Mileage for the Self-Employed: Simplified Expenses vs Actual Costs
Published 8th September 2026
Employees have no choice about how they claim for using their own car: it is the approved mileage rates or nothing. The self-employed do have a choice, and it is worth taking seriously, because the two methods can differ by thousands of pounds a year and you are largely stuck with whichever one you pick.
That last point is the one to sit with. Once you use the flat rates for a vehicle, you must keep using them for as long as that vehicle is in your business. There is no switching back and forth to whichever suits the year. So this is a decision to make when you get the vehicle, not when you fill in the tax return.
The two methods
Simplified expenses means multiplying your business miles by a flat rate and claiming that. You keep a mileage log and nothing else.
Actual costs means adding up everything the vehicle actually cost you across the year, working out what proportion of its use was for business, and claiming that share. On top of that you claim capital allowances for the cost of the vehicle itself.
The simplified expenses rates
| Vehicle | First 10,000 miles | Over 10,000 miles |
|---|---|---|
| Cars and goods vehicles | 55p | 25p |
| Motorcycles | 24p | 24p |
The car and goods vehicle rate for the first 10,000 miles rose from 45p to 55p from 6 April 2026, in step with the employee rates. If you are amending an earlier return, use the rate that applied to that year.
Who can use simplified expenses
Sole traders, and business partnerships that have no companies as partners. If you trade through a limited company, this is not available to you at all: the company either owns the vehicle, or it reimburses you at the approved mileage rates for using your own.
Two further restrictions catch people out:
- You cannot use the flat rates for a vehicle you have already claimed capital allowances on, or included as an expense when working out your taxable profit. Claim the car as a capital item once and that vehicle is on the actual costs method permanently.
- Vehicles designed for commercial use are excluded from the car category, which means black cabs, hackney carriages and dual-control driving instructors' cars are outside the simplified scheme.
You do not have to use the same method across every vehicle. A van on actual costs and a motorbike on flat rates is perfectly fine. The lock-in is per vehicle, not per business.
Where simplified expenses wins
Simplified: 10,000 × 55p = £5,500, plus 2,000 × 25p = £500. £6,000.
Actual costs (illustrative figures): fuel £2,300, insurance £620, vehicle tax £195, servicing and MOT £450, tyres £280, breakdown cover £90, repairs £250. Total running costs £4,185, of which 80% is £3,348. Capital allowances on a car emitting over 50g/km run at the special rate of 6% a year on a reducing balance, so £900 in year one, restricted to 80% business use, giving £720. £4,068.
Simplified is ahead by nearly £2,000 here, and it also saves the entire job of keeping fuel and servicing receipts. This is the typical picture for an ordinary car doing serious business mileage: the flat rate is generous, particularly in the first 10,000 miles.
Where actual costs wins
The balance flips whenever the vehicle itself is expensive and the mileage is modest, because capital allowances are the biggest number in the calculation and simplified expenses give you none of them.
Simplified: 3,000 × 55p = £1,650.
Actual costs: a new and unused car with zero emissions qualifies for a 100% first-year allowance, so £42,000 restricted to 30% business use is £12,600 in year one. Add 30% of running costs of roughly £1,550, which is £465. £13,065 in the first year.
That is not a fair fight. But read it carefully, because it is a timing difference rather than free money: you get the deduction once, at the start, and there is nothing left to claim in later years. If you sell the car, a balancing charge can claw some of it back. The comparison you actually want is over the whole period you expect to own the vehicle, not year one alone.
Vans behave similarly and more simply. A van is plant and machinery rather than a car, so it qualifies for the Annual Investment Allowance, which currently gives 100% relief on qualifying spend up to £1 million a year. Buy a £18,000 van used wholly for business and you have an £18,000 deduction in the year of purchase, against £6,500 if you did 14,000 miles on the flat rates.
A rough rule of thumb
| Your situation | Usually better |
|---|---|
| High business mileage, older or cheap vehicle | Simplified expenses |
| Low business mileage, expensive vehicle | Actual costs |
| New zero-emission car | Actual costs |
| Van bought outright and used for business | Actual costs |
| You hate paperwork and the numbers are close | Simplified expenses |
Where it is genuinely close, weigh the admin. Actual costs means retaining every fuel receipt, every service invoice and every insurance schedule for the retention period, and being able to justify your business use percentage. Simplified expenses means a mileage log. For a lot of sole traders that difference is worth a few hundred pounds on its own.
What you can Claim either way
Some costs sit outside the choice entirely and are claimable whichever method you use, as long as the expense is for business:
- Parking at a business destination
- Tolls and the congestion charge
- Train, bus, taxi and air fares for business journeys
- Overnight accommodation and reasonable subsistence on a business trip
Parking fines and speeding fines are not deductible under either method, whatever the circumstances of the journey.
Leased and financed vehicles
If you bought the vehicle on hire purchase, you are treated as owning it, so capital allowances are available and the actual costs method is on the table. If you lease it on a contract hire agreement you do not own it, so there are no capital allowances, and you deduct the rentals instead, with a restriction on higher-emitting cars. Either way, the choice between flat rates and actual costs still has to be made per vehicle and still sticks.
Decide before you buy
The practical advice is simple. Before you acquire a vehicle for the business, run both methods over the years you expect to keep it, using realistic mileage rather than optimistic mileage. Then commit, and set your bookkeeping up to match: a mileage log for the flat rate method, or a proper expense trail for actual costs.
Getting this right at the point of purchase is worth more than any amount of clever work at tax return time, because by then the decision has already been made for you.
Our mileage claim calculator gives you the simplified expenses side of the comparison. Put your own running costs next to it before you settle on a method.