HMRC Mileage Allowance for Sole Traders: Rates and Rules

The HMRC approved mileage rates for sole traders using their own vehicle for business are 45 pence per mile for the first 10,000 business miles in the tax year, and 25 pence per mile for any additional business miles beyond 10,000. These rates have remained unchanged for over a decade and apply to cars and vans regardless of their fuel type, including petrol, diesel, hybrid, and fully electric vehicles.\n\nFor motorcycles, the rate is 24 pence per mile with no tiered reduction after 10,000 miles. For bicycles, the rate is 20 pence per mile. These alternative rates are less commonly used by tradespeople but are relevant if you occasionally use a motorcycle or bicycle for business journeys.\n\nThe mileage rate is designed to cover all costs associated with running the vehicle for business purposes, including fuel, insurance, road tax, servicing, repairs, MOT, depreciation, and finance costs. Because it covers everything, you cannot claim any other vehicle costs on top of the mileage rate. This makes the calculation simple but means the allowance may not fully cover costs for tradespeople with expensive vehicles or high maintenance costs.\n\nFor a tradesperson driving 15,000 business miles per year, the mileage claim would be 10,000 miles at 45p (4,500 pounds) plus 5,000 miles at 25p (1,250 pounds), totalling 5,750 pounds. This is a significant tax deduction that reduces your taxable profit and saves you money on both income tax and National Insurance.

Business miles include any journey made wholly and exclusively for business purposes. For tradespeople, this typically covers travel from one job site to another during the working day, travel to suppliers to collect materials, journeys to meet customers for quotes and estimates, trips to the bank, accountant, or business meetings, and travel to training courses or trade shows.\n\nThe most important rule is that your regular commute from home to a permanent place of work is not a business journey. However, most sole trader tradespeople do not have a permanent place of work. If you travel directly from home to different customer sites each day, with no single site being your regular workplace, each of these journeys qualifies as business mileage. This is a significant advantage for mobile tradespeople.\n\nIf you do have a regular workshop or yard that you attend daily, journeys between that base and customer sites are business mileage, but the journey from home to the workshop is a commute and is not claimable. However, if you travel directly from home to a customer site without stopping at your workshop, that journey can be claimed.\n\nJourneys that combine business and personal purposes require careful treatment. If you drive to a supplier to pick up materials and then continue to the supermarket for personal shopping, only the portion of the journey that relates to the business purpose is claimable. In practice, you would claim the distance from your starting point to the supplier and back, not the additional miles for personal errands.

To claim mileage, you must keep a contemporaneous record of every business journey. HMRC expects your mileage log to include the date of each journey, the start and end locations, the purpose of the journey, and the distance in miles. You do not need to record odometer readings, though some tradespeople find this a useful cross-check.\n\nA contemporaneous record means one made at or near the time of the journey, not reconstructed at the end of the year from memory. If HMRC questions your mileage claim and your records are a list created retrospectively, they may disallow part or all of the claim. Recording journeys daily or weekly is much more credible than a year-end estimate.\n\nTradeTally includes a mileage tracker that logs business journeys automatically using your phone's location services, or allows you to enter them manually with a few taps. Each journey is tagged with the customer or purpose, creating an HMRC-compliant mileage log throughout the year. At tax time, the total business miles and the calculated mileage allowance are ready for your SA103F.\n\nIf you use Google Maps or a satnav that records your journeys, these records can support your mileage claims. Print or save the route histories periodically as backup evidence. HMRC is increasingly familiar with digital evidence and accepts journey logs from apps and mapping services alongside traditional paper records.

Sole traders can choose between the simplified mileage rate and claiming actual vehicle costs. The decision is important because once you choose a method for a particular vehicle, you must stick with it for as long as you use that vehicle in your business. You cannot switch between methods year to year for the same vehicle.\n\nThe mileage rate is simpler and requires less record-keeping. You only need a mileage log, not fuel receipts, insurance documents, or service invoices. It works well for vehicles with low running costs and for tradespeople who prefer administrative simplicity. A tradesperson driving a relatively efficient van with low maintenance costs may find the 45p rate more than covers their actual costs.\n\nActual costs give a more precise deduction and may be better for tradespeople with expensive vehicles, high fuel consumption, or significant repair bills. Under actual costs, you claim the business proportion of all vehicle expenses including fuel, insurance, road tax, servicing, repairs, breakdown cover, parking, and cleaning. You can also claim capital allowances on the purchase price, which the mileage rate does not allow.\n\nTo decide, calculate both methods for a typical year. If you drive 12,000 business miles and your total vehicle costs are 8,000 pounds per year with 80 percent business use, your actual cost claim would be 6,400 pounds. Under the mileage rate, you would claim 10,000 at 45p plus 2,000 at 25p, totalling 5,000 pounds. In this case, actual costs give a better result. However, if your vehicle costs only 5,000 pounds per year at 80 percent business use, giving 4,000 pounds, the mileage rate at 5,000 pounds would be more beneficial.