How to Track Business Miles for HMRC

If you use your personal vehicle for business journeys, you could be sitting on one of the most straightforward tax deductions available to UK taxpayers. Yet thousands of sole traders and company directors fail to claim business mileage each year, either because they do not keep proper records or because they are unsure what qualifies.

This guide walks you through everything you need to know about tracking business miles for HMRC: the approved rates, what counts as a business journey, record-keeping requirements, and how to avoid the mistakes that trigger enquiries. We will also show you how Penny, your AI bookkeeper on Accounted, can make the whole process virtually effortless.

Understanding HMRC Mileage Rates

HMRC publishes Approved Mileage Allowance Payments (AMAPs) that set the maximum amount you can claim per business mile without incurring a tax charge. For cars and vans, the rates are:

• 45p per mile for the first 10,000 business miles in the tax year
• 25p per mile for each business mile above 10,000

Motorcycles attract a flat rate of 24p per mile regardless of distance, while bicycles are set at 20p per mile. These rates are designed to cover all running costs including fuel, insurance, servicing, road tax, and depreciation. You do not claim these costs separately when using the mileage method.

It is worth noting that the 45p and 25p rates have remained unchanged since 2012. Although there have been periodic calls for an increase, particularly given rising fuel prices, HMRC has so far kept them static. Even so, the mileage allowance remains a generous deduction for many drivers, especially those covering fewer than 10,000 miles per year.

If you are an employer paying mileage to staff, you can pay up to the AMAP rates without creating a taxable benefit. If you pay less than the approved rate, employees can claim Mileage Allowance Relief for the difference. Full details are available on the GOV.UK page for employees who use vehicles for work.

What Counts as Business Travel

This is where many people trip up. HMRC draws a firm line between business travel and ordinary commuting, and getting it wrong can lead to penalties and interest on unpaid tax.

Business travel includes:

• Driving from one workplace to another (for example, visiting a client's office when you normally work from home)
• Travelling to a temporary workplace, defined as somewhere you attend for a limited period or for a temporary purpose
• Delivering goods to customers
• Driving to the bank to pay in business takings
• Travelling to meet suppliers, attend trade shows, or conduct site visits
• Journeys between two separate business premises you operate

Business travel does NOT include:

• Your regular commute from home to a permanent workplace
• Travel that is substantially ordinary commuting, even if you make a minor business detour
• Private journeys, even if you conduct a quick business call on the way

The critical distinction is the concept of a permanent workplace versus a temporary one. If you are a sole trader who works from home, your home is your permanent workplace, and journeys to clients are business travel. However, if you rent an office and drive there every day, that daily commute is not claimable, even though you are self-employed.

For contractors and freelancers, the rules around temporary workplaces can be more nuanced. A workplace generally becomes permanent if you attend it, or expect to attend it, for more than 24 months. Keeping this in mind is essential when planning your claims.

Record-Keeping Requirements

HMRC expects you to keep a contemporaneous record of every business journey you wish to claim. "Contemporaneous" means recorded at or near the time of the journey, not reconstructed from memory months later. Your records should include:

1. Date of the journey
2. Start and end points (addresses or clear descriptions)
3. Purpose of the journey (for example, "client meeting with ABC Ltd")
4. Miles travelled (use your odometer or a mapping tool)
5. Running total for the tax year so you know when you cross the 10,000-mile threshold

You can keep these records in a notebook, a spreadsheet, or a dedicated app. The format does not matter, provided the information is complete and accurate. HMRC may ask to see your mileage log during an enquiry, and a well-maintained record is your best defence.

This is where Penny makes a real difference. When you send Penny a WhatsApp message like "Drove 47 miles to client meeting in Manchester," she logs the journey with the date, distance, and purpose automatically. She keeps a running total across the tax year and flags when you approach the 10,000-mile threshold so you know when the rate drops to 25p. You can review your full mileage log at any time through the Accounted features dashboard, which gives you an exportable report ready for your tax return.

Simplified Expenses vs Actual Costs

If you are a sole trader or a partner in a business partnership, you have two choices for claiming vehicle costs:

Option 1: Simplified expenses (mileage allowance)

You use the flat-rate HMRC mileage allowance described above. This is the most common method and is generally simpler. You cannot claim any other vehicle running costs on top, but you do not need to keep fuel receipts, insurance documents, or service records for tax purposes.

Full guidance on this method is available from GOV.UK's simplified expenses page for vehicles.

Option 2: Actual costs

You claim the actual costs of running the vehicle, apportioned between business and private use. This means tracking every penny spent on fuel, insurance, road tax, servicing, repairs, and depreciation (or lease payments). You then calculate the business-use percentage based on your mileage records and claim that proportion.

The actual costs method can produce a larger deduction if you drive a relatively expensive vehicle with high running costs or if you do a great deal of business mileage. However, it comes with a significantly heavier record-keeping burden, and once you choose this method for a particular vehicle, you must stick with it for as long as you use that vehicle in the business.

For most sole traders, the simplified mileage allowance is the better option. It is easier to manage, requires less paperwork, and the 45p rate is generous enough to cover costs for many vehicles, particularly smaller, fuel-efficient cars.

VAT on Fuel and Mileage

If you are VAT registered, the interaction between mileage claims and VAT can be confusing. Here is how it works:

When you use the mileage allowance method, you cannot reclaim VAT on fuel as a separate input tax claim. The mileage rate is treated as inclusive of all costs, including the VAT element of fuel.

However, there is an advisory fuel rate published by HMRC that some VAT-registered businesses use to calculate the VAT element of fuel for business journeys. This applies mainly to company car drivers rather than sole traders using the simplified expenses method.

If you use the actual costs method, you can reclaim the VAT on fuel, but only the proportion that relates to business use. You must keep all fuel receipts (valid VAT receipts, not just card payment slips) and have a robust mileage log to justify the business-use percentage.

For most small businesses, keeping it simple with the mileage allowance is the sensible approach. The VAT savings from the actual costs method are often marginal and rarely justify the additional administrative effort.

Claiming as a Sole Trader vs Limited Company

The way you claim business mileage depends on your business structure.

Sole traders claim mileage as an allowable expense on their Self Assessment tax return. You enter the total business miles and the claim amount in the self-employment pages. If you use simplified expenses, HMRC's online filing system will calculate the amount for you based on the miles you enter.

Limited company directors who use their personal car for business can be reimbursed by the company at the AMAP rates (45p/25p). This payment is tax-free for the director and a deductible expense for the company. If the company pays more than the approved rates, the excess is treated as a taxable benefit and must be reported on a P11D.

If the company owns the car or provides it as a company car, the mileage allowance does not apply. Instead, the company claims the actual running costs, and the employee is taxed on the benefit in kind. Advisory fuel rates then become relevant for reimbursing fuel costs for private use.

Company directors should also be aware that mileage reimbursements must be genuine business journeys. HMRC has been known to challenge directors of personal service companies who claim mileage for travel to a single client site that is effectively a permanent workplace.

Common Mistakes to Avoid

Over the years, we have seen a number of recurring errors in mileage claims. Here are the ones to watch for:

Claiming the commute. This is the single most common mistake. Your journey from home to a permanent workplace is not business travel, no matter how far it is. If HMRC reclassifies your workplace as permanent, every commuting mile you have claimed becomes disallowable.

Rounding up or estimating. Do not guess your mileage. Use your odometer, Google Maps, or a similar tool to record actual distances. Round to the nearest mile if you wish, but do not inflate figures.

Forgetting to track from day one. Many new sole traders only start recording mileage when they realise they can claim it, often months into the tax year. By then, earlier journeys are lost. Start your mileage log on the first day of trading.

Mixing methods. If you start using the mileage allowance for a vehicle, you must continue using it for that vehicle. You cannot switch to actual costs partway through, or vice versa.

Not keeping records for long enough. HMRC can enquire into a tax return for up to 12 months after the filing deadline, or longer if they suspect carelessness or deliberate error. Keep your mileage records for at least five years after the 31 January filing deadline.

How Penny Makes Mileage Tracking Effortless

One of the reasons business owners struggle with mileage claims is that traditional tracking methods are tedious. Nobody wants to fill in a spreadsheet at the end of every journey. That is exactly why we built mileage tracking into Penny.

With Accounted, you simply message Penny on WhatsApp after a business journey. You can say something as simple as "42 miles to client in Leeds" and Penny will log the date, distance, destination, and purpose. She calculates the claim amount at the correct HMRC rate, tracks your running total, and alerts you when you hit the 10,000-mile threshold.

At tax return time, your complete mileage record is ready to go. No scrambling through notebooks, no guessing at distances, no forgotten journeys. If you are working with our guide on home office expenses for the 2025-26 tax year, you can combine mileage claims with other deductions to build a comprehensive picture of your allowable expenses.

If you are not yet using Accounted to track your business mileage, now is the perfect time to start. Sign up today and let Penny take the hassle out of one of the most valuable tax deductions available to you. Your future self, and your accountant, will thank you.

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