The HMRC Mileage Rate Has Increased to 55p: What UK Sole Traders Need to Know and Claim in 2026/27

For the first time since 2011, HMRC has increased the approved mileage rate for business travel. If you are a sole trader who uses your own car for work, this is genuinely good news. The increase was announced by the Chancellor Rachel Reeves on 21 May 2026 and backdated to 6 April 2026, the start of the current tax year, which means the full benefit applies across the whole of 2026/27."

This post covers everything a sole trader needs to know. What changed, what the increase is worth at different mileage levels, what counts as a qualifying business journey, how to record it, and how to claim it on your Self Assessment return.

What Changed and Why It Took 15 Years

The rate of 45p per mile had been frozen since the 2011/12 tax year. In that time, fuel prices, insurance, servicing costs and vehicle depreciation have all risen significantly, while the allowance sat still. Chancellor Rachel Reeves announced the increase on 21 May 2026, with it backdated to 6 April 2026, meaning sole traders can claim 55p per mile for every qualifying business journey made since the start of the 2026/27 tax year, including any driven before the announcement was made.

The rate applies to all engine types equally, petrol, diesel, hybrid and electric vehicles. HMRC has not introduced a separate EV rate. The 10,000-mile threshold that marks the point where the rate drops from 55p to 25p resets at the start of each new tax year and applies per individual, not per vehicle.

What the New 55p Mileage Rate Means for Your Tax Bill

Mileage claimed under the approved rate method reduces your taxable profit directly. Every pound of mileage you claim is a pound less of profit that gets taxed. The table below shows what the increase from 45p to 55p is worth at four different annual mileage levels, both in terms of the additional claim and the additional tax saved.

The increase from 45p to 55p is worth an additional 10p per mile, which at first sounds modest. For a sole trader driving 8,000 business miles a year, that is £800 of additional expense claim, saving £208 in tax at the basic rate. For a higher rate taxpayer on the same mileage, the additional tax saving is £336.

If your tax bill feels larger than expected and you have been claiming mileage at 45p this year, this update is directly relevant to you. Our guide to saving for your sole trader tax bill covers how changes to your expense claims affect how much you need to set aside each month.

What Counts as a Qualifying Business Journey for a Sole Trader

The mileage rate can only be claimed for journeys that are wholly and exclusively for business purposes. For a sole trader, the following journeys qualify.

Travel to visit a client or customer at their premises. Travel to a supplier, wholesaler or business bank branch. Travel to a temporary work site or location. Journeys to a post office, parcel drop-off or collection point specifically for business purposes. Travel to training courses, professional development events or conferences relevant to your trade. Journeys between two different work locations in the same day.

Ordinary commuting does not qualify, and this catches many sole traders out. The journey from your home to your regular, permanent place of work is not a business journey for tax purposes, even if you work from home on other days. If you drive to the same premises every working day, that journey is commuting regardless of whether you call yourself self-employed. However, if you genuinely work from home and then travel to visit a client, that journey is a qualifying business trip because home is your base of work.

Mileage Rate or Actual Costs: Which Is Better for Sole Traders

The mileage rate method is usually the simpler and more tax-efficient choice for most sole traders, and the increase to 55p has widened the gap further. You multiply your business miles by the approved rate and claim the result as an expense. No fuel receipts, no insurance bills, no service invoices needed. Just a mileage log.

The actual costs method involves claiming a proportional share of all your real vehicle running costs including fuel, insurance, MOT, servicing, tyres and depreciation, based on the ratio of business miles to total miles. This can produce a larger claim if your vehicle costs are high, you drive a large percentage of total miles for business, or your car is expensive to run. For most sole traders driving a standard car primarily for personal use with some business use, the mileage rate at 55p now beats actual costs in most scenarios.

A quick sense check: if your total annual motoring costs are around £3,000 and you drive 12,000 total miles of which 6,000 are business, your actual cost claim is £1,500. At 55p per mile, your mileage claim is £3,300. The mileage method wins by a wide margin here and requires significantly less record-keeping.

What Records You Need to Keep for Your Mileage Claim

HMRC expects mileage claims to be supported by a mileage log. A mileage log does not need to be elaborate, but it does need to contain the date of each journey, the start and end location, the business purpose, and the number of miles driven. A note on your phone, a simple spreadsheet, or a dedicated mileage app all work. Paper is acceptable but digital is easier to keep and harder to lose.

The log needs to cover every qualifying business journey individually. A monthly estimate or a rough annual total is not adequate if HMRC asks to see your records. HMRC can ask to see your records for up to five years after the relevant Self Assessment filing deadline, so the log needs to survive.

Our home office expenses post covers a similar record-keeping discipline for the home office claim, and the principle is the same for mileage: keep the records contemporaneously, meaning at the time of the journey, not reconstructed from memory months later.

How to Claim the 55p Mileage Rate on Your Self Assessment

Mileage is claimed on the self-employment pages of your Self Assessment return, specifically the SA103 form. It sits in the vehicle running costs section as an allowable business expense, reducing your taxable profit before your income tax and National Insurance are calculated.

You enter the total pound value of your mileage claim for the year, which is your total qualifying business miles multiplied by 55p (and 25p for any miles above 10,000). You do not enter the miles themselves, just the resulting expense figure. The Self Assessment return does not ask you to confirm which method you used, but you should keep your mileage log as evidence that the claim is correctly calculated.

Because the 55p rate applies from 6 April 2026, the full benefit is available for the entire 2026/27 tax year. For sole traders who recorded their mileage earlier in the year at the old 45p rate before the announcement was made on 21 May, our post on correcting an underclaimed mileage expense covers exactly what to do.

The UK Sole Trader Tax Template includes mileage and travel as one of its expense categories. You enter your mileage claim and the template factors it into your running tax position alongside every other expense, showing you what the claim is worth in reduced tax throughout the year rather than just at January.

Get the UK Sole Trader Tax Template, £14.99 →