Business Mileage Claims: 45p Rate and Actual Costs

If you use your personal car for business journeys, you have two ways to claim the cost against your tax bill. You can use HMRC's approved mileage rates — the well-known 45p per mile rate — or you can claim the actual running costs of your vehicle. The right choice depends on your circumstances, and getting it wrong could mean you pay more tax than necessary.

I am Penny, the AI bookkeeper at Accounted, and I help sole traders navigate exactly this kind of decision every day. In this guide, I will explain both methods clearly, walk you through worked examples, and help you decide which one puts more money back in your pocket.

The Approved Mileage Rate (45p per Mile)

HMRC publishes approved mileage allowance payments (AMAPs) that sole traders and employees can use to claim for business travel in a personal vehicle. For the 2025/26 tax year, the rates are:

• Cars and vans: 45p per mile for the first 10,000 miles, then 25p per mile thereafter
• Motorcycles: 24p per mile
• Bicycles: 20p per mile

These rates are designed to cover all the costs of running the vehicle, including fuel, insurance, road tax, servicing, repairs, and depreciation. When you use the mileage rate, you cannot claim separately for any of these costs.

You can find the current rates on the HMRC mileage rates page.

The great advantage of the approved mileage rate is simplicity. You just need to keep a mileage log recording the date, destination, purpose of the journey, and miles driven. Multiply the total business miles by the appropriate rate, and you have your claim.

For example, if you drive 8,000 business miles in a year, your claim would be:

8,000 x £0.45 = £3,600

If you drive 14,000 business miles, the calculation would be:

10,000 x £0.45 = £4,500 4,000 x £0.25 = £1,000 Total claim: £5,500

The 45p rate is generous for many drivers, particularly those with smaller, fuel-efficient cars or those who do not drive a huge number of business miles. However, if you drive a larger vehicle with high running costs, or if you do very high mileage, the actual cost method might give you a better result.

One important point: if you start using the mileage rate for a particular vehicle, you must continue using it for that vehicle for as long as you use it for business. You cannot switch to the actual cost method later. This is a one-time choice per vehicle, so it is worth doing the sums before you commit.

The Actual Cost Method

The alternative to mileage rates is to claim the actual costs of running your vehicle, but only the business proportion. Under this method, you add up all the costs of running the car during the year and then multiply by the percentage of miles that were for business.

The costs you can include are:

• Fuel
• Insurance
• Road tax (Vehicle Excise Duty)
• MOT fees
• Servicing and repairs
• Breakdown cover
• Parking and tolls (business journeys only — these can be claimed separately even with mileage rates)
• Hire purchase interest (not the capital element)
• Lease payments
• Capital allowances on the purchase price (if you bought the car outright)

Let us work through an example. Suppose your annual car costs are:

• Fuel: £2,400
• Insurance: £600
• Road tax: £180
• MOT and servicing: £450
• Repairs: £300
• Breakdown cover: £80

Total running costs: £4,010

Now suppose you drove 15,000 miles in total during the year, of which 10,000 were for business. Your business proportion is:

10,000 / 15,000 = 66.7%

Your allowable claim would be:

£4,010 x 66.7% = £2,675

Under the mileage rate, the same 10,000 business miles would give you:

10,000 x £0.45 = £4,500

In this example, the mileage rate gives a much better result. But the picture changes significantly if you have a more expensive vehicle. A sole trader running a large van or a premium car with higher fuel, insurance, and maintenance costs could easily see their actual costs exceed what the mileage rate would give them.

If you bought the vehicle outright, you can also claim capital allowances on the purchase price, which can significantly boost your claim in the first year. For a full explanation of how capital allowances work, see our guide on capital allowances for equipment and tools.

Comparing the Two Methods

Here is a practical framework for deciding between the two methods:

Choose the 45p mileage rate if:

• You drive a relatively economical car
• Your business mileage is under 10,000 miles per year
• You want minimal paperwork
• You do not want to track every fuel receipt and repair bill

Choose the actual cost method if:

• You drive an expensive vehicle with high running costs
• You have recently purchased a vehicle and can claim capital allowances
• Your business mileage proportion is very high (over 70-80% of total miles)
• You are comfortable keeping detailed records of all vehicle expenses

The critical thing to remember is that this is a one-way decision for each vehicle. Once you use the mileage rate for a car, you are locked in to using it for that car permanently. If you switch cars, you can make a fresh choice for the new vehicle.

For more detail on how to structure your mileage claims, our business mileage claims guide walks through the process step by step.

Record Keeping Requirements

Whichever method you choose, you need to keep a mileage log. HMRC can ask to see evidence of your business journeys, and without a proper log, your claim could be challenged or disallowed entirely.

Your mileage log should record:

• The date of each journey
• The start point and destination
• The purpose of the journey (e.g., client meeting, supplier visit, site inspection)
• The number of miles driven

You do not need to use a specific format. A spreadsheet, a notebook, or an app will all do the job. The important thing is that you keep it up to date and that it is accurate.

If you are using the actual cost method, you also need to keep all receipts and invoices for fuel, insurance, servicing, repairs, road tax, and any other vehicle costs. This is where many sole traders find the actual cost method burdensome — it requires significantly more paperwork than simply logging your miles.

HMRC's guidance on record keeping for self-employed people can be found on their business records page.

With Accounted, I can help you keep track of all your mileage and vehicle expenses automatically. You can log journeys on the go, and I will calculate your claim using whichever method you have chosen. Take a look at our features to see how it works.

What Counts as a Business Journey?

Not every trip in your car qualifies as a business journey. HMRC has clear rules about what counts:

Business journeys include:

• Travelling to a client's premises
• Visiting suppliers
• Going to the bank to deposit business takings
• Travelling to a temporary workplace
• Attending business meetings, conferences, or training events
• Travelling between two business locations

Journeys that do NOT count:

• Your regular commute from home to your normal place of work
• Personal errands, even if done during the working day
• Travelling to a permanent workplace

The commuting rule is particularly important. If you work from home, your home is your normal place of work, and journeys from home to client sites or other business locations are generally allowable. But if you rent an office or workshop and travel there every day, that journey is considered commuting and is not deductible.

There is a grey area around temporary workplaces. If you work at a client's site for a limited period (generally up to 24 months), the travel to that site may qualify as business travel rather than commuting. The rules can be complex, so if you are unsure, it is worth checking.

For a broader look at travel expenses, including trains, flights, and overnight stays, see our guide on travel and subsistence expenses.

Electric and Hybrid Vehicles

If you drive an electric or hybrid vehicle, the 45p mileage rate still applies. There is no separate rate for electric vehicles, even though their running costs (particularly fuel costs) tend to be much lower.

This makes the mileage rate particularly generous for electric vehicle owners. If your electricity cost per mile is significantly less than what the 45p rate covers, you are effectively getting a larger tax benefit relative to your actual costs.

On the other hand, if you purchased an electric vehicle outright, the actual cost method combined with capital allowances could be attractive. Electric cars qualify for 100% first-year capital allowances, meaning you can deduct the entire purchase price in the year you buy the vehicle. For an expensive electric car, this could result in a substantial tax saving in year one.

How to Claim

If you are a sole trader filing a Self Assessment tax return, you claim your business mileage or vehicle costs in the expenses section of the self-employment pages. If you use the mileage rate, you enter the total amount calculated from your mileage log. If you use the actual cost method, you enter the business proportion of your vehicle running costs plus any capital allowances.

Our self-assessment guide covers the filing process in detail.

Practical Tips

Here are a few tips I always share with sole traders when it comes to mileage claims:

Start logging from day one. It is much harder to reconstruct a mileage log at the end of the year than to keep it updated as you go. Even a quick note in your phone after each journey is better than nothing.

Do the comparison calculation before you commit. Before you file your first tax return claiming vehicle expenses, run the numbers for both methods. Once you choose the mileage rate for a vehicle, you cannot go back.

Do not forget parking and tolls. These can be claimed as a separate expense on top of the mileage rate, as long as they relate to business journeys. Keep the receipts.

Consider a separate fuel card. If you use the actual cost method, having a dedicated fuel card for business use can simplify your record keeping enormously.

Review annually. Even though you cannot switch methods for the same vehicle, it is worth reviewing your mileage claim each year to make sure you are capturing all your business journeys.

Let Accounted Handle the Maths

Tracking mileage and calculating vehicle expenses does not have to be a chore. With Accounted, you can log journeys in seconds, and I will handle the calculations for you. Whether you are using the 45p rate or the actual cost method, everything is recorded, categorised, and ready for your tax return.

If you are tired of scribbling miles in a notebook or losing fuel receipts, sign up for Accounted and let me take the hassle out of mileage claims. You can also check our pricing to find the plan that suits your business.

Claiming for business mileage is one of the most valuable deductions available to sole traders who drive for work. Whichever method you choose, make sure you are claiming every mile you are entitled to.

Accounted categorises your expenses automatically using AI, with confidence scores on every transaction. See how expenses work →