How does the simplified expenses mileage flat rate work for the self-employed?

Full answer

Simplified expenses mileage rates give sole traders and partners (though not limited companies) an easier alternative to tracking every individual vehicle cost, at the potential expense of some flexibility. **The flat mileage rates** For cars and goods vehicles, the simplified expenses flat rate is 45p per business mile for the first 10,000 business miles in a tax year, dropping to 25p per mile for any business miles beyond 10,000 in the same year. Motorcycles have a single flat rate of 24p per mile regardless of total mileage, and bicycles have their own rate of 20p per mile. **What the flat rate is meant to cover** The flat rate is designed to approximate the full cost of running the vehicle for business use -- fuel, insurance, servicing, repairs, and an allowance for the vehicle's depreciation -- all rolled into a single per-mile figure, so you cannot separately claim these actual costs on top of the flat rate mileage claim for the same vehicle (though you can still separately claim genuinely distinct costs like business parking fees, tolls, and congestion charges, which are not covered by the mileage rate). **The all-or-nothing choice per vehicle** Once you choose to use simplified expenses mileage rates for a particular vehicle, you must continue using this method for that same vehicle for as long as you use it in the business -- you cannot switch back and forth between simplified mileage rates and claiming actual costs for the same vehicle from year to year, though you can choose differently for a different vehicle if you change vehicles, or use actual costs for one vehicle and simplified mileage for another if you use more than one vehicle in the business. **When actual costs might work out better** For a newer, more expensive vehicle with high actual running costs (particularly if it depreciates quickly or has high insurance/finance costs relative to its mileage), tracking and claiming the ACTUAL costs (with an appropriate business-use percentage applied, and capital allowances claimed on the vehicle's cost) might produce a larger tax-deductible expense than the flat mileage rate would -- so it is worth roughly comparing both methods before committing, particularly for a car with high fixed costs relative to modest mileage. **Not available for limited companies** Simplified expenses mileage rates are only available to sole traders and partnerships (individuals within a partnership can use them for their own vehicle) -- limited companies must use actual cost/capital allowances methods for company-owned vehicles, though employees (including director-employees) of a limited company using their own personal vehicle for business trips can still be reimbursed tax-free by the company under the same 45p/25p Approved Mileage Allowance Payment (AMAP) rates, which are conceptually similar but operate under separate rules from the self-employed simplified expenses scheme. **Worked example** A self-employed mobile hairdresser drives 14,000 business miles in a tax year visiting clients, using her own car. Using simplified expenses, she claims 45p per mile for the first 10,000 miles (£4,500) plus 25p per mile for the remaining 4,000 miles (£1,000), a total tax-deductible expense of £5,500 for the year, without needing to keep receipts for fuel, insurance, servicing, or track the car's depreciation separately -- she simply needs a mileage log recording dates, destinations, and business purpose for each journey. **Practical tip** Keep a detailed, contemporaneous mileage log (rather than trying to reconstruct it later) recording the date, start/end points, purpose, and mileage of each business journey, since HMRC can request this evidence to support a simplified expenses mileage claim in the event of a compliance check.

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