How to Track Business Mileage and Claim HMRC Simplified Rates

Why Mileage Is One of the Most Overlooked Tax Deductions

If you drive for business as a sole trader, every mile you don't claim is money left on the table. HMRC's simplified mileage rates let you deduct a flat amount per business mile - no need to track fuel receipts, insurance costs, or depreciation.

Yet many self-employed people either don't claim mileage at all, or claim it incorrectly. Here's the complete guide.

The HMRC Simplified Mileage Rates

If you use the simplified expenses method (which most sole traders on the cash basis should), the rates are:

These rates cover fuel, insurance, road tax, MOT, servicing, depreciation, and wear and tear. You can't claim these costs separately if you use simplified rates.

Example: If you drive 12,000 business miles in a year, your deduction is: (10,000 × 45p) + (2,000 × 25p) = £4,500 + £500 = £5,000. At the basic tax rate of 20%, that's a ��1,000 tax saving.

What Counts as a Business Journey?

HMRC is specific about what qualifies:

Allowable

• Travelling to a client's office or site
• Driving to a meeting, conference, or networking event
• Trips to the post office to send business parcels
• Driving to collect business supplies
• Travelling between two business locations

Not Allowable

• Commuting - driving from home to your regular workplace is never a business journey, even if you're self-employed
• Personal errands combined with business trips (you can only claim the business portion)
• Travel that isn't "wholly and exclusively" for business

The Home Office Exception

If you work from home and your home is your only place of business, then journeys from home to client sites are generally allowable. This is because your home is your base of operations, not a "regular workplace" you're commuting to.

What Records Do You Need?

HMRC requires you to keep a mileage log that records:

1. Date of each journey
2. Start and end locations (or a description of the route)
3. Purpose of the journey (e.g., "client meeting with Acme Ltd")
4. Miles driven (business portion only)

You don't need fuel receipts if you use simplified rates, but your mileage log must be contemporaneous - that means recorded at or near the time of the journey, not reconstructed from memory at year-end.

Simplified Rates vs Actual Costs

You have two options for claiming vehicle expenses:

Option 1: Simplified Mileage Rates

• Flat rate per mile - simple to calculate
• No need to keep fuel receipts, insurance documents, or service records
• Once you choose this method for a vehicle, you must stick with it for that vehicle's lifetime in the business
• Best for most sole traders, especially those using the cash basis

Option 2: Actual Costs

• Claim the actual costs of running the vehicle (fuel, insurance, repairs, depreciation via capital allowances)
• Must calculate the business use percentage (e.g., 60% business, 40% personal)
• More complex record-keeping
• Can be better if you have an expensive vehicle with high running costs and high business use

Important: You can't switch between methods for the same vehicle. Once you've claimed simplified rates for your car, that car stays on simplified rates. If you get a new vehicle, you can choose either method for it.

Additional Claimable Travel Expenses

The simplified mileage rate doesn't include certain incidental expenses, which you can claim separately:

• Parking fees (business journeys only)
• Congestion charges (London zone, Clean Air Zones)
• Toll charges (bridges, tunnels)
• Road tolls and ferry charges for business travel

These are deductible on top of your mileage claim, as long as they're wholly for business.

How TaxMTD Makes Mileage Tracking Effortless

Manually logging every journey in a spreadsheet is tedious and error-prone. TaxMTD's mileage tracking feature makes it simple:

1. Log journeys - record start point, end point, and purpose. TaxMTD calculates the distance automatically.
2. Automatic rate calculation - the system applies 45p for the first 10,000 miles and 25p thereafter, keeping a running total for the tax year.
3. Running totals - see your year-to-date mileage claim at any time.
4. SA103 integration - your mileage deduction is automatically included in your Self Assessment calculation.
5. MTD quarterly reporting - mileage expenses flow into your MTD quarterly updates automatically.

Common Mistakes to Avoid

1. Claiming Commuting Miles

The number one mistake. If you rent a co-working space and drive there every day, those are commuting miles - not claimable.

2. Not Keeping Contemporaneous Records

HMRC can ask to see your mileage log during an enquiry. "I think I drove about 8,000 miles" won't cut it. Log journeys as you make them.

3. Mixing Simplified and Actual Costs

You can't claim 45p/mile AND deduct your car insurance separately for the same vehicle.

4. Forgetting Parking and Tolls

These are claimable on top of mileage rates. Many sole traders miss them.

5. Not Claiming at All

If you drive even 5,000 business miles a year, that's a £2,250 deduction you're leaving unclaimed. At 20% tax, that's £450 back in your pocket.

The Bottom Line

Mileage is free money that HMRC is willing to give you - you just have to record it properly. The simplified rate of 45p/mile is generous and easy to use. Combined with parking, tolls, and congestion charges, business travel can be one of your largest tax deductions.

Start tracking today with TaxMTD's mileage feature and never miss a mile.

Further reading: Self Assessment Guide for 2025-26 · Cash Basis: What Changed · AI Categorisation for Expenses