How can I claim mileage?

Motor vehicle expenses can be a significant cost for many small businesses. There are two main ways to claim for these expenses – simplified expenses (mileage) or actual costs, and the rules differ depending on whether you’re a sole trader or running a limited company.

For Sole Traders

1. What are my options for claiming vehicle costs?

You can choose between:

• Simplified expenses (flat rate per mile)
• Actual costs method

You must pick one method per vehicle, and you must stick with simplified expenses for the lifetime of that vehicle if you choose it first.

2. How does simplified mileage work?

You claim:

• 45p per mile for the first 10,000 business miles per tax year
• 25p per mile for any business miles above 10,000

This rate covers:

• Fuel
• Insurance
• Repairs and servicing
• Road tax
• MOT
• Depreciation or leasing costs

You can’t claim any additional vehicle-related expenses if you use this method.

3. What about actual costs?

You track:

• Fuel
• Insurance
• Repairs and maintenance
• MOT and road tax
• Finance interest or lease payments
• Breakdown cover
• Parking for business purposes

Then, you apportion costs based on the business vs personal mileage for the year – so a mileage log needs to be kept for business miles. And you also need to log the miles on your car at the start and end of the tax year.

4. Can I switch between methods?

No – once you use simplified expenses for a vehicle, you must continue to use it for as long as you own or lease that vehicle.

For Limited Companies

1. How do I claim mileage as a director or employee?

If you’re using your own personal vehicle for business (not commuting), you can claim:

• 45p per mile for the first 10,000 business miles
• 25p per mile after that

This is reimbursed through the payroll as an expense, tax-free. The company can claim corporation tax relief on the payments.

This rate covers:

• Fuel
• Wear and tear
• Insurance
• Maintenance

If you’re using the mileage method, you can’t claim for individual running costs like fuel or servicing separately.

2. What if the company owns or leases the vehicle?

In this case, the company pays all vehicle costs, but:

• The costs must be wholly and exclusively for business use to be fully deductible
• If there’s any personal use, a Benefit in Kind (BIK) charge applies, which must be reported via a P11D or payroll
• The company may also be liable for Class 1A National Insurance

This method is more complex and usually only worthwhile for electric or low-emission vehicles.

3. What about using a bicycle for business travel?

You can claim 20p per mile for using a personal bicycle for business journeys.
This must exclude ordinary commuting, but includes trips to clients or between workplaces.

What isn’t covered by the 45p per mile rate?

Whether you’re a sole trader or a company director using the simplified method:

• Parking fines or speeding tickets
• Congestion charges for non-business journeys
• Toll roads not related to business
• Travel between home and your regular workplace (commuting)

Key Takeaways

• Use simplified mileage for ease — but it must be applied consistently.
• Use actual costs if your vehicle has high expenses and a high proportion of business use.
• Limited companies can reimburse directors and employees mileage or own vehicles outright — each has tax implications.
• Bicycle mileage (20p per mile) is a valid, tax-free claim for business travel.
• Always keep accurate mileage logs and receipts for either method.