the current figures on GOV.UK before filing your return.

The limited-company caveat

If you trade through a limited company, simplified expenses don't apply to you. Companies and their director-employees use a different (though similar-looking) system: Approved Mileage Allowance Payments (AMAP). Under AMAP, the company reimburses you tax-free at the same headline rates — 45p per mile for the first 10,000 miles, 25p thereafter, 24p for motorbikes — but the mechanism, the reporting and the way it interacts with company accounts are different from a sole trader's simplified-expenses claim. If you're a company director, speak to your accountant about AMAP rather than the rules in this article.

For everyone else — sole traders and partners running a trade business — simplified expenses are one of the easiest legitimate ways to cut both your tax bill and your admin time. Work out which method suits your van, keep a tidy mileage log, and check the home-working figures on GOV.UK each year.