If you are self-employed in the UK, you have two ways to claim vehicle costs against your business profits: track every receipt and work out the actual running costs, or use HMRC’s simplified expenses flat rates. For the majority of sole traders, the flat-rate mileage method is simpler, faster, and often just as generous.
This guide covers what simplified expenses are, the current 45p and 25p rates for 2026/27, who qualifies, the lock-in rule you need to understand before choosing, and when the flat-rate approach beats actual costs.
What Are HMRC Simplified Expenses for Mileage?
Simplified expenses are a set of flat rates that HMRC permits self-employed individuals to use instead of calculating the real cost of running a vehicle. Rather than collecting fuel receipts, working out depreciation, or apportioning insurance premiums, you simply multiply your business miles by a fixed rate per mile.
HMRC offers simplified expenses for three categories — vehicle running costs, working from home, and living at your business premises — but the mileage element is by far the most widely used.
The appeal is straightforward: one mileage log replaces a year’s worth of fuel receipts, service invoices, and insurance documents. You count your business miles, apply the rate, and deduct the result from your taxable profit on your Self Assessment return.
The 45p and 25p Flat Rates for 2026/27
The approved mileage rates for the 2026/27 tax year remain unchanged:
| Vehicle type | 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 are all-inclusive. They cover fuel, insurance, road tax, servicing, MOT, tyres, depreciation, and finance costs. You cannot claim any of those expenses separately when using simplified expenses.
If you carry a fellow worker or business partner on a trip, you can claim an additional 5p per mile per passenger.
Worked example — 14,000 business miles in a car:
- First 10,000 miles at 45p = £4,500
- Remaining 4,000 miles at 25p = £1,000
- Total deduction: £5,500
At the basic income tax rate of 20%, that deduction saves £1,100. At the higher rate of 40%, the saving is £2,200. You also save the corresponding Class 4 National Insurance on the reduced profit.
Who Can Use Simplified Expenses?
Simplified expenses are available to:
- Sole traders — the most common users
- Business partnerships — provided no partner is a limited company
You cannot use simplified expenses if you are:
- A limited company director — Ltd companies must reimburse directors at the approved mileage rate instead, which is a different mechanism
- An employee — though employees can claim the same 45p/25p rates through Mileage Allowance Relief using form P87
- A partner in a limited liability partnership that includes a company as a member
There is one further restriction. If you have already claimed capital allowances on a vehicle or included its purchase price in your business expenses, you cannot switch that vehicle to simplified expenses. The vehicle must start on simplified expenses from the outset to qualify.
The Lock-In Rule: Why Your First Choice Matters
This is the rule most sole traders overlook, and it can be costly.
Once you choose simplified expenses for a particular vehicle, you must stick with it for as long as you use that vehicle in your business. You cannot switch to actual costs later — even if your circumstances change and actual costs would produce a larger deduction.
Key details of the lock-in rule:
- It applies per vehicle, not per business. If you replace your car, you can choose whichever method suits the new vehicle. Your old choice does not carry forward.
- It is one-directional for vehicles. You can switch from actual costs to simplified expenses, but you cannot go the other way. Once you are on the flat rate, you are locked in for that vehicle.
- You can mix methods across vehicles. If you run two vehicles, you could use simplified expenses for one and actual costs for the other.
The practical lesson: before you file your first return for a new vehicle, work out the deduction under both methods. Once you commit to simplified expenses for that vehicle, there is no going back.
When Simplified Expenses Beat Actual Costs
For most sole traders, simplified expenses produce a fair deduction without the paperwork burden. But the right method depends on your vehicle and driving pattern.
Simplified expenses tend to work better when:
- Your vehicle is inexpensive to run — a small petrol or diesel car with low insurance
- You drive a high number of business miles, maximising the per-mile deduction
- You want minimal record-keeping and no need to store receipts
- You have a relatively new, reliable vehicle with few repair bills
Actual costs tend to work better when:
- Your vehicle has high running costs — expensive insurance, premium fuel, frequent repairs
- You drive an electric vehicle with a high purchase price but low running costs per mile (capital allowances can be valuable)
- Your actual cost per mile exceeds 45p, which is common for larger or older vehicles
- You use the vehicle almost exclusively for business, giving you a high business-use percentage
A sole trader driving 12,000 business miles in a modest hatchback would claim £5,000 under simplified expenses (10,000 x 45p + 2,000 x 25p). If their actual vehicle costs for the year are £3,800 and business use is 80%, the actual-cost deduction would be only £3,040. Simplified expenses win clearly in that scenario.
For a deeper comparison with worked examples, see our guide on actual costs versus the mileage rate for the self-employed.
How to Record Simplified Expenses for HMRC
Even though simplified expenses remove the need for fuel receipts and running-cost invoices, HMRC still requires a mileage log. You need evidence of every business journey you claim for.
For each trip, record:
- Date of the journey
- Start and end points (or a description of the route)
- Business purpose — the reason for the trip
- Miles driven — odometer readings or a reliable digital record
You must keep these records for at least six years. HMRC can open an enquiry into any Self Assessment return within that window, and without a log, your entire mileage claim could be disallowed.
Tripbook makes this effortless. The app automatically logs every journey with GPS-verified distances, so you always have an accurate, timestamped record. At tax time, filter by business trips and your total mileage is ready to transfer to your return.
From April 2026, sole traders earning above £50,000 must comply with Making Tax Digital for Income Tax, which requires digital records and quarterly updates. A mileage tracking app like Tripbook keeps you MTD-ready without any extra effort. For more on MTD requirements, see our guide to Making Tax Digital and mileage tracking.
When it comes to your Self Assessment tax return (SA103), you enter your total business mileage for the year on the self-employment pages. HMRC’s system applies the 45p/25p rates automatically once you enter the mileage figure.
Remember that parking charges and toll fees for specific business journeys can still be claimed separately — they are journey-specific costs, not vehicle running costs. The same applies to the congestion charge if you drive into London for business.
For a step-by-step walkthrough of the Self Assessment process for mileage, see our guide on claiming mileage on your HMRC Self Assessment.
Download Tripbook from the App Store to start building your HMRC-ready mileage log today.
