Mileage Claims for Sole Traders: Simplified vs Actual Costs

Two Ways to Claim Vehicle Costs as a Sole Trader

When you use your own vehicle for business travel, HMRC gives you two options for claiming the cost against your tax bill. You can use the simplified expenses (mileage) method, or you can claim a proportion of your actual running costs. Choosing the right one can save you meaningful money, so it's worth understanding both before you commit.

How the Simplified Mileage Rate Works

HMRC's simplified expenses scheme lets you claim a flat rate for every business mile you drive. For the 2025/26 tax year, the approved rates are:

• Cars and goods vehicles: 45p per mile for the first 10,000 business miles, then 25p per mile after that
• Motorcycles: 24p per mile
• Bicycles: 20p per mile

These rates are designed to cover fuel, oil, tyres, servicing, insurance, road tax, and general wear and tear in a single simple figure. You multiply your total business miles by the relevant rate, and that's your deductible expense. No receipts for fuel, no insurance documents, no MOT invoices needed.

What Counts as a Business Mile?

It's important to be precise here. You can only claim for journeys that are wholly and exclusively for business purposes. This includes travelling to client sites, visiting suppliers, attending business meetings, or going to a temporary workplace. It does not include your regular commute to a fixed place of work, or any personal travel. Keep a simple mileage log recording the date, destination, purpose, and miles driven for every business journey.

Why Simplified Expenses Usually Wins

The actual cost method sounds thorough, but it quickly becomes burdensome. You need to track every penny spent on the vehicle across the year, then calculate the percentage of time it was used for business versus personal use. You'll need receipts for fuel, insurance, servicing, repairs, parking, and road tax. If HMRC ever queries your return, you'll need to justify that business-use percentage convincingly.

By contrast, the simplified rate requires only one thing: an accurate mileage log. For a sole trader doing 8,000 business miles in a year, that's a £3,600 deduction with minimal paperwork. For most freelancers driving a reasonably modern car, this flat rate comfortably covers real-world running costs — and sometimes exceeds them, effectively giving you a small tax advantage.

When Actual Costs Might Be Better

The actual cost method can occasionally make sense if you drive a very high proportion of business miles in a vehicle with expensive running costs, or if you drive significantly more than 10,000 business miles per year and the 25p rate feels insufficient. However, once you start using the simplified rate for a particular vehicle, you must stick with it for the life of that vehicle. You cannot switch back and forth between methods, so think carefully before opting for actual costs.

How to Record and Claim

Claiming mileage as a sole trader is straightforward:

• Keep a mileage log throughout the year — a spreadsheet or app works perfectly
• Record date, start point, destination, reason for the journey, and miles driven
• Total up your business miles at the end of the tax year
• Apply the 45p rate (up to 10,000 miles) and 25p thereafter
• Enter the total figure in the vehicle expenses box on your Self Assessment tax return

The Bottom Line

For the vast majority of sole traders and freelancers, the simplified mileage rate is the smarter, simpler choice. It minimises admin, reduces the risk of errors, and often delivers a deduction that matches or beats your real costs. Start logging your business miles now and make sure you're not leaving money on the table when your next Self Assessment return is due.