Claiming Business Mileage: A Practical Guide for Sole Traders and Limited Company Directors
Business mileage is one of the most under-claimed expenses among the self-employed — often because people either forget to track journeys or don't realise how the rules differ between sole traders...
Business mileage is one of the most under-claimed expenses among the self-employed — often because people either forget to track journeys or don't realise how the rules differ between sole traders and limited company directors.
The mileage rates
HMRC's Approved Mileage Allowance Payments (AMAP) rates are:
- 45p per mile for the first 10,000 business miles in a car or van each tax year
- 25p per mile for anything over 10,000 miles
- 24p per mile for motorcycles
- 20p per mile for bicycles
These rates are designed to cover fuel, wear and tear, insurance and depreciation combined — you don't separately claim fuel receipts on top if you're using the mileage method.
Sole traders: how it works
If you're a sole trader, you can either use the simplified mileage rate above, multiplying business miles by the relevant rate and deducting that from your taxable profit, or claim actual costs — a proportion of fuel, insurance, servicing, and depreciation based on the business-use percentage of the vehicle. You can't switch between the two methods for the same vehicle once chosen, so pick carefully based on your typical mileage and running costs, per gov.uk's simplified expenses guidance.
Limited company directors: a different picture
If you operate through a limited company and use your personal car for business journeys, the company can pay you the same 45p/25p AMAP rates tax-free, and the company can deduct this as a business expense. If instead the company owns the vehicle, different rules on Benefit in Kind (BiK) tax apply, and you may face a personal tax charge for private use of a company car — this is a common area where directors get caught out, so it's worth checking with an accountant before deciding whether a vehicle should be owned personally or by the company.
Step-by-step mileage claim checklist
- Keep a mileage log for every business journey: date, destination, purpose, and miles travelled. A simple spreadsheet or app like those recommended by Tide works fine.
- Separate business from commuting — ordinary commuting to a permanent workplace doesn't qualify; travel to temporary workplaces or client sites does.
- Track your running total against the 10,000-mile threshold where the rate drops from 45p to 25p.
- Decide sole trader vs limited company treatment based on how you operate and who owns the vehicle.
- Keep this separate from fuel receipts if using the mileage method — don't double-claim.
- Include mileage claims in your quarterly digital records if you're within Making Tax Digital for Income Tax scope.
- Review annually whether your vehicle arrangement (personal car with mileage claims vs. company-owned vehicle) is still the most tax-efficient option as your mileage or company profits change.
A word on electric vehicles
HMRC also publishes separate Advisory Electricity Rates for company-owned electric vehicles, updated periodically — worth checking directly on gov.uk if your business vehicle is electric, since rates differ from the standard AMAP figures for petrol and diesel cars.
Key Numbers
- 45p per mile — first 10,000 business miles by car
- 25p per mile — business miles over 10,000 in the same tax year
- 10,000 miles — annual threshold where the rate drops
Sources
- gov.uk: Expenses and benefits — business travel mileage
- gov.uk: Simplified expenses for vehicles
- Tide: Making Tax Digital deadlines
Educational content only — not financial advice.