Mileage rate or actual costs: which should I claim for my van?

The two ways to claim

If you're a sole trader and use a vehicle for work, you can claim its cost in one of two ways. You pick per vehicle, and you can't mix them for the same one.

1. The mileage rate (simplified expenses). Keep a log of your business miles and multiply them by HMRC's flat rate. That's your whole vehicle claim. It covers fuel, oil, insurance, servicing, repairs, vehicle tax, MOT and the wear on the vehicle itself, so you claim none of those separately.

2. Actual costs. Add up what the vehicle really cost to run over the year, take off the private share, and add capital allowances on what you paid for it.

Either way, you can claim parking, tolls and congestion charges for business journeys on top. HMRC's own manual (BIM75005) says these aren't covered by the mileage rate. Parking fines are never allowable.

The rates for 2026/27 and 2025/26

The 10p rise is the first change to the car and van rate in years. It only applies from the 2026/27 tax year, so when you file your 2025/26 return by 31 January 2027, you still use 45p. Here's what the change is worth:

For a basic-rate taxpayer, an extra £1,000 of claim is about £260 less Income Tax and Class 4 National Insurance.

Example 1: an older van, lots of miles

Kerry is a plasterer. Her van is six years old and paid off. In 2026/27 she drives 15,000 miles, 12,000 of them for work, so her business share is 80%. The van costs her £5,200 to run: £3,000 fuel, £1,000 insurance, £800 servicing and tyres, £350 vehicle tax and £50 other costs.

• Mileage rate: 10,000 × 55p = £5,500, plus 2,000 × 25p = £500. Total £6,000.
• Actual costs: £5,200 × 80% = £4,160. No capital allowance, because she didn't buy the van this year.

She also spends £150 on parking and tolls, which she adds to either claim. The mileage rate gives her £1,840 more. Her profit before van costs is £40,000, so that's £1,840 × 26% (20% tax + 6% NI) = £478.40 less to pay.

This is the typical pattern: cheap-to-run, older vehicles doing high business mileage do better on the flat rate, and the new 55p rate has widened the gap.

Example 2: buying a new van

Dev is an electrician. In May 2026 he buys a van for £24,000. He drives 10,000 miles a year, 9,000 for work (90%), and it costs £4,500 a year to run.

Vans aren't cars for capital allowances, so they qualify for the Annual Investment Allowance (AIA), which lets you deduct the full price in the year you buy. With actual costs, his first-year claim is:

• Running costs: £4,500 × 90% = £4,050
• AIA: £24,000 × 90% = £21,600
• Total: £25,650, against 9,000 × 55p = £4,950 on the mileage rate.

That looks like a clear win. But in later years, he can only claim running costs, £4,050 a year, against £4,950 he'd have got on the mileage rate, and he can't switch. Over five years, if he sells the van for £8,000:

• Actual costs: £4,050 × 5 + (£24,000 − £8,000) × 90% = £34,650
• Mileage rate: £4,950 × 5 = £24,750

So actual costs still win here, mainly because the van loses a lot of value. When he sells it, the £8,000 sale value (his 90% share) is clawed back as a balancing charge, which is why the comparison uses the price minus the sale value.

One more thing: a big first-year claim can push your profit below the £12,570 Personal Allowance, where tax relief is wasted. You don't have to claim the full AIA; anything you don't claim goes into your capital allowance pool and gets relief in later years.

What about cars?

Cars can't have the AIA. Instead:

The allowance is reduced by your private use. With only 14% or 6% a year on the reducing balance, actual costs are often smaller than the mileage rate for a petrol or diesel car, unless it's expensive to run. A new electric car is the exception: the 100% first-year allowance can make actual costs much bigger in year one.

The lock-in rules

This is the part people get wrong, and it's why it pays to think before you file:

1. Once you use the mileage rate for a vehicle, you must keep using it for as long as you use that vehicle in your business.
2. You can't use the mileage rate for a vehicle you've claimed capital allowances on, or one you've already included as an expense when working out your profits.
3. You can use different methods for different vehicles, and you choose again each time you change vehicle.

So if you're filing your first return with a new van, compare not just this year but the years you expect to keep it. The calculator's "rough lifetime" figure does that for you.

Who can use the mileage rate

Simplified expenses are for sole traders and partnerships with no company partners. They cover cars (except those designed for commercial use, like black cabs or dual-control driving school cars), goods vehicles such as vans, and motorcycles.

Limited company directors and employees can't use them. They use HMRC's approved mileage allowance payments, which work differently.

Business miles, not all miles

Only business journeys count: trips to customers, different sites, suppliers and the merchants. Travel between home and a fixed place of work you go to every day, like your own yard or unit, is commuting and doesn't count. If you work from home and travel to a different site each day, those journeys usually are business. Our guide to CIS expenses covers travel in more detail.

Keep a mileage log

Whichever method you use, you need to back up your figures. For the mileage rate that means a log of the date, start and end points, the reason for the trip and the miles. For actual costs you also need the receipts and a record of total miles to work out your business share. Keep it all for at least 5 years after the 31 January deadline. See what records to keep.

If you're in CIS, a bigger vehicle claim lowers your profit and can increase your refund. Run the figures through the CIS refund calculator once you know your claim, or see how much tax to put aside if you're not in CIS.