The flat rates that let sole traders claim for their car and their home without tracking a single utility bill, and the one decision you cannot reverse.
Zazentax Simplification Series, Part 1 of 3 · Updated July 2026 · Reading time: about 6 minutes
Every mile you drive for your business has a tax value. So does every month you work from your kitchen table. Yet a large share of self-employed people claim neither, usually for one reason: they assume claiming means keeping fuel receipts, apportioning electricity bills and defending every figure. It does not. HMRC (His Majesty’s Revenue and Customs, the United Kingdom tax authority) runs a system called simplified expenses, built precisely for people who would rather run their business than run a spreadsheet.
The system offers flat rates: fixed amounts you may claim instead of calculating actual costs. It is optional, it is available to sole traders and to partnerships made up only of individuals, and it is not available to limited companies. Before proceeding, one honest warning: simple does not always mean best, and one of these choices locks you in. Both points are covered below.
The Mileage Rate: 45p Covers Far More Than Fuel
For business journeys in a car or van, you may claim 45p per mile for the first 10,000 business miles in the year and 25p per mile above that. For motorcycles the rate is 24p for every business mile. These rates have not changed for years and remain in force for 2026/27.
The rate is deliberately wide in scope. It does not refund the purchase price directly; rather, the 45p is treated by law as already containing an amount for the cost of buying the vehicle, through its loss of value over time, alongside insurance, servicing, repairs and fuel. Consequently, none of those costs can be claimed separately, and capital allowances (the tax relief normally available when a business buys equipment) are not available for a vehicle on the flat rate, because that would relieve the same cost twice. However, tolls, parking fees and congestion charges sit outside the rate; therefore, you may claim those on top whenever the journey is for business.
Key point: The number of passengers changes nothing, and only business miles count. Ordinary commuting and private trips are excluded, so a simple mileage log with the date, destination and purpose of each business journey is the one record this method still needs.
Consider Priya, a mobile beautician who drove 11,400 business miles in 2026/27. Her claim is 10,000 miles at 45p, which gives £4,500, plus 1,400 miles at 25p, which gives £350. Her deduction is therefore £4,850, before adding the £310 she paid in parking during the year. She keeps no fuel receipts and makes no insurance apportionment; the log of her appointments does the work.
Now the decision that cannot be reversed. When you first use a vehicle in your business, you choose either the flat rate or the actual-cost route with capital allowances. Whichever you choose for that vehicle, you keep for as long as you use it in the business. Accordingly, a quick comparison in year one is worth an hour of anyone’s time: a newer, expensive vehicle with heavy business use often does better on actual costs, whereas an older, economical vehicle usually does better at 45p.
Working From Home: The Three-Band Monthly Rate
If you work 25 hours or more per month from home, you may claim a fixed monthly amount instead of apportioning household running costs. The bands for 2026/27 are £10 per month for 25 to 50 hours, £18 per month for 51 to 100 hours, and £26 per month for 101 hours or more. The hours are those you, and any employee of yours, spend working in the home wholly for the business, and an hour when two people are working counts once, not twice.
The bands are assessed month by month, so a seasonal business claims more in busy months. Take Daniel, a web designer. For nine months of 2026/27 he worked about 60 hours per month at home, and in the three months around a product launch he worked over 110 hours per month. His claim is nine months at £18, which gives £162, plus three months at £26, which gives £78, a total of £240 for the year with no utility bills examined.
Two refinements make this rate more valuable than it first appears. First, the flat rate replaces only variable running costs such as gas and electricity. A separately calculated business proportion of fixed home costs, for instance council tax, insurance and mortgage interest, may still be claimed alongside it, as may an identifiable business share of telephone and broadband. Second, unlike the vehicle choice, this one is not locked: you may use the flat rate one year and switch to actual costs the next, whichever is better.
Action required: If your actual home working costs are high, perhaps because you heat a dedicated workspace all day, compare the flat rate against a proper apportionment before filing. The flat rate is a floor for effort, not a ceiling for your claim.
Living Where You Work: The Reverse Calculation
A third rate exists for people whose business premises is also their home, such as a bed and breakfast or a pub with private quarters. Here the logic flips: instead of adding a business claim to a private home, you deduct a private amount from a business property. You claim the actual premises costs and then subtract a fixed amount for private use, based on how many people live there: £350 per month for one occupant, £500 for two, and £650 for three or more, with the figure reassessed in any month the household changes.
Suppose Marta and Jonas run a small guest house and live on site all year. Their premises spend on food, utilities and household goods for 2026/27 is £14,400. As two non-business occupants, the reduction is £500 per month, which is £6,000 across the year. Their allowable deduction is therefore £14,400 minus £6,000, which equals £8,400. Note that mortgage interest, business rates and council tax sit outside this mechanism; only the business share of those is claimed, calculated in the normal way.
Key Takeaways
- Simplified expenses are optional flat rates for sole traders and qualifying partnerships; limited companies cannot use them.
- The vehicle rate is 45p per mile for the first 10,000 business miles, then 25p, and 24p for motorcycles; tolls and parking are claimable on top, but fuel, insurance and capital allowances are not.
- The vehicle choice is permanent for that vehicle, so run the comparison in year one.
- Home working is worth £10, £18 or £26 per month depending on hours, needs at least 25 hours in the month, and can be paired with a separate claim for fixed costs such as council tax, insurance, mortgage interest and a business share of broadband.
- If your business premises is also your home, claim actual costs minus £350, £500 or £650 per month for private use.
Five Minutes With Your Mileage Could Be Worth Thousands
The flat rates take minutes to apply and can be worth thousands over a year, but the vehicle choice is permanent and the home-working comparison rewards a second look. A short review now makes sure you claim the right amount by the right method.
Ask Zazentax to check your claim.
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