A lot of time and paperwork can be saved by claiming expenses using the simplified rates, rather than recording and deducting actual costs. However, if the deduction is considerably higher using actual costs, the additional time investment may be worthwhile. Given current high cost of fuel, where mileage is high, a deduction based on actual costs may be preferable.
Use of the simplified rates is optional and is available to sole traders and partnerships that do not have any corporate partners.
Businesses can claim a fixed rate per business mile deduction for the vehicle expenses. The fixed rate deduction covers the cost of buying, running and maintaining the vehicle (including the cost of fuel, oil, servicing, repairs, insurance, VED and MOT). The fixed rates per mile are as follows:
|Type of vehicle||Flat rate per business mile|
|Cars and goods vehicles:
First 10,000 miles
Subsequent business miles
|45p per mile
25p per mile
|Motorcycles||24p per mile|
Once a business elects to use the flat rates, they must continue to do so while the vehicle remains in the business. Capital allowances cannot be claimed where the simplified rates are used and if capital allowances have been claimed in respect of the vehicle in question, it is not possible to use the flat rates.
It is also possible to claim a fixed rate deduction for the use of home for the purposes of the business. The flat rate provides an allowance for additional household running incurred as a result, and covers the additional costs of cleaning, heat, light, power, telephone, broadband etc.
The deduction is based on the total number of business hours spent working in the home on core business activities in the month and is as follows:
|Number of hours spent on core business activities||Flat rate per month|
|25 or more||£10|
|51 or more||£18|
|101 or more||£26|
Core business activities are providing goods or services, maintaining business records, marketing and obtaining new business.
Betty is a dog groomer. She provides a mobile service and also works from home. In 2022/23 she spent 60 hours a month working in her home on core business activities and she drove 15,000 business miles.
To save the work involved in determining the actual additional costs, she claims flat rate deductions in respect of the use of her car and her business use of home.
For the car she claims a deduction of £5,750 being 10,000 miles at 45p per mile (£4,500) plus 5,000 miles at 25p per mile (£1,250).
For use of her home she claims a deduction of £18 per month – an annual deduction of £216.
Claiming fixed rate deductions saves the time and effort of keeping records of actual costs and calculating the deductible amount.
Partner note: ITTOIA 2005, s. 94B to 94H