Simplified Mileage vs Actual Costs: Which Saves You More?

Every self-employed person who drives for work faces the same question at some point: should I claim the flat-rate mileage allowance, or should I tot up my actual vehicle expenses and claim those instead?

It sounds like a straightforward comparison. Run the numbers, pick the bigger one. But there are catches that make it more complicated than it first appears, and one of those catches is permanent.

The two methods, explained

HMRC allows self-employed people to claim vehicle expenses using one of two approaches. You choose one per vehicle. Not per year. Per vehicle.

Simplified mileage (the flat-rate method)

This is the one most people know about. You claim HMRC's Approved Mileage Allowance Payments (AMAPs):

• 45p per mile for the first 10,000 business miles in the tax year
• 25p per mile for every business mile after that

That's it. You don't claim fuel separately. You don't claim insurance, road tax, servicing, tyres, or depreciation. The 45p rate is meant to cover all of it. You just need a mileage log showing the date, start and end points, purpose, and distance of each business journey.

No receipts. No complicated sums. Just miles multiplied by the rate.

Actual costs (the receipt-based method)

The alternative is to claim the real costs of running your vehicle and then apply a business-use percentage. The costs you can include are:

• Fuel (petrol, diesel, or electricity)
• Insurance
• Road tax
• MOT
• Servicing and repairs
• Breakdown cover
• Hire purchase interest (not the capital repayment)
• Capital allowances (depreciation of the vehicle's value)

You add all of these up for the year, then multiply by the percentage of miles that were for business. If 60% of your total mileage was business, you claim 60% of costs.

This method requires you to keep every receipt, track every mile (business and personal), and do the calculations each year. You also need to work out capital allowances on the vehicle, which is a whole topic in itself.

The lock-in rule

Here's the bit that trips people up. According to HMRC's simplified expenses guidance, once you use actual costs for a vehicle, you must continue using actual costs for that vehicle for as long as you use it in your business. You cannot switch back to simplified mileage.

The reverse is not true. If you start with simplified mileage, you can switch to actual costs later (though you'll need to calculate the value of the vehicle at the point of switching, which adds complexity).

This means the safest default is to start with simplified mileage. You keep your options open. If you start with actual costs and later realise simplified would have been better, you're stuck.

When simplified mileage wins

Simplified mileage tends to produce a higher claim (or near enough that the paperwork difference isn't worth it) in these situations:

Low to moderate business mileage. If you're doing under 10,000 business miles a year, every mile is at the full 45p rate. That's generous. For a car with typical running costs, 45p per mile often exceeds the actual per-mile cost, especially for an older or cheaper vehicle.

Cheaper vehicles. A ten-year-old Ford Focus doesn't cost much to run. Insurance might be £400. Road tax £180. Servicing £300. Fuel at 15p per mile. The total cost per mile is well under 45p. Simplified wins easily.

Electric vehicles. This is the big one. The electricity cost to run an EV is roughly 4–6p per mile. The other running costs (insurance, tax, servicing) tend to be lower too. But you still claim 45p per mile under simplified. The gap between what you claim and what you spend is enormous. The post on electric vehicle mileage claims covers this in detail.

Anyone who hates paperwork. Even if actual costs would save you £200 more, is it worth keeping every fuel receipt, every insurance renewal, every garage invoice, and then doing the sums? For most sole traders, the answer is no.

When actual costs might win

There are situations where actual costs produce a meaningfully higher claim. They're less common than people think, but they exist.

Very high mileage with an expensive vehicle. Once you pass 10,000 business miles, the simplified rate drops to 25p. If you're doing 20,000 business miles in a vehicle that costs 40p per mile to run, the difference adds up. Your simplified claim would be £7,000. Your actual costs claim could be higher.

High business-use percentage. If 90% of your driving is for business, you get to claim 90% of all costs. That's a much bigger slice than someone who uses their car 50/50. The higher your business percentage, the more actual costs favours you.

Expensive fuel costs. A large diesel van doing 25 miles per gallon costs significantly more per mile than a small petrol car doing 45mpg. If your fuel costs alone are 25p+ per mile, the total running cost will likely exceed what simplified mileage gives you, especially above the 10,000-mile threshold.

Worked example 1: Van doing 15,000 business miles

You're a plumber. You drive a Ford Transit Custom. You do 15,000 business miles and 3,000 personal miles in a year. Total: 18,000 miles. Business use: 83%.

Simplified mileage

• First 10,000 miles at 45p = £4,500
• Next 5,000 miles at 25p = £1,250
• Total claim: £5,750

Actual costs

• Fuel: 18,000 miles at ~20p/mile = £3,600
• Insurance: £900
• Road tax: £290
• MOT: £55
• Servicing and repairs: £600
• Capital allowances (writing down allowance on a £25,000 van): ~£4,500 in year one, ~£1,000 in later years

Take a mid-life year where capital allowances have settled. Total costs: roughly £5,445. Business percentage: 83%. Claimable: £4,519.

Simplified wins by over £1,200, and you didn't need to keep a single fuel receipt.

Even in year one, where the capital allowance is higher, the total actual claim might be around £5,600. Still less than simplified. And from year two onwards, simplified pulls further ahead.

Worked example 2: Car doing 5,000 business miles with high running costs

Here's a case where actual costs might seem tempting. You're a consultant. You drive a BMW 5 Series. You do 5,000 business miles and 10,000 personal miles. Business use: 33%.

Simplified mileage

• 5,000 miles at 45p = £2,250

Actual costs

• Fuel: 15,000 miles at 18p/mile = £2,700
• Insurance: £1,200
• Road tax: £580
• MOT: £55
• Servicing: £800
• Tyres: £400
• Capital allowances: ~£1,500

Total costs: £7,235. Business percentage: 33%. Claimable: £2,388.

Actual costs gives you an extra £138. Is that worth keeping every receipt for 12 months and calculating capital allowances? For most people, probably not. And remember, once you go actual, you can't go back to simplified for this car. If you sell the BMW and buy something cheaper next year, you might wish you'd stuck with simplified.

The only time actual costs clearly wins here is if the business-use percentage is much higher. At 70% business use, the actual costs claim jumps to £5,065 vs £2,250 for simplified. But then you're also doing more business miles, which pushes up the simplified number too.

The scenarios where simplified always wins

There are some situations where you don't even need to run the numbers.

Electric vehicles. An EV running on home-charged electricity costs roughly 4–6p per mile. Insurance, tax, and servicing are typically lower than petrol equivalents. Total running cost: maybe 15–20p per mile. Claiming 45p? Simplified wins by a mile. Literally. See the full breakdown in the EV mileage claims guide.

Older, cheaper cars. If your car is worth under £5,000, capital allowances are minimal. Running costs are low. Simplified will almost certainly beat actual costs.

Low business-use percentage. If only 30% of your driving is for business, you can only claim 30% of actual costs. That fraction makes it very hard for actual costs to beat 45p per mile on the business miles alone.

You value your time. Even if actual costs edges ahead by a few hundred pounds, the time spent collecting receipts, filing them, and doing the calculations has a cost too. If you bill £40 an hour and the receipt management takes 10 hours a year, you've spent £400 of your time to claim an extra £200. That's not a good trade.

What records do you need for each method?

This is where the practical difference really shows.

Simplified mileage records

• Date of each business journey
• Start and end points
• Purpose of the journey
• Distance in miles

That's the minimum HMRC requires. No fuel receipts. No insurance documents. Just a log of your business journeys. Exactly what records to keep is covered in the guide: do I need to keep a mileage log?

Actual costs records

• Everything above (the full mileage log)
• Plus a log of all miles, business and personal (to calculate the percentage)
• Every fuel receipt
• Insurance policy documents
• Road tax payments
• MOT certificates and costs
• Every service invoice, repair bill, and tyre receipt
• Vehicle purchase price or market value (for capital allowances)

That's a lot more filing. And if HMRC asks to see your records, you need to produce all of it. Missing a chunk of fuel receipts? Your claim gets reduced. Lost your service history? Same problem.

What about Making Tax Digital?

MTD for Income Tax is coming. When it arrives, you'll need to submit quarterly updates of your income and expenses. If you're using actual costs, that means tracking and categorising vehicle expenses every quarter. With simplified mileage, you just need to keep your mileage log up to date. One of these is considerably easier to do four times a year.

For more on what MTD means for your mileage records, see the Making Tax Digital mileage records guide.

Can you use different methods for different vehicles?

Yes. The choice is per vehicle, not per business. If you have a van and a car, you could use simplified mileage for the car and actual costs for the van (or vice versa). Each vehicle is tracked independently.

But remember the lock-in rule. If you use actual costs for the van one year, you must use actual costs for that van every year. The car remains on simplified until you choose otherwise.

The bottom line

For the vast majority of self-employed people, simplified mileage is the right choice. It's simpler (the clue is in the name), it requires far less record-keeping, and it produces a claim that's equal to or better than actual costs in most real-world scenarios.

The exceptions are narrow: very expensive vehicles with very high business-use percentages and very high mileage. If that's you, it's worth running the numbers with an accountant before committing. For everyone else, especially EV drivers, van owners, and anyone who doesn't enjoy filing receipts, simplified mileage is the answer.

The most important thing, regardless of which method you choose, is to actually track your miles. An unclaimed business mile is money left on the table, whether you're claiming 45p for it or a percentage of your actual costs. For a full breakdown of the current rates, see the HMRC mileage rates 2026/27 guide.

Track every mile. Claim what you're owed.

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