Can someone explain simplified expenses to me.

[Mummame2222]

If I’m not using simplified expenses:

I have a van I use solely for business use. Can I just top this up with diesel, keep the receipts and log it on quikbooks as a cost or do I still need to track the mileage?

Am I better off with simplified expenses? Probably around 600-650 miles a month, £50 insurance a month, tax £320 a year MOT £30.

Using the simplified expense mileage rate, you just claim the 45p for the business miles travelled, nothing else, based on a mileage log.

Using the normal method, you claim the costs (purchase cost in year of purchase, and all running costs). No need to keep a mileage log if all the mileage is business only, but may be wise to keep a log so you can prove it's 100% business use if ever investigated by HMRC.

Assuming no personal use, for 650 miles a month you can either claim 45p a mile (£3,510) a year OR you can claim all of your fuel, insurance, MOT, RFL and repairs. Whichever is the most.

I would recommend recording all of the van running expenses as you go along, but also record your mileage at the start and end of your accounting period and then you can claim the higher amount.

(I assume that you are self employed and are not including commuting to a regular place of business in your mileage figure).

(I also assume you are actually self employed and not a company director that calls themselves self employed).

This is a second hand van brought by a third party that I am paying back monthly, over three years or faster if I can. Can I claim these costs?

Yes self employed. The first trip of the day is from my home address to the first job.

Thanks for the info.

Are you a Sole trader?
Using cash accounting or traditional?
My DH is a sole trader / cash basis,
I do his books / tax returns and don’t use simplified expenses, despite the hmrc calculator recommending it.
45p a mile wouldn’t cover the cost of the van, the tax and insurance/ MOT/ running costs but he only does around 6000 miles., if he did over 8000, it would have been worth using simplified.

I think if you use cash basis, you can include the cost of paying for the van but only up to £500 of the interest ( per year).

Thank you. Cash accounting, sole trader. It will definitely be over 8000 miles a year.

There’s no interest on the van, the third party was my FIL.

You can claim capital allowances on the cost of the van (despite the outstanding loan) if you are using the actual cost basis.

If you are using a mileage charge, you cannot also have capital allowances.

Again, it's a case of adding it all up and the end of the year and claiming the highest amount.

Caveat: once you have picked the best basis in year one, you will have to stick to it until you change vehicles. You cannot pick and choose each year.

Ok thanks all very helpful. I’ll do both for this year and see how it turns out.

The van is in my name but I am paying my Dad back for it £100 a month. Total £5k, can I still claim capital allowance on that?

Depends if you are preparing on a cash or accruals basis - if cash basis, no, if accruals basis, yes

Also you can't claim the cost of the van AND mileage, you would claim the cost of the van and cost of running the van

Costs of running the van ie diesel? Diesel receipts, insurance, tax, repairs and van repayments?

I don’t know what an accrual basis is.

Accrual basis is traditional accounting.
For you, just put down the £1200 you pay your Dad as an expense, along with Diesel, MOT/insurance/tax/ repairs/new tyres etc.

I use freeagent to do DH’s books, it allows a direct bank feed from his mettle business account and I upload pics / pdfs of receipts to match with each transaction.