MilometrySelf-employed: the same 55p, by a completely different route
Employees claim relief on a shortfall. Sole traders deduct simplified expenses from profit. The rate is identical and almost nothing else is.
Allgemeine Information, keine Beratung. Als allgemeine Information verfasst und nach unserem Wissen korrekt am 27. September 2026. Steuerregeln ändern sich, und wie sie gelten, hängt von deinen Umständen ab. Dies ist keine Steuer-, Rechts- oder Finanzberatung: Frag eine Steuerberaterin, einen Steuerberater oder das Finanzamt, bevor du dich darauf verlässt.
Updated 27 September 2026: the car and van rate rose from 45p to 55p for journeys from 6 April 2026 (announced 21 May 2026). Figures below use 55p.
The number is the same, which is why people assume the mechanism is. It is not, and the differences decide what you can actually deduct or get relief on.
Two different things called a mileage claim
An employee is reimbursed by an employer. If that reimbursement is below the approved rate, the employee can claim tax relief (Mileage Allowance Relief) on the gap, through Self Assessment or a P87. The claim is for relief on a shortfall: it is worth the shortfall times the employee's tax rate, and its size depends on what the employer paid.
A sole trader has no employer and no reimbursement. They deduct a simplified expense from business profit: business miles multiplied by the flat rate, taken off the profit the tax is calculated on. There is no shortfall, because there was never a payment.
So an employee's claim gets smaller the more their employer pays. A sole trader's claim depends only on how far they drove.
The rate is the same, the bands are the same
Both use 55p for the first 10,000 business miles and 25p after (the rates for journeys from 6 April 2026; 45p before that). How the 10,000 is counted differs, though. Employees count per tax year across all the cars and vans used for one job. The self-employed count per accounting period across all the business's cars and vans.
The shared rates are why the two get conflated, and they are close to the only part that is shared.
The choice a sole trader has, and an employee does not
This is the real divergence.
A sole trader can use the flat rate, or they can claim actual costs: the business proportion of fuel, insurance, servicing, repairs, and capital allowances on the vehicle itself.
An employee has no such choice. The approved rate is the approved rate.
Two things make the choice consequential.
It can be worth substantially more or less. An expensive vehicle doing modest business mileage often comes out ahead on actual costs, because the capital allowances and the insurance are large and the mileage is not. A cheap, economical car doing high mileage tends to come out ahead on the flat rate.
It is sticky. Once you use the flat rate for a particular vehicle, you must keep using it for that vehicle for as long as you have it. You cannot alternate year by year to whichever suits, and the decision is effectively made the first time you claim for that car.
That last point can catch new traders out. The first year's choice, often made without thinking, binds every year after it.
| Employee | Sole trader | |
|---|---|---|
| Claims against | A shortfall in reimbursement | Business profit |
| Rate (2026-27) | 55p, then 25p | 55p, then 25p |
| 10,000 miles counted | Per tax year, per job, across its cars and vans | Per accounting period, across the business's cars and vans |
| Can claim actual costs instead | No | Yes |
| Choice is reversible | n/a | No, per vehicle |
| Route | Self Assessment or P87 | Self Assessment |
| Passengers | Up to 5p per passenger mile tax free, only if the employer pays it; no relief if unpaid | No effect on the rate |
What both need to evidence
Identical, and unremarkable: date, destination, business purpose, distance, recorded at the time.
The sole trader carries one extra burden. Because the flat rate is a deduction against profit rather than a reimbursement someone else calculated, nobody is checking the arithmetic on the way through. An employee's claim passes across an employer's desk. A sole trader's does not pass across anyone's until it is questioned.
That makes the log the entire evidence base, and it makes the 10,000 mile boundary something you have to know your position against all year rather than discover in January.
Sources
- Simplified expenses if you are self-employed: vehicles (HMRC)
- Simplified expenses if you are self-employed (HMRC)
- Claim tax relief for your job expenses: vehicles you use for work (HMRC)
- Self Assessment tax returns (GOV.UK)
- BIM75005: simplified expenses, expenditure on motor vehicles (HMRC)
- Income Tax (Trading and Other Income) Act 2005, section 94F (legislation.gov.uk)
- EIM31240: statutory mileage rates, kinds of vehicle (HMRC)
- Increasing mileage rates (HMRC policy paper)
- Travel, mileage and fuel rates and allowances (HMRC)
General information, not tax advice. The flat rate against actual costs decision is hard to reverse: check with your accountant before making it.
