ABSTRACT Self-interacting dark matter (SIDM) offers the potential to mitigate some of the discrepancies between simulated cold dark matter (CDM) and observed galactic properties. We introduce a physically motivated SIDM model to understand the effects of self interactions on the properties of Milky Way and dwarf galaxy sized haloes. This model consists of dark matter with a nearly degenerate excited state, which allows for both elastic and inelastic scattering. In particular, the model includes a significant probability for particles to up-scatter from the ground state to the excited state. We simulate a suite of zoom-in Milky Way-sized N-body haloes with six models with different scattering cross sections to study the effects of up-scattering in SIDM models. We find that the up-scattering reaction greatly increases the central densities of the main halo through the loss of kinetic energy. However, the physical model still results in significant coring due to the presence of elastic scattering and down-scattering. These effects are not as apparent in the subhalo population compared to the main halo, but the number of subhaloes is reduced compared to CDM.