12/12/2025
Mileage vs Actual Travel Costs: Which Should You Claim?
When you use your own car for business, HMRC gives you two options for claiming tax relief on your travel costs. But choosing the wrong method can cost you money every single year.
This guide breaks down both options in a simple, practical way — so you can choose the method that gives you the best result.
1. What HMRC’s Mileage Allowance Actually Means
If you use your personal car for business journeys, HMRC allows you to claim a flat-rate mileage allowance instead of claiming your real motoring costs.
The rates are:
45p per mile for the first 10,000 business miles (cars and vans)
25p per mile after 10,000 miles
24p per mile for motorcycles
20p per mile for bicycles
These rates have not changed for years — but they already include far more than most people realise.
What the mileage rate covers
The HMRC mileage rate is designed to cover everyday running costs of your personal vehicle, including:
Fuel
Insurance
Road tax
Repairs and servicing
MOT
Wear and tear
Depreciation
Because these costs are already built into the mileage allowance, you cannot claim them again.
It is one method or the other — not both.
2. What You Can Still Claim Separately
Not every travel cost is included in the mileage rate.
You can still claim:
Parking fees
Toll charges
Congestion charges
These are treated as separate business expenses because they are not part of the normal running costs of a vehicle.
3. When Mileage Allowance Cannot Be Used
Mileage allowance only applies if the vehicle belongs to you personally.
If the car is:
Owned by your limited company, or
Leased through your business,
…you cannot use mileage rates.
Instead, you must claim the actual running costs of the vehicle (insurance, repairs, fuel, lease payments, etc.), and your business will normally need to record any private use adjustments.
4. Claiming Actual Costs: When It May Be Better
Claiming actual costs means adding up all real expenses for the year and claiming the business-use proportion.
This method may work better if:
Your actual costs are high
You drive a car with poor fuel economy
You have expensive repairs or servicing
You do low business mileage
But actual costs take more admin and require good record-keeping.
Mileage, by contrast, is simple, predictable, and often tax-efficient for people who do higher business miles.
5. A Key Rule Many People Miss
Once you choose a method for a particular car — mileage or actual costs — you cannot switch later.
Your first choice locks that car into one method for its entire life in your business.
This is why it’s important to run the numbers carefully before deciding.
6. So Which Method Should You Choose?
There is no one-size-fits-all answer.
The right method depends on:
The type of car you drive
How many business miles you travel
Your fuel and running costs
Whether the car is personal or business-owned
A simple rule of thumb:
High mileage + personal car = mileage allowance is often best
Low mileage + high running costs = actual costs may give more relief
But the most tax-efficient option will always depend on your individual situation.
Not sure which option is best for you?
Busy Bee Accountancy can help you work out the most efficient method for your situation.
📲 Book a discovery call today: https://www.busybeeaccountancy.co.uk/
