Mileage allowance or actual costs: claiming for your vehicle

If you use your own vehicle for work, you can claim tax relief on the cost in one of two ways. The simplified mileage method pays a flat rate per business mile: 45p for the first 10,000 miles in a tax year, then 25p for every mile after that, for cars and vans¹. The actual costs method lets you claim a proportion of everything you spend running the vehicle, including fuel, insurance, servicing and repairs, plus capital allowances on part of the purchase price².

The method you choose affects what you can claim and what records you need to keep. You cannot mix the two for the same vehicle in the same tax year, and you cannot claim the simplified mileage rate and also claim capital allowances on the same car². The choice is yours to make, but it has to be consistent.

For most self-employed people with a single vehicle used partly for business, the simplified method is simpler to administer. The actual costs method can produce a larger claim if your vehicle is expensive to run or you do a high proportion of business miles, but it requires detailed record-keeping and a fair apportionment between business and private use².

The two methods side by side

Vehicle costs are claimed through your Self Assessment return

You claim vehicle expenses as part of your Self Assessment tax return. If you are self-employed, you add up all your allowable expenses for the tax year and put the total on your return⁸. The vehicle costs go in the self-employment section, and you need to keep records that support the figure you put down.

If you use the simplified mileage method, you multiply your business miles by the approved rate. For cars and vans, that is 45p per mile for the first 10,000 miles and 25p per mile after that¹. The cost of buying the vehicle is treated as included in the mileage claim, so you cannot separately claim capital allowances on the same vehicle².

If you use the actual costs method, you claim all motor expenses for the year in proportion to your business miles, plus possible capital allowances on part of the vehicle cost². You need a mileage record of business and private trips, plus receipts for fuel, servicing, insurance, road fund licence and subscriptions to motoring organisations². The business proportion is worked out from your mileage log.

Who has to register and file a return

You need to complete a Self Assessment tax return if you are self-employed and your gross income was more than £1,000 in the tax year, including cash in hand⁹. Gross income means before you deduct any expenses. If your income from buying and selling, providing services or other commercial activities is more than £1,000 before expenses, you may have to complete a return⁹.

It is your responsibility to register for Self Assessment if you meet the criteria¹⁰. HMRC will not automatically know you have started self-employment. If you earned below £1,000 and wish to pay Class 2 National Insurance Contributions voluntarily to protect your entitlement to State Pension and certain benefits, you can also register¹¹.

If you have property income, the rules are similar. Property income of less than £1,000 does not need to be reported to HMRC and is tax free¹². Above that threshold, you need to report it.

Filing deadlines: online by the end of January, paper by October

The deadline for sending your tax return online is 31 January following the end of the tax year⁴. For the 2025/26 tax year, that means 31 January 2027⁴. If you send a paper return, the deadline is earlier: 31 October following the end of the tax year⁵.

If you want HMRC to collect tax you owe through your PAYE code rather than paying it directly, you need to have submitted your paper return by 31 October or your online return by 30 December¹⁴. That gives HMRC time to adjust your code before the new tax year starts.

The deadlines are the same across the UK. Whether you live in England, Scotland, Wales or Northern Ireland, the filing dates do not change. What changes is the rate of income tax you pay on your income, which is set by the Scottish Government for Scottish taxpayers¹⁵.

Paying your tax: 31 January and 31 July

You need to pay your Self Assessment tax bill by midnight on 31 January following the tax year you are paying for¹⁶. If you make payments on account, the second instalment is due by 31 July. Payments on account are advance payments towards your next bill, based on your previous year's liability.

If you cannot pay in full, you may be able to set up a payment plan. HMRC will typically agree to a plan if you can clear the amount owed in less than 12 months¹⁷. If you have no ability to pay, HMRC can decide to stop recovery for 12 months¹⁷.

Making Tax Digital: thresholds falling to £30,000, then £20,000

Making Tax Digital for Income Tax is changing how self-employed people and landlords report their income. From April 2027, the earnings threshold will be lowered to £30,000⁷. From April 2028, it drops again to £20,000⁷.

If you are a sole trader or landlord with combined income from self-employment and property above these thresholds, you will need to use compatible software to keep digital records and send quarterly updates to HMRC⁷. The thresholds apply to your qualifying income, which is your gross income from self-employment and property before expenses.

The change means more frequent reporting. Instead of one annual return, you send quarterly updates and a final declaration. The deadlines for those updates and the final declaration are set out in the Making Tax Digital rules.

HMRC can enquire into your return for up to 12 months

HMRC has 12 months from the date of a determination to enquire into your return¹⁹. A determination is a formal estimate HMRC makes if you do not file. The enquiry window is the period during which HMRC can ask questions about your return and check that the figures are correct.

If HMRC finds that you have not taken reasonable care, you may face penalties. HMRC can charge a penalty if your records are not accurate, complete and readable²⁰. Keeping good records is not just about getting your claim right; it is also about protecting yourself if HMRC asks questions later.

Where filing ends: stopping self-employment or leaving the UK

If you stop being self-employed, HMRC asks to be told, and any outstanding tax is payable¹³. A final return covering the period up to the date trading stopped may also be needed. HMRC sets out what is required.

If you leave the UK, your tax situation depends on your residence status. If you are eligible for a Personal Allowance, you pay Income Tax on your income above that amount. Otherwise, you pay tax on all your income²¹. You do not need to report your income to HMRC if you have already claimed tax relief under a double-taxation agreement²¹.

If you move to or from Scotland, you must tell HMRC of your new address²². If you do not, you may pay tax at the wrong rate²². Scottish Income Tax has different bands and allowances from the rest of the UK, and HMRC needs your correct address to apply them.

Which penalty rules will apply to all Self Assessment taxpayers?

The current penalty rules for late filing are tiered. HMRC could automatically charge you £100 if your return is up to 3 months late⁶. If it is more than three months late, you are charged £10 for each additional day, capped at 90 days, plus the £100 initial fine, to a maximum of £1,000⁶. If it is more than six months late, you will be charged £300 or 5% of the tax due, whichever is higher, on top of the penalties above⁶.

From April 2027, the Government plans to extend the points-based penalty system for late filing and the revised late payment penalty rules to all Self Assessment taxpayers⁷. The points-based system means you get a penalty point for each late submission, and a financial penalty only when you reach a threshold number of points.