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Legislation on fixed rate expenses allows the use of ‘simplified’ fixed rate adjustments to the profit figure used to calculate income tax liabilities. The use of fixed rate adjustments is optional. You may also find a larger tax deduction is available compared to the use of actual costs. Anyone who is self-employed can use the fixed rates. The fixed rates apply to:
• Business mileage - Rather than deductions for the actual costs of purchasing, maintaining and running a vehicle businesses can calculate allowable expenditure on motor vehicles using a flat rate based on mileage. The rates for cars and vans are 45p per mile up to 10,000 miles and 25p per mile over 10,000 miles.
• Expenses relating to the business use of home - The amount that you can claim varies with the number of hours per month you work at home, as follows: 25-50 hours working from home per month £10 per month; 51-100 hours working from home per month £18 per month; 101 hours or more working from home per month £26 per month.
• Private use of business premises - Where a person uses premises both as a home and as business premises e.g. a hotel or a guest house, the total expenses of the property need to be adjusted for the private use. A fixed scale can be used for the private use. The deduction against profits is the amount of the actual expenses less the non-business use amount based on the number of occupants per month as follows: 1 £350, 2 £500, 3 or more £650.
The flat rate includes all household goods and services, food and non-alcoholic drinks and utilities. It does not include mortgage interest, rent of the premises, council tax or rates. An apportionment of these expenses based on the extent of the private occupation would be made.
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