Mileage allowance vs actual costs — which saves more tax

Updated: 14/07/2026 · 6 min read

You can claim your vehicle either with HMRC’s simplified mileage rate — 45p per business mile for the first 10,000 miles a year, 25p after — or with actual running costs (fuel, insurance, servicing, MOT, repairs) in your business-use proportion. You choose once per vehicle and stick with it while you use that vehicle.

Method 1: the mileage rate

Keep a log of business miles and multiply. The rate covers everything — fuel, insurance, wear and tear, depreciation — so you claim nothing else for the vehicle. Minimal paperwork; you just need a credible mileage log (date, journey, purpose, miles).

  • Cars and vans: 45p up to 10,000 miles, then 25p
  • Motorcycles: 24p
  • Home-to-regular-workplace commuting does not count
  • A mileage log is required evidence

Method 2: actual costs

Keep every vehicle receipt and claim the business proportion, plus capital allowances on the vehicle’s purchase cost. More admin, but often more money for an expensive-to-run van used mostly for work.

  • Fuel, insurance, servicing, MOT, repairs, tyres
  • Finance interest element on loans or leases
  • Parking and tolls on business journeys (never fines)
  • You must be able to justify the business-use percentage

Which usually wins?

Rule of thumb: many miles in a cheap car → mileage rate; fewer miles in a costly van → actual costs. Model both for your first year before committing, because you cannot switch methods for the same vehicle.

The rules you cannot break

  • No mixing methods for one vehicle
  • No claiming commuting to a regular base
  • No fines or penalty charges
  • No 100% claims on a vehicle you also use privately

Every receipt captured, categorised and audit-ready.

Snap a photo or forward the email — Reclaim Day reads the vendor, amounts, VAT and date for you.

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Frequently asked questions

What is the current mileage rate?+

45p per business mile for the first 10,000 miles in a tax year, 25p thereafter (cars and vans). Motorcycles: 24p.

Can I switch between mileage and actual costs?+

Not for the same vehicle. You pick a method when you first claim for that vehicle and keep it until you change vehicle.

Can I claim fuel receipts on top of 45p per mile?+

No — the mileage rate already includes fuel and all running costs. Fuel is only claimable separately under the actual-costs method.

Does driving from home to a site count as business miles?+

Travel to a regular workplace is commuting and does not count. Travel between changing sites or to customers generally does. When in doubt, ask an accountant.

Related guides

Allowable expenses — what the self-employed can claimSA103 expense categories — where each cost goes

This guide is general information, not tax advice. Rules and figures change — check gov.uk (HMRC) for current rates, and speak to an accountant about your situation.