Mileage allowance turns every business mile into a simple, tax-free claim, sparing you from tracking fuel, servicing, and insurance separately.
Mileage allowance is the simplest way to be reimbursed for business driving without drowning in fuel receipts. Instead of tracking the real cost of running your car, you claim a flat rate per business mile that HMRC has already agreed covers fuel, wear and tear, insurance, and servicing combined. For 2025/26 the headline rate is 45p per mile.
HMRC's Approved Mileage Allowance Payment (AMAP) rates are deliberately blunt: one figure per mile that is presumed to cover all the costs of running the vehicle. For cars and vans the rate steps down after 10,000 business miles in the tax year, on the logic that fixed costs are spread over more miles:
| Vehicle | First 10,000 miles | Over 10,000 miles |
|---|---|---|
| Cars and vans | 45p | 25p |
| Motorcycles | 24p | 24p |
| Bicycles | 20p | 20p |
The 10,000-mile counter resets each tax year on 6 April. Crucially, the rate is all-inclusive, so once you claim mileage you cannot also deduct fuel, road tax, insurance, or repairs for the same vehicle.
Suppose Grace is a self-employed plumber who drives 14,000 business miles in 2025/26.
Grace deducts £5,500 from her business profits before tax. As a basic-rate taxpayer this saves her £5,500 × 20% Income Tax, plus the Class 4 National Insurance on that profit, a meaningful reduction with almost no paperwork beyond a mileage log. Our mileage calculator does this split for you.
Now suppose Grace's friend Ben is employed and his company pays him 30p a mile for 8,000 business miles. The AMAP rate is 45p, so Ben is 15p a mile short:
8,000 miles × 15p = £1,200 of unrelieved cost. Ben can claim Mileage Allowance Relief on this £1,200, getting tax back at his marginal rate (£240 for a basic-rate taxpayer) through his tax return or a P87 claim.
Mileage allowance is one of HMRC's simplified expenses options for the self-employed, designed to save time. The alternative is to claim the actual running costs of the vehicle (a proportion of fuel, insurance, servicing, and capital allowances based on business use). Actual costs can be more generous for expensive or high-depreciation vehicles, but they demand far more record-keeping.
The key rule: once you use the mileage method for a particular vehicle, you must stick with it for as long as you own that vehicle. So choose carefully when you first start using a car for business. Remember too that ordinary commuting between home and a regular workplace is not business travel and cannot be claimed.
For most sole traders with a normal car, the 45p mileage rate beats itemising actual costs once you factor in the time saved. Keep a simple log of date, journey, and miles and you are covered.
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