HMRC Simplified Expenses for Sole Traders (2026/27): 45p/25p Vehicle, £10–£26 Home & SA103 Rules

Short answer: HMRC simplified expenses let UK sole traders and ordinary partnerships calculate three categories of business deductions on Form SA103 using statutory flat rates instead of apportioning actual bills: (1) Vehicles at 45p per business mile for the first 10,000 miles and 25p thereafter (24p for motorcycles), (2) Working from home at £10/month (25–50 hrs), £18/month (51–100 hrs), or £26/month (101+ hrs), and (3) Living at your business premises using fixed £350/£500/£650 monthly private-use adjustments.

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Every UK sole trader completing a Self Assessment tax return (Form SA103S or SA103F) has to decide whether to claim HMRC simplified expenses (flat rates) or actual receipted costs for their van, car, and home office. Unlike the £1,000 Trading Allowance—which replaces all business deductions—HMRC’s simplified expenses scheme (ITTOIA 2005 Part 2 Chapter 5A) lets you use flat rates for your vehicle or home utilities while still deducting 100% of your actual receipts for tools, materials, trade insurance, phone, and subcontractor payments.

Below is the complete 2025/26 and 2026/27 HMRC breakdown of all three simplified expense categories, the exact SA103S / SA103F box numbers, and worked £GBP comparisons so you never leave tax relief on the table. For related guides, see our UK self-employed mileage allowance guide and UK sole trader allowable expenses list.

What are the 3 HMRC simplified expenses categories (and who can use them)?

Who qualifies: All unincorporated sole traders and business partnerships where all partners are individuals can use HMRC simplified expenses. Limited companies and partnerships that have a corporate partner cannot use them.

Here is the complete 2026/27 statutory rate table across all three categories:

Simplified Expense Category	Official HMRC Flat-Rate Tiers (2025/26 & 2026/27)	What the Flat Rate Replaces	Where It Goes on Form SA103S / SA103F
1. Business Vehicles (Cars, Goods Vans & Motorcycles)	• Cars & Vans: 45p/mile (first 10,000 business miles in tax year), 25p/mile (over 10,000 miles) • Motorcycles: 24p/mile (all business miles)	Fuel, servicing, repairs, MOT, vehicle insurance, breakdown cover, Road Tax (VED) & vehicle depreciation / Capital Allowances	SA103S Box 17 / SA103F Box 20 (Car, van and travel expenses)
2. Working From Home (Requires 25+ business hours/month at home)	• 25 to 50 hours/month: £10/month (£120/yr) • 51 to 100 hours/month: £18/month (£216/yr) • 101+ hours/month: £26/month (£312/yr)	Household heat, light/electricity, and metered water (does not cover phone or broadband—claim the business % of phone/internet separately!)	SA103S Box 18 or Box 20 / SA103F Box 21 (Rent, rates, power and insurance costs)
3. Living at Your Business Premises (B&Bs, pubs, care homes, guesthouses)	Flat monthly deduction from total premises expenses based on occupants: • 1 person: £350/mo · 2 people: £500/mo · 3+ people: £650/mo	Calculates the non-deductible private-use share of food, utilities, and household running costs when you live on site	Deducted from total premises expenses before entering SA103F Box 21

Category 1: When does the 45p/25p vehicle flat rate beat actual van or car costs?

When you bring a car or commercial van into your sole trader business, HMRC makes you choose between two mutually exclusive methods for that specific vehicle:

1. Simplified Mileage Flat Rate (45p / 25p per mile):
   • You keep a dated business mileage log (date, start, destination, business purpose, miles driven) and multiply your first 10,000 business miles by 45p (£4,500) and every additional business mile by 25p.
   • Bonus deductions still allowed on top: Even when you use the 45p/25p flat rate, you can still claim actual receipts for business parking fees, Congestion Charge, ULEZ/Clean Air Zone charges, road/bridge tolls, and the business-use percentage of vehicle finance/loan interest.
   • The Once-In Lock-In Rule: Once you claim the 45p/25p flat rate for a specific vehicle, you must keep using the flat rate for as long as you use that vehicle in your business. You cannot switch if you have already claimed Capital Allowances (such as Annual Investment Allowance) on that vehicle.
2. Actual Vehicle Costs + Capital Allowances:
   • You keep every fuel, insurance, servicing, tyre, and repair receipt, multiply the total by your business-use mileage percentage, and separately claim Capital Allowances (up to 100% Annual Investment Allowance (AIA) on a commercial van, or Writing Down Allowances based on $\text{CO}_2$ emissions for a car).

Worked £GBP comparison: UK Tradie Van (12,000 Business Miles / 85% Business Use)

Cost Method	Year 1 (Bought a £18,000 Used Transit Van)	Year 2 (Same Van, No Purchase Cost)	Best Choice Rule of Thumb
45p / 25p Simplified Mileage	(10,000 × 45p) + (2,000 × 25p) = £5,000 deduction	£5,000 deduction	Wins for older, lower-cost, fuel-efficient cars/vans with high annual business mileage
Actual Running Costs (£4,200 × 85%) + 100% Van AIA	£3,570 running costs + £15,300 (85% of £18k AIA) = £18,870 deduction	£3,570 running costs (£0 remaining AIA pool)	Wins in Year 1 when buying an expensive commercial van eligible for 100% AIA

Category 2: HMRC Working From Home Flat Rate (£10 / £18 / £26) vs. Actual Apportionment

If you do your quoting, invoicing, CIS verification, or client design work from home for at least 25 hours in a calendar month, you can claim the HMRC working-from-home flat rate on a month-by-month basis (for example, 8 months at 60 hours/month = 8 × £18 + 4 busy winter months at 110 hours/month = 4 × £26 = £248/year) without keeping a single gas or electricity bill.

However, the HMRC flat rate only covers household heat, electricity, and water:

• Always claim telephone and broadband separately: Even when you claim the £10/£18/£26 monthly flat rate, HMRC explicitly allows you to claim the business-use percentage of your home broadband and mobile phone bills on top (SA103S Box 20 / SA103F Box 23).
• When actual home costs beat the flat rate: Because the maximum flat rate is only £26/month (£312/year), a sole trader with a dedicated room at home who pays £3,600/year in council tax, mortgage interest/rent, heating, and electricity can often claim £600 to £1,200+/year using actual room-and-time apportionment. Unlike vehicles, you can switch freely between the home flat rate and actual home costs from one tax year to the next.

Category 3: Living at your business premises (£350 / £500 / £650 flat-rate adjustment)

If you run a sole trader business where you also live on the premises—such as a bed and breakfast, guesthouse, small pub, or residential care home—HMRC lets you deduct the full running costs of the building and then subtract a fixed monthly flat rate (£350/month for 1 person, £500/month for 2 people, or £650/month for 3 or more people) to account for private household use on Form SA103F Box 21.

How do you enter HMRC simplified expenses on Form SA103S and SA103F?

When filing your online Self Assessment return at GOV.UK, add your 45p/25p flat-rate business mileage (plus allowable business parking and tolls) into Box 17 on Form SA103S (Car, van and travel expenses) or Box 20 on Form SA103F. Enter your £10/£18/£26 monthly working-from-home flat rate into Box 18 or Box 20 on Form SA103S (Rent, rates, power and insurance costs, or total allowable expenses if turnover is under £85,000) or Box 21 on Form SA103F, and keep your mileage log and hours record for at least 5 years after the 31 January filing deadline.

Frequently asked questions

Can I use HMRC simplified expenses and the £1,000 trading allowance together?

No. Under HMRC Self Assessment rules, if you claim the £1,000 tax-free trading allowance (Form SA103S Box 10.1 / Form SA103F Box 10.1), you cannot deduct any business expenses at all—neither actual receipted costs nor simplified flat-rate expenses. Whenever your combined 45p/25p mileage and tool, material, or insurance receipts exceed £1,000, claiming expenses saves more Income Tax and Class 4 National Insurance than the trading allowance.

Can I change from 45p/mile simplified expenses to actual vehicle costs next year?

Not on the same vehicle. HMRC rules under ITTOIA 2005 state that once you claim the 45p/25p flat-rate mileage allowance for a specific car or van, you must continue using the flat-rate method for that vehicle for as long as you use it in your sole trader business. You can only choose between flat-rate mileage and actual costs plus Capital Allowances when you bring a different vehicle into the business.

Does the £10–£26 working from home simplified expense include internet and phone?

No. The HMRC working-from-home flat rate (£10/month for 25–50 hours, £18/month for 51–100 hours, or £26/month for 101+ hours) covers only household utility costs such as heating, electricity, and metered water. You can claim the business-use proportion of your home broadband internet and mobile telephone bills in addition to the monthly flat rate on your SA103 return.

Can I claim parking fees, ULEZ, and tolls on top of the 45p/25p HMRC mileage rate?

Yes. The 45p/25p per mile flat rate covers the costs of buying, insuring, taxing, servicing, and fuelling the vehicle itself, but it does not cover trip-specific charges. You can deduct actual receipts for business parking fees, road and bridge tolls, London Congestion Charge, and ULEZ or Clean Air Zone charges on top of your 45p/25p mileage claim, though penalty charge notices and parking fines are never deductible.

Can a sole trader use the 45p/25p flat rate for a commercial van as well as a car?

Yes. Unlike US or Canadian rules that vary by vehicle weight, HMRC allows sole traders to use the exact same 45p per mile (first 10,000 business miles) and 25p per mile (over 10,000 business miles) simplified flat rate for both cars and commercial goods vans, provided you have not already claimed Annual Investment Allowance (AIA) or other Capital Allowances on the purchase of that van.

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