45p Versus 25p HMRC Mileage Rates: What You Need to Know

Published 2026-04-25

Understanding HMRC Mileage Allowance Tiers: 45p vs. 25p

As a self-employed driver, sole trader, or gig worker in the UK, it's essential to understand how mileage allowances work and which tier applies to you when claiming tax deductions. This article will delve into the differences between the 45p-versus-25p HMRC mileage tiers, helping you make informed decisions about your business expenses.

The Basics of Mileage Allowances

Mileage allowances are a common way for self-employed individuals to claim tax deductions for their vehicle usage. These allowances help offset the costs associated with using your own car, van, or motorcycle for work-related journeys. HMRC sets these rates annually based on various factors such as fuel prices and running costs.

The 2023-24 Mileage Allowance Rates

For the tax year 2023-24, the current 25p-per-mile rate is applicable for most business journeys. However, there are exceptions and alternative rates to consider:

Motorcycles: 12p per mile.
Company cars: Special rates apply based on the vehicle's CO2 emissions.

The 45p Mileage Rate and Its Application

In specific circumstances, a higher 45p-per-mile rate may be applicable. This tier comes into play when your business involves significant distances or you use your vehicle for more demanding purposes than regular commuting. Let's explore the scenarios where this higher rate might apply:

1. Heavy Goods Vehicles (HGVs)

If you operate an HGV, the 45p-per-mile rate applies to both loading and unloading journeys, as well as any driving involved.

2. Public Service Vehicles (PSVs) and Hackney Carriages

These vehicles are eligible for the higher rate when used by their registered drivers for hire or reward purposes.

Determining Your Appropriate Mileage Rate

It's crucial to accurately determine which mileage allowance tier applies to your business. Here’s how you can do it:

Evaluate the nature of your work: Are you primarily commuting, or are you involved in long-distance deliveries or other demanding tasks? This will help identify whether 25p or 45p is more suitable.
Check HMRC guidelines: Review the latest HMRC tax guidance to ensure compliance and avoid any potential penalties for misclassification.
Keep detailed records: Accurate logging of your journeys, including start times, end times, destinations, and purposes, can help substantiate your claims.

The Importance of Accurate Record Keeping

No matter which mileage rate you're claiming for, accurate record keeping is key. It ensures that you receive the correct tax allowances and avoids any discrepancies with HMRC.

Start tracking now: Even if your business isn't fully established yet, starting to track your journeys can save time later on.
Use a reliable mileage tracker: An automatic mileage tracker like Odomo logs every trip to HMRC standards, ensuring you have all the necessary documentation ready at tax filing time.

Pitfalls and Common Mistakes

Many self-employed drivers and gig workers make common mistakes when claiming mileage allowances. Here are a few pitfalls to avoid:

Misclassifying journeys: Overclaiming by mistakenly classifying personal trips as business can lead to HMRC scrutiny and potential penalties.
Inadequate record keeping: Failing to keep detailed logs of your journeys, especially when using the 25p rate for standard commuting, may result in lower-than-expected tax deductions.

Practical Tips for Claiming Mileage Correctly

To ensure you claim mileage correctly and maximize your tax savings, follow these practical tips:

Use Odomo or a similar app to track every journey: This ensures that all miles are accurately logged and easily accessible when HMRC comes knocking.
Separate personal from business journeys: Keep detailed records of which trips were for work and which were for personal use, using separate accounts if possible.
Stay updated with HMRC guidelines: Regularly check the HMRC website or consult a tax professional to ensure you're following the latest regulations.

Conclusion

The choice between the 25p and 45p-per-mile rates for claiming mileage is a critical decision for self-employed drivers, sole traders, and gig workers in the UK. By understanding which tier applies to your business and following best practices for record keeping, you can ensure accurate claims and minimize tax liabilities.

An automatic mileage tracker like Odomo logs every trip to HMRC standards, making it easy for you to manage your expenses and file your taxes with confidence. Don't let the complexity of claiming mileage allowance overwhelm you – start tracking today with Odomo!