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The mileage rate just went up 10p. Here is how to claim your vehicle properly.

By Buzz Accounting · 2026-08-05

For fifteen years the flat mileage rate sat at 45p. Every article about sole trader vehicle costs, including plenty still online, was written against that number. On 21 May 2026 the Chancellor announced it was going up to 55p, backdated to 6 April 2026 — the first change since 2011.

That is not a rounding adjustment. It is a 22% increase in the flat rate, and for a lot of tradespeople it flips the answer to the question they settled years ago: should I claim mileage, or claim my actual costs? This is the arithmetic, at the real 2026/27 rates, with the trap at the end that most comparisons leave out.

What changed on 6 April 2026

The approved rates for cars and goods vehicles — used both for employee mileage payments and for the self-employed simplified expenses scheme — are now:

55p per mile for the first 10,000 business miles in the tax year (up from 45p)
25p per mile for every business mile after that (unchanged)
24p per mile for motorcycles and 20p for bicycles (both unchanged)

The increase applies for the whole of 2026/27, so miles you drove in April and May before the announcement are covered at 55p too. The government has said rates beyond 2026/27 will be looked at again at a future Budget.

The two routes, and why you only get one

You may claim vehicle costs one of two ways, and the choice is made per vehicle, not per year.

Route one: flat-rate mileage

Multiply your business miles by the rate and claim the result. That single figure is deemed to cover everything to do with owning and running the vehicle — fuel, insurance, servicing, repairs, tyres, vehicle excise duty and the cost of the vehicle itself. You keep a mileage log showing date, destination, purpose and miles for each business journey. Incidental costs of a business trip, such as business parking and tolls, sit outside the flat rate and are claimed separately.

The restriction that catches people: you cannot use the flat rate for a vehicle if you have ever claimed capital allowances on it, or otherwise deducted its purchase price. And once you use the flat rate for a vehicle, you stay on the flat rate for as long as you use that vehicle in the business. The fork comes once, at the first claim.

Route two: actual costs

Add up what the vehicle really costs you across the year, then claim the business proportion. If the van is 80% business and 20% private, you claim 80% of the fuel, insurance, servicing, repairs, breakdown cover and vehicle excise duty.

The capital side depends on what you bought and how you keep your books. Cash basis is the default for sole traders, and under it the treatment splits in two:

Vans and other goods vehicles are ordinary equipment. Under the cash basis you deduct the business proportion of the purchase price as an expense in the year you pay for it.
Cars are the exception. A car is never an ordinary expense. Even on the cash basis you claim capital allowances on it — the one asset for which capital allowances survive the cash basis — and only if you are not using the flat mileage rate for it.

If you use traditional accruals accounting instead, a van is covered by the Annual Investment Allowance, which stays at £1 million and gives you 100% of the business proportion in year one. Cars are specifically excluded from the AIA.

What a car actually gets

Cars go into pools and unwind slowly, at rates that changed this April:

New and unused zero-emission cars: a 100% first-year allowance, now extended to expenditure up to 5 April 2027 for unincorporated businesses.
Cars up to 50g/km CO2: main rate pool, and the main writing-down allowance fell from 18% to 14% for income tax from 6 April 2026.
Cars over 50g/km CO2: special rate pool at 6%.

At 14% a year on a reducing balance, a £20,000 petrol car has given you about £2,800 of relief after year one and roughly £7,300 after three. That is the honest reason so many sole traders with ordinary cars end up on the flat rate: 14% of a declining balance is a slow drip, and it now drips more slowly than it did last year.

A worked four-year comparison

The figures below are illustrative, but the rates and rules are the real 2026/27 ones.

Priya is a self-employed plumber on the cash basis. In June 2026 she buys a used van for £18,000. It is 80% business use, she drives 12,000 business miles a year, and she expects to keep it four years and sell it for around £7,000. Her running costs are £2,900 of fuel, £780 of insurance, £650 of servicing, MOT and tyres, and £345 of vehicle excise duty — £4,675 a year.

Flat-rate mileage

First 10,000 miles × 55p = £5,500
Next 2,000 miles × 25p = £500
£6,000 a year, so £24,000 across four years. Nothing for the van purchase — the rate covers it.

Actual costs

Van, business share: £18,000 × 80% = £14,400, deducted in 2026/27
Running costs: £4,675 × 80% = £3,740 a year, so £14,960 over four years
Sub-total: £29,360

On those two lines alone, actual costs look £5,360 better. Here is the line that gets left out of most comparisons. Under the cash basis, when you sell an asset whose cost you deducted, the business proportion of the sale proceeds is taxable income. Priya's £7,000 sale brings £5,600 back into her profit in year four.

Net position on actual costs: £29,360 − £5,600 = £23,760
Flat rate: £24,000

The flat rate wins by £240 over four years, with a fraction of the record-keeping. At 20% income tax plus 6% Class 4 National Insurance, that £240 is worth about £62 in tax. Effectively a dead heat — decided on admin, not tax.

Run the same example at the old 45p and the flat rate would have produced only £20,000, and actual costs would have won by £3,760. Nothing about Priya's van changed. The rate did.

The decision rule you can apply in five minutes

You are really comparing one number against 55p. Work out your true cost per business mile over the whole period you will own the vehicle:

(purchase price − expected resale value + total running costs over the period) × business-use % ÷ total business miles over the period

For Priya: (£18,000 − £7,000 + £18,700) × 80% = £23,760, over 48,000 business miles = 49.5p a mile. Below 55p, so the flat rate wins. It ties exactly to the four-year comparison above, because it is the same sum done a shorter way.

Three patterns fall out of it:

High miles, modest vehicle — flat rate, comfortably. Above 10,000 miles the marginal rate drops to 25p, so very high-mileage drivers should still run the calculation rather than assume.
Expensive vehicle, low miles — actual costs, usually by a wide margin. A £35,000 van doing 5,000 business miles a year is nowhere near 55p a mile.
New zero-emission car — run the numbers before you touch the flat rate. The 100% first-year allowance on a new electric car is a large deduction you permanently give up by taking mileage instead, and it is only available on expenditure up to 5 April 2027.

Does Making Tax Digital change any of this?

The rules are the same; the rhythm is not. If your qualifying income was over £50,000 you are inside Making Tax Digital for Income Tax from 6 April 2026, and vehicle figures now have to be good enough to report every quarter rather than reconstructed each January. A mileage log kept in an app takes seconds a journey. Twelve months of guessing does not survive quarterly filing. Our MTD guide for sole traders covers the mechanics.

What to do this week

Check whether you have ever claimed capital allowances on your current vehicle. If you have, the flat rate is closed to you for that vehicle and the decision is already made.
Recalculate this year's mileage claim at 55p, not 45p. If you have been accruing at the old rate since April, you are under-claiming by 10p a mile on the first 10,000.
Do the cost-per-mile sum above for your actual vehicle and your actual miles. Five minutes, one line.
Start a proper mileage log today if you do not have one — date, destination, purpose, miles. Without it, a claim of either kind is hard to defend.
If you are about to buy, decide the method before you buy, not after. Van versus car and cash basis versus accruals change the answer more than the vehicle does. Our allowable expenses guide sets out the wider list.

Where we help

We run this comparison for clients as part of the year-end, because it is one of the few decisions where getting it right once is worth several years of tax. We also make sure the method you picked years ago is still the right one — the 10p rise means, for a good number of sole traders, that it is not. Fixed fees from £19 + VAT a month, Self Assessment included. Get started.

Quick answers

About this post

What is the HMRC mileage rate for sole traders in 2026/27?

For cars and goods vehicles it is 55p per mile for the first 10,000 business miles in the tax year and 25p per mile after that. The 55p rate replaced the long-standing 45p rate with effect from 6 April 2026, announced on 21 May 2026 and backdated to the start of the tax year, so the whole of 2026/27 is claimed at the higher figure. Motorcycles remain at 24p a mile and bicycles at 20p, both unchanged. The same rates serve as the self-employed simplified expenses rates and as the approved mileage allowance payments an employer can pay tax-free.

Should I claim mileage or actual costs?

Work out your true cost per business mile and compare it with 55p. Take the purchase price, subtract what you expect to sell the vehicle for, add every running cost across the years you will own it, multiply by your business-use percentage and divide by your total business miles. Above 55p, actual costs win. Below it, the flat rate wins and takes far less record-keeping with it. An expensive vehicle doing low business miles almost always favours actual costs; a modest vehicle doing high miles almost always favours the flat rate.

Can I switch from mileage to actual costs later?

Not for the same vehicle. Once you claim the flat rate for a particular vehicle you must keep using it for as long as that vehicle is in your business, and you cannot use the flat rate at all for a vehicle on which you have already claimed capital allowances or deducted the purchase price. The decision is made once, at your first claim for that vehicle, and it sticks. You get a genuine fresh choice when you change vehicles, which is the moment to run the comparison again rather than carrying the old habit across.

Can I claim the cost of the van itself if I use the mileage rate?

No. The flat rate is deemed to cover the acquisition of the vehicle as well as fuel, insurance, servicing, repairs and vehicle excise duty, so claiming the purchase price on top would be claiming the same cost twice. That is the single biggest reason people on the flat rate under-claim: they buy a van for £18,000, get no separate deduction for it, and never revisit the choice. What you can still claim separately are incidental costs of a business journey such as business parking and tolls, which sit outside the flat rate entirely.

Is a van better than a car for tax?

Generally yes, and by a wide margin. A van counts as ordinary plant and machinery, so on the cash basis you deduct the business proportion of its cost in the year you pay for it, and on accruals accounting the Annual Investment Allowance gives you 100% of it in year one. Cars are excluded from the Annual Investment Allowance and go into pools instead, unwinding at 14% a year for main rate cars or 6% for those over 50g/km CO2. Only a new, unused zero-emission car gets a 100% first-year allowance.

What records do I need to keep for a mileage claim?

A log of every business journey showing the date, the destination, the purpose and the miles driven, plus your opening and closing odometer readings for the year. You do not need fuel receipts under the flat rate, because the rate replaces them, but you do need the journeys. Commuting to a regular workplace does not count as business mileage. If you claim actual costs instead, keep every invoice and receipt as well as the mileage log, because you still need the business-use percentage to apportion the costs correctly.

Did the writing-down allowance for cars really change this year?

Yes. The main rate of writing-down allowance fell from 18% to 14% with effect from 6 April 2026 for income tax, and 1 April 2026 for corporation tax. The special rate pool, which covers cars emitting more than 50g/km of CO2, stays at 6%. In cash terms a £20,000 main rate car now gives about £2,800 of relief in its first year instead of £3,600. It makes an ordinary car a slower deduction than it was last year, which tilts more sole traders towards the flat mileage rate.

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