Self-Employed Mileage Allowance: The 45p Rule 2026/27

For many sole traders the simplest way to claim the cost of driving for work is the mileage method: a flat pence-per-mile rate that covers everything to do with running the vehicle. Here is how it works for 2026/27 and how to decide whether it beats claiming actual costs.

The mileage rates

The approved mileage rates for the self-employed are:

• Cars and vans: 45p per mile for the first 10,000 business miles in the tax year, then 25p per mile.
• Motorcycles: 24p per mile, with no mileage threshold.

The rate is meant to cover all running costs: fuel, insurance, road tax, servicing, repairs and the wear and tear on the vehicle. You record your business miles, multiply by the rate, and that is your deduction. You cannot then claim fuel or repairs separately for that vehicle.

What counts as a business mile

Business mileage is travel you make wholly for work, such as visiting clients, going to a temporary work site, or travelling between two workplaces. It does not include:

• Ordinary commuting from home to a regular base.
• Private trips, even in a vehicle you mostly use for work.

Keep a simple log of date, journey, purpose and miles. A diary or a phone app is enough, but you must be able to back up the figure you put on your tax return.

Worked example: a mobile hairdresser

Lauren is a self-employed mobile hairdresser. In 2026/27 she drives 12,500 business miles visiting clients.

Mileage method:

• First 10,000 miles at 45p = GBP 4,500.
• Remaining 2,500 miles at 25p = GBP 625.
• Total deduction: GBP 5,125.

If Lauren's profits sit in the basic-rate band, that GBP 5,125 deduction reduces income tax at 20% and Class 4 National Insurance at 6%, a combined 26% saving of about GBP 1,333. The deduction is easy to evidence and needs no fuel receipts.

When actual costs beat mileage

The actual-cost method means adding up real running costs and claiming the business-use proportion, plus capital allowances on the vehicle itself. It can be worth more if:

• You run a high-cost or newly bought vehicle, so capital allowances are large.
• You drive relatively few business miles, so the flat rate produces a small figure.
• You have an electric vehicle, where first-year capital allowances can be generous.

The trade-off is record-keeping: every fuel, insurance and repair receipt, plus a robust business-use percentage.

The lock-in rule

The biggest catch is that once you choose the mileage method for a particular vehicle, you must stick with it for as long as you use that vehicle in the business. You cannot flip to actual costs mid-ownership. You also cannot claim capital allowances on a car you are claiming mileage for, because the rate already includes an element for the vehicle's cost.

This makes the choice most important in the first year you use a vehicle for work. It is worth modelling both methods then.

Quick decision guide

• Low-cost car, high business mileage: mileage method usually wins and is simpler.
• Expensive or new vehicle, modest mileage: actual costs plus capital allowances may win.
• You hate paperwork: the mileage method needs only a journey log.
• Electric vehicle bought outright: check actual costs, as the allowances can be significant.

To compare the two methods against your own figures and see the effect on income tax and Class 4 National Insurance, use the calchub.uk self-employed tax calculator, and check the current simplified expenses mileage rates on gov.uk before you file.