What car expenses can sole traders claim?

Updated 21 May 2026 to reflect the new HMRC approved mileage rates, following Chancellor Rachel Reeves' statement to Parliament.

If you use a car for work, you can claim a tax deduction for any business usage. It comes back to HMRC's core principle: the expense must be "wholly and exclusively" incurred for business purposes. As a sole trader, there are two ways to calculate your allowable motor expenses, and from April 2026 the rules got more generous.

You keep track of your work mileage and apply the HMRC approved mileage rate. From April 2026, following the Chancellor's announcement on 21 May 2026, that rate has increased to 55p per mile for the first 10,000 business miles per year, and 25p per mile thereafter. This is the first increase in over a decade and is backdated to the start of the 2026/27 tax year.

If you've already been recording mileage this tax year at the old rate (45p), you can claim the difference when you file your Self Assessment.

For a full breakdown of what you can claim and worked examples, read our guide to how to claim mileage allowance when you're self-employed.

This method requires more record-keeping. You log all motor costs including fuel, repairs, insurance and MOT, then record both business and personal mileage to calculate the proportion of expenses that are deductible. You can also claim capital allowances on the vehicle under this method, which can make it significantly more valuable if you have a newer or more expensive car.

The mileage method is simpler: all you need is a record of your business miles. The actual cost method involves more admin, but the savings can be substantial, particularly if you drive a new car and use it heavily for work.

One important rule: once you start using a particular method for a vehicle, you must stick with it for as long as you own it. It is worth calculating your deductible expenses under both methods in your first year to find out which works in your favour. You can use HMRC's simplified expenses checker to help you decide.

Note that the flat rate mileage method is not available to limited company directors. If you operate through a limited company, different rules apply. Read our guide to leasing a car as a tax-deductible expense for more on your options.

Yes. You can claim the mileage allowance regardless of when you bought the car. The actual cost method is also available, though calculating capital allowances is more complicated if you owned the vehicle before becoming self-employed. It is worth speaking to an accountant if you are in this situation.

You need to keep a clear record of both business and personal mileage. Note your odometer reading at the start and end of the tax year to establish your total annual mileage, then maintain a log of business journeys, including dates, destinations and purpose, so you can calculate your business miles each month.

Apps such as Driversnote and MileIQ can automate this using your phone's GPS, which is particularly useful as Making Tax Digital extends to more sole traders. If HMRC ever enquires into your return, a detailed mileage log is your strongest evidence.

If you lease a car solely for business, all lease, insurance and fuel costs are generally deductible. If you also use it personally, you can only claim the business proportion. The key, as always, is keeping clear records. 

Read our guide to whether leasing a car is tax-deductible for more detail.

Mileage is just one part of the picture. As a sole trader you may also be able to claim for parking costs, congestion charges, and other business travel expenses, as long as they meet the "wholly and exclusively" test. For a broader overview of what you can deduct, explore our self-employed tax guidance.

If you are unsure which method suits your situation, or how the new mileage rates affect your current year's claim, it is worth speaking to an accountant. 

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