Vehicle costs are one of the most commonly claimed — and most commonly misunderstood — expenses for self-employed people. Whether you're a tradesperson driving to customers, a consultant travelling between clients, or a delivery driver covering hundreds of miles a week, getting your mileage claim right can meaningfully reduce your tax bill. Get it wrong, and HMRC can disallow the expense entirely.
Here's how to do it properly.
The two methods: mileage rate or actual costs
As a sole trader, you have two options for claiming vehicle expenses. You can either claim the HMRC approved mileage rate (a flat rate per mile, known as the simplified expenses method), or you can claim a proportion of your actual vehicle running costs. Once you've started a business with a vehicle and chosen one method, you generally need to stick with it for that vehicle — you can't switch back and forth.
For most people with modest business mileage — say, up to 10,000–15,000 business miles per year — the mileage rate is simpler and often produces a comparable or higher deduction than actual costs. For high-mileage users, actual costs may be more beneficial, but the record-keeping is more involved.
HMRC approved mileage rates for 2026/27
The approved mileage rates for cars and vans are:
| Vehicle | First 10,000 miles | Above 10,000 miles |
|---|---|---|
| Cars and vans | 45p per mile | 25p per mile |
| Motorcycles | 24p per mile | 24p per mile |
| Bicycles | 20p per mile | 20p per mile |
These rates haven't changed for years — which means in real terms they're worth less than they used to be as fuel and vehicle costs have risen. HMRC has been lobbied to increase them but hasn't done so yet. The rates are set to cover all vehicle running costs — fuel, insurance, servicing, MOT, depreciation — in a single simple calculation. You don't claim anything else on top if you're using the mileage rate.
As an example: if you drive 8,000 business miles in a year, you claim 8,000 × 45p = £3,600 as a business expense. That reduces your taxable profit by £3,600, saving you £720 at the basic rate or £1,440 at the higher rate.
What counts as a business journey?
This is where people sometimes make mistakes. A business journey is travel for a business purpose — visiting a client, attending a meeting, travelling to a temporary workplace, collecting supplies. It does not include your ordinary commute to a permanent place of work.
For most sole traders this distinction is less of an issue than for employees, because you don't typically have one fixed employer's premises you commute to. If you work from home and drive to clients from home, those journeys generally qualify as business travel. If you have a fixed office or workshop that you drive to every day, that commute would not qualify.
Journeys that are partly private and partly business need to be apportioned. If you drive to a meeting and then do some personal errands on the way back, only the business portion of the trip is claimable. In practice, most people only log genuinely business journeys and don't worry about minor detours.
Keeping a mileage log
HMRC does not prescribe a specific format for a mileage log, but it does require that records support the figures claimed on your return. A good mileage log records, for each journey: the date, the start and end location, the purpose of the journey (client name, meeting description etc.), and the number of miles driven.
A spreadsheet or a mileage tracking app (several free options exist) are both acceptable. Some accounting software includes mileage logging built in. What HMRC doesn't accept is a round number estimate at the end of the year with no supporting detail — "approximately 5,000 miles" written on a tax return without a log to back it up is exactly the kind of thing that gets disallowed in an enquiry.
If you use your vehicle for both business and personal travel, keeping a log also helps you establish the business percentage of total mileage — which you'd need if you were ever to switch to claiming actual costs, or if HMRC asks how you arrived at your figure.
Passenger payments
If you carry employees or fellow workers in your vehicle on business journeys, you can claim an additional 5p per mile per passenger. This is a separate calculation on top of the standard mileage rate and is easily overlooked. If you regularly take a member of staff to site visits, that 5p per mile per trip adds up over a year.
Electric vehicles
The HMRC mileage rate for an electric car is the same 45p/25p as for a petrol or diesel car. There is a separate advisory electricity rate for company cars that's lower (reflecting cheaper per-mile fuel cost), but for personal vehicles used for business under the simplified expenses method, the standard rate applies regardless of fuel type. This currently makes claiming mileage rather than actual costs particularly advantageous for electric vehicle users, since their actual fuel cost per mile is very low but they still get the full 45p per mile allowance.
Claiming mileage if you use actual costs instead
If you've opted for the actual costs method, you calculate the total cost of running the vehicle for the year — fuel, insurance, servicing, road tax, MOT, and capital allowances on the purchase price — and then claim the business proportion based on business miles divided by total miles. This is more accurate if your vehicle is primarily used for business, but it requires much more detailed record keeping and the calculations are more complex.
If you're unsure which method is better for your situation, your accountant can run the numbers both ways. The difference can be worth several hundred pounds in some cases.