by Asim Abbas
11 November 2026 
Mileage vs actual car costs: which is better for the self-employed?
Mileage vs actual car costs: which is better for the self-employed?
If you use a car or van for your business, you have two ways to claim: HMRC’s flat mileage rates, or a share of your actual running costs plus capital allowances.
- Mileage rates are 45p for the first 10,000 miles, then 25p
- Actual costs means a business share of fuel, insurance and repairs
- Plus capital allowances on the vehicle itself
- You can’t switch methods for the same vehicle
The right choice can be worth hundreds of pounds a year, and once you choose for a vehicle, you’re usually stuck with it.
This guide compares both methods with examples so you can pick the better one.
Option 1: simplified mileage
You claim a flat rate for every business mile. It covers fuel, insurance, servicing, repairs and depreciation, so you can’t claim those separately. Parking, tolls and congestion charges can still be added.
| Vehicle | First 10,000 business miles | Above 10,000 |
|---|---|---|
| Car or van | 45p | 25p |
| Motorcycle | 24p | 24p |
You need a mileage log: date, journey, purpose and miles. Commuting to a permanent workplace doesn’t count.
Option 2: actual costs
You add up all running costs for the year, then claim the business percentage. If 60% of your miles are for business, you claim 60% of fuel, insurance, road tax, servicing and repairs.
On top of that, you claim capital allowances on the vehicle’s cost:
- New zero-emission cars: 100% first-year allowance
- Cars with CO2 up to 50g/km: main rate pool, 14% a year from April 2026
- Cars over 50g/km: special rate pool, 6% a year
- Vans: usually the Annual Investment Allowance, so full relief in year one
Capital allowances on a car are also restricted to the business-use percentage.
Mileage tax calculator
Work out your 45p mileage claim.
Which works out better?
You drive 12,000 business miles in a petrol car. Mileage gives £4,500 + £500 = £5,000. With actual costs, if running costs are £5,500 a year at 70% business use, you’d claim £3,850, plus allowances on the car. For most mid-range cars, mileage wins. For an expensive car, or a van bought outright, actual costs often win.
- Mileage usually wins for cheaper or older cars and high business mileage
- Actual costs often win for vans, new electric vehicles bought outright and very high running costs
- Electric cars can use mileage rates too, but a new EV’s 100% allowance can make actual costs better
Fixed-fee accountancy support
Transparent monthly packages for sole traders, landlords and limited companies. Fixed fees agreed upfront, VAT included.
Get a fixed-fee quoteCall 0161 531 4179Rules to remember
- Once you use mileage rates for a vehicle, you must keep using them while you have it
- Simplified mileage isn’t available for vehicles you’ve already claimed capital allowances on
- Keep a log either way; HMRC can ask for evidence of business use
- Limited company directors are different: the company can pay you mileage tax-free at the same rates
See HMRC’s vehicle simplified expenses. Our self-employed accountants can run both calculations for you.
What should I do next?
An app makes it easy.
Fuel, insurance, tax, servicing.
Before your first claim on the vehicle.
Our sole trader team runs the numbers.
Frequently Asked Questions
Can I claim mileage on an electric car?
Yes. Self-employed people can use the same 45p and 25p rates for electric cars.
Can I switch from mileage to actual costs?
Not for the same vehicle. Your choice applies for as long as you keep it.
Do I need receipts if I use mileage rates?
You need a mileage log rather than fuel receipts. Keep receipts for parking and tolls.
Is commuting allowable?
No. Travel between home and a permanent workplace is personal. Travel to temporary sites and clients usually counts.
Which method do most sole traders use?
Mileage, because it’s simpler and often better. Van owners frequently use actual costs instead.
Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.
About the Author
Asim Abbas
I’m Asim Abbas, founder of Wingate Accountants and a Chartered Certified Accountant. I help sole traders, landlords and directors stay on top of their tax with fixed fees and plain-English advice.
