Katerina Swanson
If you're self-employed and use your vehicle for work, you can claim back some of your fuel costs through your self-employed mileage allowance. There are two ways to claim your mileage allowance: the flat-rate method (simplified expenses) or the actual cost method (direct expenses). The flat-rate method is the simplest option, allowing you to claim a fixed amount per business mile travelled, which is meant to cover all vehicle costs, including fuel, servicing, repairs, maintenance, depreciation, insurance, and road tax. The actual cost method requires you to keep a detailed record of your vehicle's associated costs, including fuel receipts, and calculate the percentage of usage that was for business purposes. It's important to note that you can also claim the VAT on the fuel element of the mileage allowance by referring to the advisory fuel rates issued by HMRC. Additionally, fuel cards can help you easily track your fuel expenses and save time on administration.
| Characteristics | Values |
|---|---|
| Mileage allowance calculation | 45p for the first 10,000 miles travelled per year and then 25p for every mile beyond that |
| Additional allowance for carrying a passenger | 5p per mile |
| VAT on the fuel element | Allowed |
| Mileage allowance for electric cars | 5p per mile |
| Mileage allowance for petrol cars | 25p per mile |
| Fuel cards | Can be used to find fuel expenses in one place |
| Self-employed mileage allowance calculation method | Flat rate method (simplified expenses) or actual cost method (direct expenses) |
| Flat rate method | Fixed amount per business mile travelled |
| Actual cost method | Detailed record-keeping of fuel receipts, repairs, invoices, etc. |
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What You'll Learn
Self-employed mileage allowance
Self-employed workers can claim a mileage allowance for business-related driving. This is a tax deduction based on the mileage accrued for business purposes. The standard mileage rate method uses a set rate per mile to calculate tax deductions for business miles driven. This rate covers all expenses of owning and running a vehicle for business purposes, including fuel, servicing, repairs, maintenance, depreciation, insurance, and road tax.
For example, the standard mileage rates for 2025 in the US are 70 cents/mile for self-employed and business mileage. The IRS mileage rate for 2024 was $0.67 per mile. In the UK, a self-employed plasterer who travels 13,000 miles per year in their van for business can claim 45p for the first 10,000 miles and then 25p for the remaining 3,000 miles.
There are different rules for leased vehicles, electric cars, and bicycles. If you use your vehicle for both private and business purposes, you can only claim a self-employed mileage allowance for your business mileage. It is important to keep records of your mileage to justify the amount claimed.
Alternatively, self-employed individuals can deduct the actual expenses related to owning and operating the car. This involves tracking all vehicle expenses and determining the percentage of total mileage that was for business purposes. This method may be better if vehicle expenses are high, but it is more time-consuming.
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Flat rate method
If you're self-employed, you can claim a fixed amount per business mile travelled using the flat rate method (simplified expenses). This method is the simplest way to claim self-employed mileage allowance and is more popular than the actual cost method (direct expenses) due to its simplicity.
The flat rate is meant to cover all vehicle costs, including fuel, servicing and repairs, maintenance, depreciation, insurance, and road tax. It is important to note that you cannot use simplified expenses if you have claimed capital allowance for your vehicle or have included it in your business expenses. Additionally, if you use the simplified expenses method for your vehicle, you cannot switch to actual vehicle costs as long as you use the same vehicle for work.
To use the flat rate method, you must apply a flat rate per mile for cars, goods vehicles (like vans), and motorcycles. This rate is set by HMRC and is meant to cover vehicle costs. For example, a self-employed plasterer who travels 13,000 miles per year in their van for business can claim 45p for the first 10,000 miles (£4,500) and then 25p for the remaining 3,000 miles (£750), totalling £5,250. It is worth noting that you can also claim the VAT on the fuel element of the mileage allowance by checking the advisory fuel rates issued by HMRC quarterly.
While the flat rate method simplifies the process of claiming mileage expenses, it may not accurately reflect the full costs of motoring. It is important to keep full records of your mileage, even if you don't need to submit them with your tax return, as they may be required in the event of an investigation by HMRC.
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$28.7
$63.16
$64.36
Actual cost method
When claiming vehicle expenses, self-employed individuals can choose between actual costs and simplified expenses. The actual cost method is more time-consuming but provides a more accurate reading of vehicle expenses. This method involves tracking every expense related to the vehicle, including insurance, fuel, repairs, and maintenance, and keeping detailed records. It is important to note that if you use the simplified expenses method for your vehicle, you can switch to actual vehicle costs, but not vice versa for the same vehicle.
Using the actual cost method, self-employed individuals can deduct the costs from their company's taxable profit at the end of the tax year. This method might be preferable if your vehicle expenses are high due to factors such as high road tax, insurance, fuel consumption, etc. It provides a more precise calculation of vehicle expenses but requires meticulous tracking of expenses.
The actual cost method allows self-employed individuals to claim all their actual business car expenses. This includes expenses such as buying or renting a vehicle, insurance, repairs for wear and tear, fuel, parking, licencing fees, breakdown insurance, and public transport tickets. It is important to note that the self-employed mileage allowance provided by HMRC only applies to journeys that are "wholly and exclusively" for business purposes, excluding combined business and personal trips.
When using the actual cost method, it is crucial to keep full records of your mileage, even if you don't need to submit them as part of your tax return. In the event of an investigation by HMRC, you will need to justify the amount you have claimed. This method provides a detailed and direct approach to claiming vehicle expenses, ensuring that all relevant costs are considered.
Overall, the actual cost method for self-employed fuel allowance involves meticulously tracking and recording all vehicle-related expenses. While it requires more time and effort, it provides a more accurate representation of actual vehicle expenses, allowing self-employed individuals to claim all their business-related car expenses.
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Advisory fuel rates
The advisory fuel rates for petrol, LPG, and diesel cars are shown in tables available online. The fuel prices for petrol, diesel, and liquefied petroleum gas are updated periodically. The advisory fuel rates from 1 June 2025 have been added, with the advisory electric rate for fully electric cars set at 7 pence per mile. Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.
If your company owns the vehicle, you can only claim Advisory Fuel Rates (AFRs) set by HMRC. The company will then take on the expenses of vehicle maintenance and other travel expenses. If you use your vehicle for both private and business purposes, you can only claim a self-employed mileage allowance for your business mileage. This means regularly recording your total mileage for both private and business trips.
The flat rate is meant to cover all vehicle costs, including fuel, servicing and repairs, maintenance, depreciation, insurance, and road tax. You can also claim the VAT on the fuel element of the mileage allowance. You can use the simplified expenses method for your vehicle, which saves time by not requiring you to log every single vehicle expense. However, once you decide to use the flat-rate scheme for a specific vehicle, you cannot switch back to claiming actual costs.
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Fuel cards
There are many options available for fuel cards, and it can be overwhelming to choose the right one. Some fuel cards are built for large fleets and may not be suitable for smaller operations. Some cards charge a fee if you don't use them enough, and some offer reward schemes.
If you are a self-employed person who drives a lot for work, you may want to consider the Shell Multi-Network card, which can be used at over 3,500 stations across the UK, including Shell, Esso, Texaco, Gulf, and Gleaner stations. It offers fixed weekly fuel prices, which can protect your budget against fuel price fluctuations.
Another option is the fuelGenie card, which is accepted at Tesco, Morrisons, and Sainsbury's petrol filling stations—over 1,370 locations in the UK. It offers access to supermarket forecourt prices, which are typically 3-5p cheaper than branded stations, and all your invoices are automatically categorized and VAT-friendly.
If you regularly use diesel, the Texaco fuel card provides a fixed weekly price, helping you budget against fuel price changes.
Finally, if you are looking for a card with a reward scheme, you might consider the iCompario card, which lets you collect supermarket or loyalty points.
Overall, fuel cards can be a valuable tool for self-employed individuals to save time and money on fuel expenses, but it is important to choose the right card for your specific needs.
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Frequently asked questions
Self-employed mileage allowance is a way to simplify how self-employed workers claim mileage for business purposes.
Self-employed workers can claim fuel costs as part of their mileage allowance. The flat rate per mile covers fuel, insurance, road tax, repairs, maintenance, depreciation, etc. This rate is set by HMRC and depends on the type of vehicle. For example, a fully electric car has a rate of 5p per mile, while a petrol car is 25p per mile.
You can calculate your fuel allowance by checking the advisory fuel rates issued by HMRC on a quarterly basis.
The flat rate method is a simplified way to calculate your mileage allowance. It lets you claim a fixed amount per business mile travelled. This method covers all vehicle costs, including fuel.
You can use fuel cards to help you find all your fuel expenses in one place. You can also use a fleet telematics system to track your vehicles and mileage.
