🚗 Business vs Personal Use: How to Claim Car and Van Expenses Correctly for Tax Purposes - UK 2025

For many business owners, freelancers, and landlords, vehicles are essential tools — whether for meeting clients, delivering goods, or managing properties. But when it comes to tax time, confusion often arises: what can you actually claim for business use?

With Making Tax Digital (MTD) coming into effect, keeping accurate and digital vehicle records is more important than ever. This guide from AccountingIN breaks down the key rules for cars and vans used for both personal and business purposes — helping you stay compliant and maximise your tax relief in 2025.

🚘 Understanding Business vs Personal Use

HMRC allows you to claim vehicle expenses that relate only to business use. That means any personal journeys — such as commuting from home to a regular workplace — cannot be claimed.

Business mileage includes:

• Travelling between different work sites

• Visiting clients or suppliers

• Going to the bank or post office for business reasons

• Travelling to collect supplies or equipment

Personal mileage includes:

• Daily commuting to and from work

• School runs or personal errands

• Leisure travel or holidays

The proportion of business vs personal use determines how much of your vehicle expenses you can claim.

🧾 Two Ways to Claim Vehicle Expenses

There are two main methods to claim your vehicle expenses for tax purposes in the UK:

1️⃣ Simplified Mileage Method

You can claim a flat rate per mile for business journeys. This is the simplest method and ideal for sole traders, freelancers, and small businesses.

HMRC Approved Mileage Rates (2024/25):

• Cars & Vans: 45p per mile for the first 10,000 miles, then 25p per mile after

• Motorcycles: 24p per mile

• Bicycles: 20p per mile

👉 Example: If you drive 8,000 business miles in a year using your own car: 8,000 × 45p = £3,600 allowable expense.

You can also claim extra for passengers (5p per mile per passenger) if they’re on the same business trip.

For full guidance, visit:🔗 HMRC Approved Mileage Allowance Payments (AMAP)

2️⃣ Actual Cost Method

This method involves claiming the actual running costs of your car or van — based on the proportion of business use.

You can include:

• Fuel

• Insurance

• Repairs and servicing

• Road tax and MOT

• Breakdown cover

• Lease or hire costs

• Parking and tolls (for business journeys)

You’ll need to calculate the percentage of business use. For example, if your car is used 70% for business and 30% for personal, you can claim 70% of the total running costs.

💡 Tip: Keep a digital mileage log or use an app to track your business journeys accurately.

🚐 Cars vs Vans: What’s the Difference?

HMRC treats cars and vans differently when it comes to tax.

Vehicle Type	Description	Tax Treatment
Car	Designed for carrying passengers	Private use is taxable as a Benefit in Kind (BIK) if owned by the company
Van	Designed primarily for carrying goods or equipment	Often treated more favourably for business use

If you use a company car or van, you’ll need to consider Benefit in Kind (BIK) tax.

For 2024/25, the BIK rate depends on the vehicle’s CO₂ emissions and list price — with electric vehicles currently enjoying very low BIK rates (as low as 3%).

For more details, see:🔗 HMRC Company Car and Van Benefits

💼 Capital Allowances for Business Vehicles

If you buy a vehicle specifically for business, you may be able to claim capital allowances to reduce your taxable profits.

The amount depends on the vehicle type and its emissions:

• Electric cars & low-emission vehicles (0g/km CO₂): 100% First Year Allowance (you can claim the full cost)

• Other cars: 6% or 18% Writing Down Allowance depending on CO₂ emissions

• Vans: Usually qualify for 100% Annual Investment Allowance (AIA)

For full guidance, visit:🔗 HMRC – Claim Capital Allowances

📱 Record-Keeping Under Making Tax Digital (MTD)

From April 2026, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) will become mandatory for many self-employed individuals and landlords.

That means vehicle and mileage records must be kept digitally and submitted quarterly using MTD-compliant software.

Recommended options include:

• QuickBooks MTD for Self Assessment

• Xero MTD for Income Tax

• FreeAgent for Landlords & Self-Employed

At AccountingIN, we help clients set up and manage MTD-compliant bookkeeping systems — ensuring your vehicle and mileage records are fully HMRC-ready.

🧮 Example: Claiming Expenses in Practice

Let’s say you own a car worth £20,000, used 70% for business. Your annual running costs total £5,000.

• You can claim £3,500 (70% of £5,000) as allowable expenses.

• If purchased through your business, you could also claim 70% of the capital allowance based on emissions and cost.

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However, if the car is provided by your company for both personal and business use, you’ll pay Benefit in Kind tax, which your accountant can calculate precisely.

⚠️ Common Mistakes to Avoid

• Claiming commuting as business mileage

• Not keeping digital evidence (fuel receipts, mileage logs)

• Mixing personal and business expenses

• Forgetting to adjust claims for mixed use

• Using outdated or non-MTD-compliant spreadsheets

Keeping accurate, real-time records avoids penalties and simplifies tax submissions.

🤝 How AccountingIN Can Help

At AccountingIN, our ACCA-qualified accountants specialise in helping self-employed professionals, company directors, and landlords manage their vehicle expenses efficiently and compliantly.

We offer:

• Setup and training for MTD-compliant accounting software

• Accurate mileage tracking and expense categorisation

• Tax-efficient advice for company cars and vans

• Quarterly submissions and full compliance with HMRC rules

We work across multiple sectors including construction, healthcare, digital content creation, and retail, providing expert tax support tailored to your business.

🏁 Final Thoughts

Understanding the difference between business and personal vehicle use is key to staying compliant and maximising your tax relief. With the MTD rollout approaching in 2026, there’s never been a better time to go digital and stay organised.

Let AccountingIN handle the details so you can focus on driving your business forward — literally and financially.

📞 Ready to get started? Contact us today to discuss your vehicle expense claims and get your accounts MTD-ready with confidence.

⚠️ Disclaimer

The information provided in this article is for general information purposes only and should not be relied upon as professional, legal, or tax advice. Although every effort has been made to ensure the accuracy of the content at the time of publication, AccountingIN makes no representations, warranties, or guarantees of any kind, express or implied, regarding its completeness, accuracy, or reliability.

AccountingIN, its directors, or employees accept no liability for any loss or damage arising from reliance on this information. Tax laws and regulations change frequently, and the applicability of the information will vary depending on individual circumstances. Readers are strongly advised to obtain independent professional advice before making any financial or tax-related decisions.