Mileage Expense Claims for Sole Traders and Company Directors: 2026 Guide

If you use your own car for business — whether you run your own business as a sole trader or you are a director of a limited company — you can claim back the cost of those journeys. The rules differ slightly depending on your setup, but the same HMRC rates apply to both.

This guide explains it all in plain language. Rates and rules are accurate as at 8 April 2026.

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The Approved Mileage Rates

HMRC sets approved rates for business mileage. These rates have not changed since April 2011:

The 10,000-mile threshold resets every tax year (6 April to 5 April). It applies to you personally — not per vehicle. If you use two different cars during the year, the miles in both count together towards that 10,000 threshold.

Electric and hybrid cars use the same rates as petrol and diesel. If you own an electric or hybrid vehicle and use it for business, you still claim 45p per mile for the first 10,000 miles and 25p after that. HMRC confirmed this in EIM31240 — EVs sit within the standard "cars and vans" category. There is no separate, lower rate for personal EVs under this scheme.

What do these rates cover? Everything in one figure — fuel (or electricity), insurance, servicing, repairs, tyres, road tax, MOT, and the general wear on your vehicle. Because it is an all-in rate, you cannot then separately claim fuel receipts, charging costs, or insurance on top.

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If You Are a Sole Trader

As a sole trader, mileage is a business expense — it reduces your profit and therefore the tax you pay. HMRC gives you two ways to handle it.

Option 1: The Flat Mileage Rate (the Simple Way)

You claim a fixed amount per business mile using the rates above — no receipts needed, no complex calculations. HMRC calls this simplified expenses (BIM75005).

Example: You drive 7,000 business miles in the year. Your mileage deduction is:

7,000 × 45p = £3,150 off your taxable profit

If your next 4,000 miles for the year push you over 10,000 total, those extra miles drop to 25p each.

You can still claim parking fees, tolls, congestion charges, and ULEZ charges on top — separately, provided they were for business journeys.

Two rules you must follow:

1. Stick with it once you start. Once you use the mileage rate for a vehicle in any tax year, you must keep using it for that vehicle every year going forward. You cannot switch to actual costs one year and back to the mileage rate the next.

2. Never mix it with capital allowances. If you have ever claimed capital allowances on a vehicle — a tax deduction for the cost of buying it — you cannot use the flat mileage rate for that vehicle. The two systems cannot be used together on the same vehicle. If you want to use the mileage rate, the vehicle must never have had capital allowances claimed on it.

For most sole traders, the flat mileage rate is the simplest option and requires the least record-keeping.

Option 2: Actual Costs

Instead of using the flat rate, you can track your actual vehicle running costs and claim the business proportion.

Here is how it works: If 60% of your total miles in the year are business miles, you can claim 60% of your fuel, insurance, servicing, repairs, road tax, and MOT as a business expense. You can also claim capital allowances on 60% of the cost of the vehicle itself.

This approach involves more work — you need to keep all receipts and track your total mileage carefully. It can produce a bigger deduction than the flat rate if your actual costs are high, or if you have an expensive vehicle to run.

Once you have used actual costs (or claimed capital allowances on the vehicle), you cannot then switch to the mileage rate for that vehicle.

What Counts as a Business Journey?

Only trips made for your business qualify. This includes visiting clients, going to suppliers, attending training, or travelling to a temporary work location.

Your normal journey from home to your regular place of work does not count. It does not matter how far you travel — commuting is private travel, not business travel. HMRC is firm on this, and it is one of the most common points challenged in enquiries.

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If You Are a Limited Company Director

As a director, you are technically an employee of your company — even if you own it. This means mileage works slightly differently from the sole trader route, but the end result is very similar.

Using Your Own Car for Business

When you use your personal car to carry out work on behalf of your company — visiting clients, attending meetings, travelling between sites — your company can reimburse you at the approved HMRC rates:

• 45p per mile for the first 10,000 miles in a tax year
• 25p per mile after that

This is tax-free for you and fully deductible by the company as a business expense. No income tax, no National Insurance — as long as the company does not pay above the approved rates.

The mileage count is personal to you and resets each tax year.

If the company pays above the approved rates, the extra becomes a taxable benefit. The company would need to report it on a P11D and pay Class 1A National Insurance on the excess. It is generally not worth paying above the approved rates for this reason.

If the company pays you nothing or less than the approved rate, you can claim Mileage Allowance Relief (MAR) through your Self Assessment tax return on the difference. You can go back up to four tax years if you have missed this.

Example of a missed claim: You have driven 5,000 business miles per year for the past three years and your company paid nothing. Each year you were entitled to 5,000 × 45p = £2,250 of relief. Over three years that is £6,750 in deductions — worth £2,700 in tax saved if you pay at 40%.

What Counts as a Business Journey?

The same rule applies as for sole traders. Visiting clients, going to meetings, travelling to a temporary work location — these are business journeys.

Your regular commute from home to your company's office does not qualify, even if you own the company. Home-to-office travel is still treated as private travel under HMRC rules.

The 24-Month Rule: When a Client Site Stops Being Temporary

This is an important rule that catches a lot of contractors and directors off guard.

Travel to a client site qualifies as a business journey because it is a temporary workplace — somewhere you attend for a limited purpose, not your permanent base. But HMRC removes that temporary status if you end up spending 40% or more of your working time at the same location over a period that lasts, or is likely to last, more than 24 months.

Once that threshold is crossed, the site is treated as a permanent workplace. Travel from home to that site becomes ordinary commuting — not claimable.

The rule is forward-looking. If you take on a contract that is expected from the start to run for more than 24 months, travel is disallowed from day one — not just after month 25. HMRC looks at what you reasonably expected at the outset, not just what actually happened.

If a contract is extended beyond 24 months, travel becomes disallowed from the point at which you knew (or should have known) the engagement would exceed 24 months — not retrospectively from the start.

Example: A director contracts at a client's office four days a week. The contract is initially for 18 months. Travel to that site is claimable. At month 14, the contract is extended to 30 months in total. From month 14 onwards, travel to that site is no longer claimable — the workplace has lost its temporary status.

This rule applies to the director personally and is independent of how the company is structured. It also applies equally to employees. The relevant HMRC guidance is EIM32080.

Carrying Colleagues on Business Trips

If you give fellow employees a lift on a business journey — a trip that also counts as a work journey for them — your company can pay an extra 5p per mile per passenger, also tax-free.

Two colleagues in the car on a 100-mile business trip = 100 × 5p × 2 = £10 extra, on top of your mileage allowance.

This only applies when the passenger is also an employee of the company and the trip is genuinely a business journey for them — not a social occasion or a regular commute.

If You Have a Company Car (Petrol or Diesel)

The rules above only apply when you are using your own personal vehicle. If your company owns or leases a petrol or diesel car and provides it to you, the 45p/25p rates do not apply. Instead, fuel reimbursements for company car business travel use HMRC's Advisory Fuel Rates (AFRs) — separate rates that only cover fuel, vary by engine size, and are updated quarterly in March, June, September, and December.

If You Have a Company Electric Car

Electric company cars have their own separate rate called the Advisory Electricity Rate (AER). This covers only the electricity cost of business miles — not the full running cost (which is handled through the benefit-in-kind tax system separately).

Current Advisory Electricity Rates (from 1 March 2026)

Source: HMRC Advisory Fuel Rates, updated 23 February 2026.

How this works in practice:

If your company pays you back for the electricity you use on business trips in a company EV, it can reimburse at these rates tax-free. If you charge entirely at home, the company pays you 7p per mile for business journeys. If you charge entirely at public charge points, the rate is 15p per mile.

If you charge in both places, you can split the claim proportionally — based on a fair and reasonable estimate of how much of your charging happens at each location.

If your actual electricity cost per mile works out higher than these rates — for example because your home electricity tariff is high — you can use a higher rate, but you will need to be able to demonstrate the actual cost with evidence.

One important point: the AER for company EVs is much lower than the 45p/25p rate that applies to personal EVs. This is intentional — the AER only covers fuel (electricity) costs, whereas the 45p/25p AMAP rate covers fuel plus all other running costs. Do not confuse the two.

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Keep a Mileage Log

Whether you are a sole trader or a director, HMRC expects you to keep records of every business journey. If HMRC ever checks your claim, you need to show:

• The date of the journey
• Where you started and where you went
• The reason for the journey
• The number of miles

A simple spreadsheet, notebook, or mileage app all work fine. The key is recording journeys at the time — not trying to piece them together from memory months later.

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Common Mistakes to Avoid

Claiming the daily commute. Home-to-office travel is not a business journey. It does not matter how far you travel or that you own the business — HMRC applies this rule consistently.

Sole traders switching mileage methods. Once you use the flat rate for a vehicle, you must keep using it for that vehicle. Switching to actual costs and back is not allowed.

Claiming capital allowances and the flat mileage rate on the same vehicle. These two systems cannot be combined. Pick one and stick with it.

Directors missing relief because the company pays nothing. If your company has never reimbursed you for business mileage, you may be owed years of tax relief. It can be claimed back up to four years through Self Assessment.

Treating all work-related travel as business miles. Only journeys made in the course of doing your work — visiting clients, attending meetings — count. Travel to and from your usual workplace does not.

Continuing to claim mileage to a client site after the 24-month rule kicks in. If you have been attending the same client site for more than 24 months (spending 40% or more of your time there), that site is no longer a temporary workplace. Travel to it is not claimable. Many contractors do not realise the rule applies from the point the engagement was expected to exceed 24 months — not just after the fact.

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Rates at a Glance (8 April 2026)

AMAP rates unchanged since April 2011. Advisory Electricity Rates effective 1 March 2026. Sources: HMRC BIM75005; EIM31240; Advisory Fuel Rates (updated 23 February 2026).

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Need Help?

Getting the mileage claim right is straightforward once you know the rules — but the common mistakes above catch a lot of people out, and unclaimed relief adds up quickly over several years.

At Companies999, we go through mileage and travel expenses as part of our standard work with sole traders and limited company directors. If you want to make sure you are claiming correctly — or to check whether you have missed anything — we are happy to help.

Find out more about our accountancy services, or get in touch for a free consultation.