As a self-employed individual in the UK, claiming vehicle expenses correctly can save you hundreds — or even thousands — of pounds on your tax bill. But the rules are full of traps, especially around simplified mileage rates, switching methods, finance agreements like PCP, home-as-base journeys, and electric vehicles.
Recent HMRC webinar Q&A sessions highlighted the most common areas of confusion among sole traders, tradespeople, drivers, and freelancers. Here’s a clear, practical breakdown to help you stay compliant and maximise your claims for the 2026/27 tax year.
1. Simplified Mileage Rates vs Actual Costs
You have two main options for claiming car/van expenses:
Simplified (Flat-Rate) Method (easiest for most people): No need to track fuel, insurance, servicing, or depreciation separately. Just record your business miles.
2026/27 Rates (updated from April 2026):
- Cars & Vans: 55p per mile for the first 10,000 business miles
- 25p per mile for any miles above that
- Motorcycles: 24p per mile
- Bicycles: 20p per mile
Note: These rates already include fuel, maintenance, insurance, etc. You can still claim extras like tolls, parking, or congestion charges separately.
- Actual Costs Method: Track all running costs + claim capital allowances on the vehicle itself. Better if you have high costs or a low-mileage, expensive vehicle — but requires detailed records and a mileage log for business/private split.
Key Rules:
- You can usually switch from actual costs to simplified (or vice versa) when you change vehicles.
- Once you use the flat-rate for a particular vehicle, you generally stick with it for as long as you own/ use that vehicle.
- You cannot mix the two methods for the same vehicle in the same year.
Pro Tip: Keep a simple mileage log (date, journey purpose, start/end, miles) even with the flat rate — HMRC may ask for it.
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