What are simplified expenses for the self-employed?

Simplified expenses are flat rates you can use instead of actual costs for three things: vehicles (55p a mile for the first 10,000 business miles in 2026-27), working from home, and living at your business premises.

Everything else is still claimed at what it really cost. The rules below follow GOV.UK and HMRC's Business Income Manual as checked on 16 October 2026.

The three flat rates for 2026-27

The 55p rate is new: before 6 April 2026 it was 45p. Parking, tolls and congestion charges for business trips are not covered by the mileage rate, so you claim those on top. The home rate leaves out phone and internet, so you claim the business share of those bills from the actual costs. HMRC's manual adds that the business share of fixed costs such as council tax, home insurance and mortgage interest can still be claimed on top, where a clear business share can be identified.

The business premises rate is for places used mainly for the business that you also live in. GOV.UK's examples are a guesthouse, a bed and breakfast and a small care home, so it rarely applies to trades. Mortgage interest, business rates and council tax are outside that flat rate, and the business share of those is claimed separately.

Who can use them

GOV.UK and HMRC's manual set the rules:

• Sole traders and partnerships with no company as a partner can use them. Limited companies cannot.
• There is no income limit.
• They are optional, and work with the cash basis or traditional accounting.
• If you take the £1,000 trading allowance, you cannot claim expenses at all, flat rate or otherwise.
• Cars designed for commercial use, such as black cabs and dual-control driving school cars, cannot use the mileage rate. Vans can.

The van lock-in

The vehicle rate comes with conditions that decide your choice for years:

1. You cannot use it for a vehicle you have already claimed capital allowances on, or deducted as an expense. Under the cash basis, a van's price is normally deducted as an expense when you buy it, so claiming that closes off the flat rate for that van.
2. Once you use the flat rate for a vehicle, you must keep using it for as long as that vehicle is in the business.
3. HMRC's manual says you can only change method, in either direction, when you replace the vehicle.

So the real decision is made in the first tax return that includes a new van.

A worked example: van-driving tiler

A self-employed tiler buys a used van for £9,000 at the start of the 2026-27 tax year and uses it 90% for business. It costs £4,200 a year to run in fuel, insurance, servicing, repairs and road tax. The tiler uses the cash basis and drives 8,000 business miles a year.

At 8,000 miles, actual costs give more, both up front and over 3 years. Change one thing: the same tiler drives 16,000 business miles. The flat rate becomes £7,000 a year (£5,500 for the first 10,000 miles, plus 6,000 × 25p), or £21,000 over 3 years, against the same £19,440 on actual costs. Now the flat rate comes out ahead.

The example assumes the 2026-27 rates stay the same each year, which is not certain, and leaves out selling the van. It is an illustration, not a recommendation: mileage and the van's price swing the answer, so use your own figures.

What this means for you

For most tradespeople, the van is the only simplified expense worth a real decision. Working from home is usually small (see the working from home guide), and living at business premises is unlikely to apply.

Keep the records the flat rates rely on: business miles, the hours you work at home each month, and, for premises, how many people live there. GOV.UK says that under Making Tax Digital (MTD), if you are sure you will use simplified expenses you do not need digital records of the actual costs they replace, and you make an adjustment before you finalise your tax for the year. How mileage works in MTD explains the timing. Everything else goes in as actual costs, covered in what expenses a tradesperson can claim.

Steps to decide on simplified expenses

1. List your vehicles and check whether you have already claimed the price of any of them. If you have, the flat rate is closed for that vehicle.
2. Start a business mileage log and a monthly log of hours worked at home.
3. For a new van, work out both methods for the first year and the years after, using your expected mileage.
4. Use GOV.UK's simplified expenses checker to compare, if you want a second view.
5. Note the method you chose for each vehicle and keep using it while that vehicle is in the business.
6. Add the flat-rate amounts to your expenses at the year end, and claim parking, tolls, phone and internet separately.

The free MTD check shows when Making Tax Digital starts for you, and the trades section has more guides for tradespeople.