Vehicle expenses are one of the largest tax deductions available to self-employed people in the UK. Whether you are a plumber driving between jobs, a consultant visiting clients, or a freelancer picking up supplies, the miles you drive for business translate directly into lower tax bills. This pillar guide covers both claiming methods, every eligible expense, capital allowances after the April 2026 rate change, and the record-keeping rules you need to follow under Making Tax Digital.
Simplified Expenses vs Actual Costs: Your Two Options
HMRC gives sole traders two ways to deduct vehicle expenses. You choose one method per vehicle, and that choice is subject to a lock-in rule — so it pays to understand both before you start.
Option 1 — Simplified expenses (flat-rate mileage)
You claim a set amount per business mile instead of tracking every receipt:
- 45p per mile for the first 10,000 business miles in the tax year
- 25p per mile for every mile above 10,000
- 24p per mile for motorcycles (flat rate, no threshold)
- An extra 5p per mile per business passenger you carry
The flat rate covers fuel, insurance, servicing, MOT, road tax, tyres, and depreciation. You cannot claim any of those costs separately on top.
Option 2 — Actual costs
You total every vehicle running cost for the year, calculate what percentage of your mileage was for business, and claim that proportion. Capital allowances on the purchase price are claimed separately (see below).
The Lock-In Rule
Once you use simplified expenses for a vehicle, you must stick with that method for as long as you use the same vehicle in your business. You can switch from actual costs to simplified expenses, but you cannot switch from simplified expenses to actual costs. For a new vehicle you have a fresh choice, and you can use different methods for different vehicles.
Tip: In your first year with a new vehicle, track both your mileage and your actual receipts. Compare the two figures at year end, then choose the method that gives the larger deduction.
What Expenses Can You Claim Under Actual Costs?
If you choose the actual costs method, the following running costs qualify for a business-use deduction:
- Fuel — petrol, diesel, or electricity charging costs
- Insurance — annual or monthly motor insurance premiums
- Servicing, repairs, and MOT — routine maintenance and unplanned repairs
- Road tax (VED) — the annual vehicle excise duty
- Tyres — replacements and puncture repairs
- Lease or hire-purchase payments — the finance element of your vehicle agreement
- Parking — business parking only (never fines or penalties)
- Toll charges, Congestion Charge, and Clean Air Zone fees — for business journeys
- Breakdown cover — AA, RAC, or similar memberships
You cannot claim parking fines, speeding penalties, or any cost relating to a personal journey. Only the business-use percentage of each cost is deductible.
Calculating Your Business-Use Percentage
The formula is straightforward:
(Business miles ÷ Total miles) × 100 = Business-use %
For example, if you drive 15,000 business miles out of 20,000 total miles, your business-use percentage is 75%. You then claim 75% of every eligible running cost.
Tripbook logs both business and personal journeys automatically using GPS, so your exact business-use percentage is ready at year end without any manual calculations.
Capital Allowances on Cars from April 2026
Under actual costs, you also claim capital allowances on the purchase price of your vehicle. Cars are excluded from the Annual Investment Allowance (AIA) and full expensing, so the relief depends on CO2 emissions:
| Vehicle type | Allowance from April 2026 |
|---|---|
| New zero-emission car (fully electric) | 100% First Year Allowance (FYA) |
| Second-hand EV or car with CO2 ≤ 50 g/km | 14% main-rate WDA (was 18%) |
| Car with CO2 > 50 g/km | 6% special-rate WDA |
Key changes for 2026/27:
- The main-pool Writing Down Allowance (WDA) drops from 18% to 14% from 6 April 2026 for sole traders. The reduction applies on a reducing-balance basis each year.
- The 100% FYA for new zero-emission cars has been extended to 5 April 2027. If you buy a brand-new electric car outright, you can deduct the entire purchase price from your taxable profits in year one.
- The special-rate pool stays at 6% for higher-emission vehicles.
Example — buying a new electric van vs a petrol car: Sarah is a self-employed electrician. She buys a new electric van for £32,000 in May 2026. Because it is zero-emission, she claims the full £32,000 as a First Year Allowance, wiping it entirely from her taxable profit in one go. If she had bought a petrol car with CO2 above 50 g/km for the same price, she would claim only £1,920 (6% of £32,000) in year one — and the remaining balance would continue to be written down at 6% each subsequent year.
For the full breakdown of every pool and threshold, see our capital allowances on cars UK guide.
What Counts as Business Mileage?
Whichever method you choose, you need to know which journeys qualify. Business mileage includes:
- Travelling to clients, customers, or job sites
- Driving between work locations during the day
- Trips to suppliers, wholesalers, or trade accounts
- Travelling to training courses or professional events
- Visits to your accountant, bank, or HMRC
What does not qualify:
- Ordinary commuting — travelling from home to a fixed, permanent workplace
- Personal errands, even during the working day
If you work from home and it is your main business base, journeys to your first client of the day and back from the last are claimable. This is a significant advantage for home-based sole traders.
Record-Keeping and Making Tax Digital
HMRC requires you to keep records for at least six years after the end of the relevant tax year (up to 20 years in cases of deliberate error).
If you use simplified expenses, you need:
- A mileage log recording the date, start point, destination, purpose, and distance of every business journey
- A total of your business miles for the year
If you use actual costs, you also need:
- Receipts or digital records for every running cost (fuel, insurance, servicing, MOT, etc.)
- Your capital allowance calculation
MTD for Income Tax from April 2026
From April 2026, sole traders and landlords with gross income above £50,000 must comply with Making Tax Digital for Income Tax. This means:
- All business records — including mileage — must be kept digitally
- You submit quarterly updates to HMRC through MTD-compatible software
- A paper logbook alone will no longer satisfy HMRC requirements
Tripbook creates a digital, HMRC-compliant mileage log automatically. Every trip is recorded with GPS coordinates, timestamps, and distance, and you can export your records in a format that integrates with MTD-compatible accounting software.
Worked Example: Mileage Method vs Actual Costs
James is a self-employed IT contractor. He drives 18,000 business miles and 24,000 total miles per year. His car is a three-year-old petrol hatchback (CO2 above 50 g/km) that cost £18,000.
Mileage method:
- 10,000 miles × 45p = £4,500
- 8,000 miles × 25p = £2,000
- Total deduction: £6,500
Actual costs:
- Fuel: £3,200
- Insurance: £650
- Servicing and MOT: £480
- Road tax: £190
- Tyres: £260
- Total running costs: £4,780
- Business-use percentage: 18,000 ÷ 24,000 = 75%
- Claimable running costs: £4,780 × 75% = £3,585
- Plus special-rate WDA on car: £18,000 × 6% × 75% = £810
- Total deduction: £4,395
In James’s case, the mileage method produces a deduction of £6,500 — over £2,100 more than actual costs. For many sole traders with moderate running costs, the simplified expenses route wins. But for those with expensive vehicles, high repair bills, or zero-emission cars qualifying for 100% FYA, actual costs can be significantly better.
For the full head-to-head comparison, read our guide to actual costs vs mileage rate for the self-employed.
Self-employed vehicle expenses are one of the most valuable deductions on your Self Assessment return. Whether you choose simplified expenses or actual costs, you need an accurate mileage log — and from April 2026, that log must be digital.
Tripbook records every business journey in the background using GPS, calculates your business-use percentage automatically, and exports HMRC-ready reports whenever you need them.
Download Tripbook free from the App Store and make sure every deductible mile counts.
