Is road tax
tax deductible?

Partly. Vehicle tax is an allowable running cost for a business vehicle, for the business share if it is also used privately (GOV.UK). If you use the mileage rate for the vehicle, vehicle tax is already covered by the rate (simplified expenses).

Vehicle tax is a small, predictable running cost, but it follows the same rules as fuel and insurance: allowable in proportion to business use when you claim actual costs, and swallowed by the mileage rate when you do not.

Is road tax tax deductible?

The HMRC rule

Vehicle insurance, repairs, fuel, parking, hire, road tax and breakdown cover, fares and hotel rooms for business trips are allowable. Travel between home and work, non-business journeys, and fines are not. The rule comes from Car, van and travel expenses, Simplified expenses if you’re self-employed.

GOV.UK lists vehicle tax among the travel costs a sole trader can claim (travel expenses), and the SA103F notes include vehicle licence fees in box 20 (SA103F notes). For a vehicle also used privately, only the business share is allowable. The simplified mileage rate replaces the actual costs of running a vehicle, so if you use it, vehicle tax is not claimed separately (simplified expenses).

When you can claim it

• The business share of vehicle tax for a car, van or motorcycle you claim actual costs for.
• All the vehicle tax for a vehicle used only in the business.
• Vehicle tax on a van, pickup or lorry used for trading.
• Direct debit instalments, in the year you pay them on the cash basis.

When you cannot

• Vehicle tax for a vehicle whose business use you claim at the mileage rate.
• The private share for a vehicle also used personally.
• Vehicle tax on a family car not used in the business.
• Late licensing penalties, which are fines.

What to claim instead

The alternative to claiming the cost of a vehicle is the simplified mileage rate: 55p a mile for the first 10,000 business miles in 2026/27 (45p before 6 April 2026), then 25p (GOV.UK). It covers the vehicle's purchase, finance and running costs in one figure, so if you use it for a vehicle you do not also claim capital allowances, fuel, insurance or repairs for that vehicle.

How to decide if you can claim it

1. Was it for the business? A cost is only allowable if you incur it wholly and exclusively for the business. If it also serves a personal purpose that cannot be separated, such as clothing that keeps you warm or a meal that keeps you going, HMRC disallows it.
2. Is part of it personal? Where a cost has a business part you can identify, such as the business calls on a phone bill or the business miles in a car, you claim that part and leave the rest out, on a reasonable basis you can explain.
3. Is it a running cost or something you keep? It is a running cost, so on the cash basis it counts when you pay it and on traditional accounting when you incur it. Nothing about it needs spreading over later years.
4. Is there a specific rule? For road tax, the deciding rule is business travel and vehicle running costs: vehicle insurance, repairs, fuel, parking, hire, road tax and breakdown cover, fares and hotel rooms for business trips are allowable. Travel between home and work, non-business journeys, and fines are not.

Worked example: vehicle tax on a van

A builder pays vehicle tax on his van, which he uses only for work, and on his car, which he uses 30% for business. He claims the van's tax in full and 30% of the car's, alongside the same percentages of their other running costs. If he later switches to a new car and uses the mileage rate for it, he stops claiming that car's tax altogether.

Vehicle tax and the mileage rate

Vehicle tax is one of the running costs the flat rate is designed to cover, alongside fuel, insurance, servicing and depreciation. That is why you cannot claim it on top. Parking, tolls and congestion charges are different: they are claimable on top of the mileage rate, because they are costs of the journey rather than of owning the vehicle.

Electric vehicles and vehicle tax

Electric vehicles now pay vehicle tax, and higher-value cars can attract an additional annual charge for several years. The tax follows the same rule as for any other vehicle: allowable for the business share when you claim actual costs, covered by the mileage rate when you do not. Check the vehicle's tax on GOV.UK when you buy it, so the running costs you compare are accurate.

Fines are separate

A penalty for not taxing a vehicle, or a fine for driving an untaxed one, is not vehicle tax: it is a penalty, and penalties are never allowable. Keep them out of your vehicle costs.

Where it goes

Vehicle tax goes in car, van and travel expenses with the vehicle's other running costs, box 20 on the full self-employment pages and the travel costs category of a Making Tax Digital update. On the short self-employment pages, it is simply part of total allowable expenses.

Road tax for more than one vehicle

If the business uses several vehicles, each is treated separately. You might claim actual costs for a van used only for work, including all its vehicle tax, and the mileage rate for your own car, with no separate tax claim for it. Record which method applies to each vehicle so the right running costs reach your expenses.

Where it goes on your return and in MTD

For a sole trader, the allowable part goes under car, van and travel expenses (SA103F box 20 on the full self-employment pages). Under Making Tax Digital for Income Tax, it goes in the same category of your quarterly update, which is the category TapTax files it under when you record the cost.

If your turnover was under £90,000, you can use the short self-employment pages (SA103S), which ask for a single figure for total allowable expenses rather than a box-by-box breakdown, and the full pages let you give just a total in box 31 too. The category still matters for your own records and for Making Tax Digital, where each quarterly update uses the same categories unless you choose to send one consolidated figure.

Most sole traders now use the cash basis, the default from the 2024/25 tax year, which counts a cost when you pay it. On traditional accounting you count it when you incur it, and equipment you keep goes through capital allowances rather than expenses.

How much an allowable cost saves

The value of a deduction is the tax it removes from your profit, not the cost itself. At the basic rate a sole trader saves 26p for every pound of allowable expense, at the higher rate 42p, and in the personal allowance taper between £100,000 and £125,140 as much as 62p. Landlords pay no Class 4 on rental profit, so they save 20p or 40p.

What £1,000 of allowable expense saves a sole trader in 2026/27

• Basic rate (20% + 6%)£260
• Higher rate (40% + 2%)£420
• Additional rate (45% + 2%)£470
• Allowance taper band (60% + 2%)£620

Records to keep

Keep the purchase or finance agreement, every invoice for running costs, and a mileage log that shows business and total miles, so you can support the business percentage. For capital allowances, keep the date the vehicle was bought, its cost and, for a car, its CO2 emissions.

From 6 April 2026, sole traders and landlords with qualifying income over £50,000 keep these records digitally and send quarterly updates under Making Tax Digital, falling to £30,000 from April 2027 and £20,000 from April 2028. The MTD requirement checker shows when it applies to you.

Common mistakes

• Claiming vehicle tax as well as the mileage rate for the same vehicle.
• Claiming all of the tax for a car that is also used privately.
• Including late-licensing penalties with vehicle tax.

Related expenses

This item sits in the car, van and travel expenses category, alongside buying a car, buying a van, car insurance, car leasing and PCP, car repairs and servicing, electric and hybrid cars, food and meals and fuel. The A to Z of expenses answers the same question for every other cost.

TapTax sorts each cost into the right category as you record it, applies the business share where you set one, and keeps the receipts with the figures, ready for your quarterly updates and final return.