Vehicle Expenses for Self-Employed: Cars and Vans
Introduction
If you use a car or van for business as a sole trader, you can claim tax relief on your vehicle costs. HMRC offers two methods: simplified mileage rates or actual running costs. Choosing the right method depends on your circumstances and how much business use your vehicle gets.
This guide covers both approaches, the current mileage rates for 2025/26, what you can claim under actual costs, and how to handle vehicles used for both business and personal purposes.
Two Methods for Claiming Vehicle Expenses
Option 1: Simplified Mileage Rates
Use HMRC's approved mileage rates to calculate your claim based on business miles driven.
Option 2: Actual Costs
Claim the actual running costs of your vehicle, apportioned for business use.
Important: Once you choose a method for a vehicle, you must stick with it for as long as you use that vehicle in your business. You cannot switch methods mid-way.
Simplified Mileage Rates (2025/26)
Current HMRC rates
Cars and goods vehicles (vans):
| Miles per tax year | Rate per mile |
|---|---|
| First 10,000 business miles | 45p |
| Above 10,000 miles | 25p |
Motorcycles:
| All business miles | Rate per mile |
|---|---|
| All miles | 24p |
Bicycles:
| All business miles | Rate per mile |
|---|---|
| All miles | 20p |
Example calculation
If you drive 15,000 business miles in a year:
- First 10,000 miles: 10,000 x 45p = £4,500
- Next 5,000 miles: 5,000 x 25p = £1,250
- Total claim: £5,750
What the mileage rate covers
The mileage rate includes:
- Fuel
- Insurance
- Road tax
- MOT
- Servicing and repairs
- Depreciation
You cannot claim these costs separately if using the mileage method.
What you can claim on top
Even when using mileage rates, you can claim:
- Parking fees for business trips
- Congestion charges for business trips
- Toll fees for business trips
Actual Costs Method
What you can claim
If you choose actual costs, you can claim the business proportion of:
- Fuel
- Insurance
- Road tax (vehicle excise duty)
- MOT
- Servicing and repairs
- Breakdown cover
- Lease payments (restrictions apply to high-emission vehicles)
- Hire costs
- Interest on a vehicle loan
Capital allowances
If you own the vehicle outright, you cannot claim the purchase price as an expense. Instead, you claim capital allowances:
- Annual Investment Allowance (AIA): 100% relief up to £1,000,000 (including vans and most business vehicles)
- First Year Allowance: 100% for electric and zero-emission vehicles
- Writing Down Allowance: 18% for main pool (cars with CO2 up to 50g/km), 6% for special rate pool (higher emissions)
Calculating business proportion
Calculate the percentage of business use based on mileage:
- Total miles driven: 12,000
- Business miles: 8,000
- Business proportion: 8,000 / 12,000 = 66.7%
Apply this percentage to all actual costs.
Example calculation
- Total vehicle running costs: £3,600
- Business proportion: 66.7%
- Allowable claim: £3,600 x 66.7% = £2,401
Private Use Adjustment
Why it matters
HMRC requires you to separate business and personal use. Only the business portion is tax-deductible.
How to track it
Keep a mileage log recording:
- Date
- Start and end location
- Purpose of journey
- Business or personal
- Miles driven
You do not need to submit this to HMRC, but keep it for at least 5 years in case of enquiry.
Choosing Between Methods
When mileage rates work best
- High-mileage, low running cost vehicles
- Older vehicles with lower depreciation
- Simplicity and less record-keeping
When actual costs work best
- Expensive vehicles with high running costs
- Electric or low-emission vehicles (100% first-year allowance)
- High business-use percentage
Key consideration
If you use mileage rates for a vehicle, you can never switch to actual costs for that vehicle. Choose carefully when you first use a vehicle in your business.
Electric and Low-Emission Vehicles
Tax advantages
Electric vehicles (EVs) qualify for:
- 100% First Year Allowance: Deduct the full purchase cost in year one
- Lower benefit-in-kind (BiK): Relevant if you have employees using company cars
- Zero road tax: For fully electric vehicles
Charging costs
If using mileage rates, charging costs are included in the 45p/25p rate.
If using actual costs, you can claim:
- Electricity costs for home charging (apportioned for business use)
- Public charging costs for business journeys
Vans vs Cars
HMRC definition of a van
A van is designed primarily for carrying goods, not passengers. It must have:
- A payload capacity of at least 1 tonne
- A dedicated load area separate from the cab
Key differences
- Vans qualify for the same mileage rates as cars (45p/25p)
- Vans often qualify for the full Annual Investment Allowance on purchase
- Private use of a van has different tax implications if you have employees
Record Keeping Requirements
What to keep
- Mileage log with dates, destinations, purposes, and distances
- Receipts for fuel, repairs, insurance, and other costs
- Purchase or lease agreements
- Evidence of how you calculated business use percentage
How long to keep records
Keep all records for at least 5 years after the 31 January filing deadline for the relevant tax year.
How QTax Helps
QTax supports you by:
- Helping you understand which method suits your situation
- Calculating your mileage claim or actual costs apportionment
- Ensuring your claim follows HMRC rules
- Highlighting capital allowances you may be entitled to
FAQs
Can I switch from mileage rates to actual costs?
No. Once you choose mileage rates for a vehicle, you must continue using that method for as long as you use that vehicle in your business.
What if I buy a second vehicle?
You can choose a different method for a different vehicle. Each vehicle can use its own method.
Are commuting miles claimable?
No. Travel between your home and a regular place of work is commuting and is not tax-deductible.
Can I claim for a vehicle I also use personally?
Yes, but only the business proportion. Track your mileage carefully to support your claim.
Conclusion
Claiming vehicle expenses is one of the larger deductions available to many sole traders. Whether you use the simplicity of mileage rates or the detail of actual costs, the key is to choose the right method for your situation and keep accurate records.
For the 2025/26 tax year, electric vehicles offer particular advantages through 100% first-year allowances, making them worth considering if you are planning a vehicle purchase.
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