Mileage Allowance for the Self-Employed: The 45p and 25p Simplified Expenses Rule
For a sole trader using their own vehicle for business, HMRC offers a simplified alternative to tracking every fuel receipt, service bill and insurance renewal: a flat rate per business mile driven. It is optional, but for many small businesses it is simpler and gives a very similar result to claiming actual running costs.
The simplified mileage rates
- Cars and vans: 45p per mile for the first 10,000 business miles in the tax year, then 25p per mile after that.
- Motorcycles: 24p per mile for all business miles.
- Bicycles: 20p per mile for all business miles.
These flat rates are meant to cover fuel, servicing, insurance, repairs and depreciation combined — you do not separately claim any of those costs on top for a vehicle where you are using the mileage method.
Simplified mileage versus actual costs
The alternative is claiming a proportion of your actual vehicle running costs — fuel, insurance, repairs, servicing and capital allowances — based on the percentage of your total mileage that was for business. This can work out higher for an expensive-to-run or high-value vehicle, but it demands much more detailed record keeping across the whole year.
The rule you cannot break
Once you choose simplified mileage rates for a particular vehicle, you must keep using that method for as long as you use that vehicle in the business — you cannot switch to actual costs for the same vehicle later just because it becomes more favourable. The choice is made per vehicle, so a new van bought next year can use a different method if that suits you better.
Who cannot use this method
- Limited companies cannot use these flat rates for a vehicle the company itself owns — different capital allowance and Benefit in Kind rules apply instead.
- If you have already claimed capital allowances on a vehicle, you cannot then switch to simplified mileage for it.
- Business partnerships with a company as a partner also cannot use simplified expenses.
Practical next steps
- Keep a mileage log recording date, purpose and miles for every business journey, not just an end-of-year estimate.
- Decide which method — simplified mileage or actual costs — you will use for each vehicle before you claim any expense on it.
- Track cumulative business miles across the tax year to know when you cross the 10,000-mile rate change for cars.
- If you use a car, van or motorcycle for both business and personal journeys, only claim the business-use miles.
