Research and analysis

Executive Summary: HMRC Mileage Rates Research

Published 28 May 2025

1. Background and objectives 

People who are self-employed may be entitled to claim a proportion of the total cost of their motoring expenses if they use a vehicle for business purposes. They can choose to use simplified expenses for their motoring expenses, also know as the simplified mileage rates. The flat rate deduction is 45p per mile for the first 10,000 business miles, and 25p per mile for subsequent miles.  

HMRC does not currently collect comprehensive data on the current costs of motoring for self employed businesses or the patterns of vehicle use among self-employed businesses. Therefore, HMRC had some gaps in their understanding of self-employed travel expenses. With this in mind, the overall objective of this research was to help HMRC understand the population of those that use simplified mileage rates. The research also sought to understand why some of those who are self-employed do not use simplified mileage rates, and whether they would consider using them in future.  

The research was based on a multimode survey where the primary data collection method was telephone interviews. A self-completion online option was offered to those who preferred to complete the questionnaire online. A total of 1,000 interviews were completed with three-quarters conducted by telephone (754), and the remainder (246) online. 

The survey covered people who were self-employed or a partner in a business partnership and these were sampled from HMRC’s Self Assessment database.  

2. Key findings 

2.1 Awareness of simplified mileage rates 

Just over 4 in 10 vehicle users (43%) were aware of simplified mileage rates, with awareness higher among car users (49%) than van users (27%). More sole traders (44%) than partnerships (31%) had heard of simplified mileage rates.  

Vehicle users primarily heard of simplified mileage rates via their agent or accountant (34%), or the HMRC website (32%). No more than 1 in 10 vehicle users had heard about simplified mileage rates via any other source.  

2.2 Usage of simplified mileage rates 

Fewer than 3 in 10 of all vehicle users (28%) were currently using simplified mileage rates. However, among those aware of this method of claiming business mileage, it was closer to 7 in 10 (66%).  

Among those aware of simplified mileage rates: 

• car users (73%) were more likely to be using them than van users (38%)  

• smaller organisations with a turnover below £20,000 (74%) or between £20,000 and £49,999 (64%) were more likely to use them than businesses with larger revenues 

• usage was higher within the business services (70%) and other services (76%) sectors compared to the rest of the sectors covered in the survey 

• there was little difference in levels of use among sole traders (66%) and partnerships (62%) 

Around a quarter of vehicle users (24%) that were not currently using simplified mileage rates (but who knew about them) had used them in the past. If combined with those currently using simplified mileage rates, around three-quarters (74%) of those aware of simplified mileage rates had made use of it at some time. This implies a lack of awareness may be one of the largest barriers to uptake. 

2.3 Reasons for using or not using simplified mileage rates 

Almost 6 in 10 (59%) of those currently using simplified mileage rates or who had used them in the past did so because it made record keeping more straightforward. Vehicle users also said they used them because of recommendations from their agent or accountant (31%), that vehicle expenses were considered a relatively minor aspect of overall business expenditure (27%), or because it meant they did not have to calculate their actual expenses (24%). 

Just under a quarter of vehicle users who knew of simplified mileage rates, were not using it because they preferred to keep exact records (23%). Slightly fewer had calculated they would be better off by working out the actual costs (20%) or considered it fairer to pay for exactly what they used (18%). A further 14% believed the rates offered by simplified mileage rates were too low.  

2.4 Consideration among those currently not using simplified mileage rates 

Almost 7 in 10 (68%) of those unaware of simplified mileage rates would consider using it in the future. However, only 15% would consider using simplified mileage rates straightaway with the remainder preferring to first find out more about them. The level of interest was highest among those operating in business services or other services sectors (both 74%). 

2.5 Perceived adequacy of simplified mileage rates  

Vehicle users were over twice as likely to agree (45%) than disagree (20%) that simplified mileage rates would be adequate to cover their business vehicle expenses. Agreement was significantly higher among car users (47%) than van users (38%) and sole traders (47%) compared to partnerships (34%).  

Two-thirds (66%) of those currently using simplified mileage rates said it adequately covered their business vehicle expenses but a sizeable minority (21%) said it did not.  

2.6 Methods of record keeping  

The majority of self-employed vehicle users relied on manual record keeping for travel expenses. Those using simplified mileage rates (40%) were significantly more likely than those who do not (15%) to digitally record their mileage and expenses via non-specialist software. Those not currently using simplified mileage rates placed greater reliance than other vehicle users on an agent for record keeping. 

2.7 Vehicle ownership and annual mileage  

The majority of vehicle users in the survey used cars for business purposes (72%) while almost 4 in 10 used vans for business purposes (37%). Just under 1 in 10 (9%) used both cars and vans with a very small minority (1%) using motorcycles for business purposes (as well as either a car or a van). 

The estimated annual mileage for cars in tax year 2021 to 2022 was 8,500. It was significantly lower among those using simplified mileage rates to calculate their vehicle expenses (5,810 miles) than among those who did not (9,970 miles). 

The estimated annual business mileage for vans in tax year 2021 to 2022 was 13,630. This did not vary significantly between those who did use simplified mileage rates (10,200 miles) and those who did not (14,010 miles), though was lower for those who used simplified mileage rates.  

2.8 Personal mileage in vehicles primarily used for business purposes  

Seven in ten vehicle users (70%) used their vehicle for both business and personal purposes. The figure was significantly higher than average among car users (84%) and those using simplified mileage rates to calculate vehicle expenses (89%). Of those that used their vehicle for business purposes the average number of miles driven for personal purposes was almost 5,500. 

2.9 Type of fuel used in business vehicles  

Car users were almost equally divided between those using petrol (48%) and those fuelling their vehicles with diesel (45%). Van users fuelled their vehicles almost exclusively by diesel (97%). Very few car users (7%) and none of those with vans utilised renewable energy sources.  

2.10 Ownership models 

Eight in ten car (80%) and van owners (82%) owned their vehicles outright. The remainder had utilised some form of leasing arrangement (Personal Contract Plans, Hire Purchase agreements or personal loans). For both car and van users, there was no significant difference in ownership arrangement depending on whether they used simplified mileage rates or not. 

2.11 Perceived importance of vehicles to businesses 

Over 9 in 10 vehicle users (94%) said their vehicles were essential to their business while little more than 1 in 10 (13%) believed there were alternative modes of transport they could use instead. Among van users (99%) and those not currently using simplified mileage rates (96%) there was almost universal agreement that their vehicles were essential to the business. 

A quarter of vehicle users in London (25%) said they could use alternative modes of transport. This compared to fewer than 1 in 10 in the North East of England (4%), Wales (6%) and the West Midlands (9%). 

2.12 Value of cars and vans used for business purposes  

At the time of purchase, the average value of cars used for business purposes was £14,230. At £13,000, the average cost of a van was slightly lower. Those working within partnerships tended to have vehicles of a higher value than sole traders. For example, the average value of a car used by a partnership (£23,500) was approximately double that of one owned by a sole trader (£12,830). 

2.13 Monthly cost of leasing cars and vans used for business purposes  

Leasing accounts for 20% of car users and 18% of van users. Where these arrangements were in place, the average monthly cost of a car was £450 and £390 for a van.  

2.14 Annual cost of operating a car for business purposes in tax year 2021 to 2022 

The total annual cost to self-employed businesses of operating a car was estimated at £3,770. The largest proportion of this expenditure (49%) was accounted for by fuel. Approximately a fifth was spent on repairs and servicing (22%) and insurance (18%) with relatively little of the total cost of running a car represented by road tax (6%) or other fees (6%). 

Those who used simplified mileage rates spent an average of £2,850 running a car in tax year 2021 to 2022. That was £1,410 (or 33%) less than businesses using other calculation methods. Partnerships estimated that in tax year 2021 to 2022 it cost them an average of £5,410 to run car. That was 53% more than the amount spent by sole traders (£3,550). Those who leased their cars spent £1,740 (49%) more than those who owned them outright. 

2.15 Annual cost of operating a van for business purposes in tax year 2021 to 2022 

The total estimated annual cost of operating a van for business purposes was 75% higher than for running a car (£6,590 versus £3,770). The largest proportion of van expenditure (56%) was accounted for by fuel. Repairs and servicing accounted for 21% and insurance 15%, with relatively little of the total cost of running a van accounted for by road tax (5%) or other fees (6%). 

The cost of running a van for business purposes tended to be consistent whether they were a sole trader or partnership and whether they used simplified mileage rates or not. 

2.16 Declaring other travel costs in tax year 2021 to 2022 

In tax year 2021 to 2022, just over 2 in 10 self-employed vehicle users (21%) declared another type of travel cost such as train, bus, air, or taxi fares as a business expense. Car users (26%) were significantly more likely than van users (11%) to declare other travel costs, while those using simplified mileage rates (31%) also had a greater tendency than those not using simplified mileage rates (17%).