Driving for work as a self-employed person is tough. You spend hours on the road picking up passengers or delivering goods. Fuel, repairs, and insurance add up fast. But you can claim these costs on your taxes to keep more money.
If you are looking for accountants for taxi drivers, this guide will help you choose the best way. We compare mileage allowance and actual costs in simple words. From years of helping drivers like you, we know which method saves the most in 2026. business accounting services works with many self-employed drivers. We see real savings when claims are done right.
Let us break it down so you can decide what fits your driving job.
What Are Vehicle Expenses for Self-Employed Drivers?
As a self-employed driver, your car or van is key to your business. You use it to earn money. HMRC lets you deduct business costs from your income. This lowers your taxable profit. You pay less income tax and National Insurance.
There are two main ways to claim vehicle expenses:
- Simplified mileage allowance
- Actual running costs
You pick one method for each vehicle. Once you choose actual costs for a car, you must stick with it until you change the vehicle. Mileage is easier for many.
The tax year runs from 6 April to 5 April. For 2025-2026, rules stay the same as recent years.
The Mileage Allowance Method
HMRC gives a flat rate per business mile. This is called simplified expenses. It covers fuel, insurance, repairs, servicing, and wear on the vehicle.
You do not need receipts for these costs. Just track your business miles.
Rates for cars and vans in 2026:
- 45p per mile for the first 10,000 business miles
- 25p per mile for every mile after that
For motorcycles, it is 24p per mile all the way.
Bicycles get 20p per mile.
Example: You drive 12,000 business miles in your car.
- First 10,000 miles: 10,000 x 45p = £4,500
- Next 2,000 miles: 2,000 x 25p = £500
- Total claim: £5,000
This £5,000 reduces your taxable profit. If you are a basic rate taxpayer, you save around £1,000 in tax and NI.
Many taxi drivers, delivery drivers, and couriers love this method. It is quick and no hassle with receipts.
How Actual Costs Work
With actual costs, you claim the real amount you spend on the vehicle.
You work out the business part only. Split costs based on how much you use the car for work.
First, track total miles and business miles. Say your car does 20,000 miles a year. 15,000 are business. That is 75% business use.
Then claim 75% of these costs:
- Fuel
- Insurance
- Road tax
- MOT and servicing
- Repairs and tyres
- Breakdown cover
- Car finance interest (if you have a loan)
- Depreciation (wear and tear)
You can claim capital allowances for big buys like a new car. This spreads the cost over years.
You need receipts for everything. Keep a mileage log too. Note every business trip with dates, places, and purpose.
This method suits drivers with high costs. Think old cars that need lots of repairs or expensive fuel use.
Pros and Cons of Mileage Allowance
Pros
- Very easy. Just count miles.
- No need for receipts on vehicle costs.
- Good for most drivers with average cars.
- Fast to calculate at tax time.
- HMRC likes it. Less chance of questions.
Cons
- May give less claim if your car is costly to run.
- Fixed rates do not change with fuel prices.
- You cannot claim extra for parking or tolls on top (those are separate).
Many drivers we help say mileage is best for them. One taxi driver with 11,000 miles claimed £4,750. He saved time and got a good deduction.
Pros and Cons of Actual Costs
Pros
- Can claim more if your vehicle is expensive.
- Good for high-mileage drivers or big repairs.
- Claim VAT on fuel if VAT registered (some drivers are).
- Shows exact business use.
Cons
- Lots of work. Keep all receipts.
- Need to split personal and business use.
- More records for HMRC checks.
- Once chosen, hard to switch back for that car.
Actual costs win for drivers with fuel-hungry vans or frequent fixes. We see some couriers save extra hundreds this way.
business accounting services compares both for drivers. We often find mileage wins for taxis and small vans.
How to Choose the Best Method for You
Think about your driving.
- How many business miles do you do?
- What does your car cost to run?
- Do you like simple records?
Mileage is best if:
- You drive under 15,000 business miles a year.
- Your car is average or low cost.
- You want easy tax time.
- Most taxi and delivery drivers fit here.
Actual costs are best if:
- You drive over 15,000-20,000 business miles.
- Your vehicle has high repairs or fuel use.
- You have proof of costs.
- You do not mind paperwork.
Try both ways for one year. Track actual costs and miles. Compare the claims. Pick the higher one next year.
Remember: Commuting from home to a regular base does not count as business miles. Only trips for work like picking up fares or deliveries.
Keep Good Records Either Way
Records matter for both methods.
For mileage:
- Log every business trip.
- Note date, start and end place, miles, and reason.
- Use apps or a notebook.
For actual costs:
- Save all receipts.
- Keep a mileage log for the split.
- Note total miles and business miles.
HMRC can check up to 6 years back. Good logs keep you safe.
Other Expenses Drivers Can Claim
Vehicle costs are big, but add these too:
- Phone bills for work calls
- Uniforms or hi-vis if needed
- Parking fees and tolls
- Cleaning the car for passengers
- Accountant fees
These lower your tax more.
Tips from Real Driver Cases
We help drivers every tax year.
- Use a mileage app. It tracks automatic.
- Review each year. Fuel prices change.
- Claim parking separate from mileage.
- Get help if unsure. Mistakes cost fines.
One delivery driver switched to actual costs. His old van had big repair bills. He claimed £2,000 more than mileage.
Another taxi driver stuck with mileage. Simple and he saved time for more fares.
Common Questions from Self-Employed Drivers
Can I switch methods each year?
Yes for mileage. No for actual once started on a car.
What about electric cars?
Same rates apply. No special rate yet.
Do I claim VAT on fuel?
Only if VAT registered. Most small drivers are not.
How do I claim on tax return?
In the self-employment section. Add to expenses.
What if HMRC checks?
Show your logs and receipts. Stay calm.
Pick the Right Claim for Your Driving Business
Mileage allowance is simple and good for most self-employed drivers. It saves time and gives fair deductions. Actual costs fit when your vehicle runs expensive.
In 2026, rules stay steady. Use the 45p and 25p rates. Track miles well.
At business accounting services, we know driver taxes well. We help choose the best method and file right. Many drivers keep more pay this way.
Ready to check your claim? Reach out today. We can compare mileage and actual for your car. Your driving business can save more and stay easy. Let’s get your taxes sorted now.
