Vehicle costs are among the most commonly claimed expenses for self-employed people, and among the most commonly misunderstood. A tradesperson driving to customers or a delivery driver covering hundreds of miles a week can cut their tax bill by getting the mileage claim right. Get it wrong and HMRC can disallow the expense entirely.
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 to 15,000 business miles a 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 | 55p per mile | 25p per mile |
| Motorcycles | 24p per mile | 24p per mile |
| Bicycles | 20p per mile | 20p per mile |
The car and van rate for the first 10,000 miles rose from 45p to 55p a mile, announced on 21 May 2026 and effective retrospectively from 6 April 2026, so it covers the whole 2026/27 tax year. The 25p rate above 10,000 miles and the motorcycle (24p) and bicycle (20p) rates did not change, and the government has said it will review the rates beyond 2026/27. Journeys in earlier tax years were claimed at 45p. The rates are set to cover all vehicle running costs (fuel, insurance, servicing, MOT, depreciation) in a single 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 × 55p = £4,400 as a business expense in 2026/27. That reduces your taxable profit by £4,400, saving you £880 at the basic rate or £1,760 at the higher rate.
What counts as a business journey?
People sometimes make mistakes here. A business journey is travel for a business purpose, such as visiting a client, attending a meeting, travelling to a temporary workplace or 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 journeys that are clearly business 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 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 ever switch to claiming actual costs or if HMRC asks how you arrived at your figure.
Passenger payments
GOV.UK describes passenger payments as a rule for employers: an employer can pay an employee up to 5p per mile tax-free for each other employee they carry in their own car or van on a business journey. GOV.UK's guidance on simplified expenses for the self-employed does not mention a passenger supplement, so don't add one to a simplified expenses claim unless HMRC guidance for your situation says you can.
Electric vehicles
The HMRC mileage rate for an electric car is the same 55p/25p as for a petrol or diesel car. There is a separate advisory electricity rate for company cars that's lower, reflecting the 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 makes claiming mileage rather than actual costs especially attractive for electric vehicle users, since their fuel cost per mile is very low but they still get the full 55p 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 mainly used for business, but it needs 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.