Making Tax Digital · Sole traders
Claiming business mileage: 2026/27 rates vs actual vehicle costs
ONLY£15A MONTHVehicle costs can produce a useful tax deduction, but the method matters.
Vehicle costs can produce a useful tax deduction, but the method matters. For 2026/27, the eligible car and van simplified-mileage rate for the first 10,000 business miles is 55p. Older guidance quoting 45p needs to be matched to the tax year it describes.
The current simplified rates
HMRC's vehicle guidance gives these 2026/27 rates:
| Eligible vehicle and mileage | Rate |
|---|---|
| Cars and goods vehicles: first 10,000 business miles | 55p |
| Cars and goods vehicles: additional business miles | 25p |
| Motorcycles | 24p |
This is not the employee mileage scheme. Do not import an employee bicycle rate into a sole-trader simplified-expenses claim.
Some cars designed for commercial use, including black cabs and dual-control driving-instructor cars, are excluded. You also cannot use simplified mileage where you have already claimed the vehicle through capital allowances or as an expense. Once you use the flat rate for a vehicle, continue while that vehicle remains in business use.
The alternative is eligible actual running costs with a business-use adjustment and appropriate treatment of acquisition costs. Do not add fuel, insurance, repairs or purchase relief on top of simplified mileage for the same vehicle.
Worked example: 12,000 business miles
For an eligible van in 2026/27, the simplified calculation is 10,000 × £0.55 plus 2,000 × £0.25 = £6,000. Separately qualifying business parking can be considered in addition.
If annual running costs total £7,000 and supported business use is 70%, the running-cost element of an actual-cost comparison is £4,900. That is not yet a complete comparison: acquisition relief and the vehicle's previous treatment must also be considered.
Give equipment its own review
The tax treatment of equipment depends on the accounting basis and the asset, not just its price. Under the cash basis, many business equipment purchases are deducted when paid. Cars and certain other expenditure are exceptions. Under traditional accounting, a purchase with lasting business use may instead enter the capital-allowances calculation.
HMRC's capital-allowances guide explains the available routes. Annual Investment Allowance can cover qualifying plant and machinery, subject to its conditions and limit, but it does not apply to cars. Accounting depreciation is not itself the tax deduction.
Keep the purchase invoice, date, payment evidence and any finance agreement. A finance instalment can combine capital and interest, so treating every payment as an ordinary running cost may give the wrong answer. Record private use where relevant and retain the disposal paperwork when equipment is sold or part-exchanged.
For an expensive or unusual purchase, resolve the treatment before relying on a tax estimate. A category chosen from the merchant name cannot tell you whether an item was bought outright, leased, used privately or acquired as part of a larger building project.
Keep the evidence connected to the figures
Your digital record should explain the amount, date and nature of the transaction. Keep the invoice, receipt, statement or other evidence that supports it. A photograph can make a paper document easier to retain, but a folder of photographs alone does not create complete transaction records.
For sole traders, HMRC normally requires business records to be kept for at least five years after the relevant 31 January filing deadline. Keep them longer where the rules for a late return, enquiry or other circumstances require it. Check the record-retention guidance.
Make the records usable by your future self. Include a short explanation where a bank description is vague, retain the calculation behind a business-use split and make corrections traceable. For a missing receipt, try the supplier account, email confirmation or a replacement invoice before relying on incomplete evidence.
At review time, compare your records with the bank or payment account and investigate differences. Equal totals are useful, but two errors can cancel each other out. A sample of individual transactions can reveal a duplicated purchase or an omitted customer receipt that a totals-only check misses.
Where this fits into Making Tax Digital
For 2026/27, the first mandatory phase generally covers individuals whose combined qualifying self-employment and property income was more than £50,000 in 2024/25, subject to exemptions. Qualifying income normally means income before expenses. It is a different figure from taxable profit. Check the qualifying-income rules.
Once within MTD, keep the required digital records and send quarterly summaries for each relevant business. The summaries are cumulative from the start of the reporting year. They do not contain your entire personal tax position, and sending one does not itself create a quarterly tax-payment demand.
HMRC does not require accounting or tax adjustments before each quarterly update. Those adjustments and the other information needed for the annual return still have to be completed at the appropriate stage. Keep a review list so a matter deferred until year end is not forgotten. Read HMRC's quarterly-update guidance.
Software can organise the information, but the business facts remain essential. Review the figures you approve rather than assuming that a successful import has also settled every tax question.
Keep a useful mileage log
Record the journey date, destination, business purpose and distance. Distinguish private travel and ordinary commuting from qualifying business journeys. A phone app can make logging easier, but review its classifications and record trips only when safely parked.
Take the next step
Avona.app offers a self-service route from £15/month. Bring your records together, review the figures and choose a workflow that fits your business. For professional help, discuss the scope and total price of Avona Concierge, managed by chartered accountants, before choosing a service.