Mileage method or actual costs: which is worth more?

There are two ways to get tax relief for using your own vehicle for work, and you have to pick one per vehicle. Choosing wrong costs money, and the choice is difficult to undo, so it is worth ten minutes now.

The two methods

Mileage. You claim a flat rate per business mile: 55p for the first 10,000 miles in a tax year, 25p after that. Motorcycles are 24p and bicycles 20p, with no threshold.

Actual costs. You claim the business proportion of what the vehicle really cost you: fuel, insurance, tax, servicing, repairs, tyres, breakdown cover, plus capital allowances on the vehicle itself.

The arithmetic that decides it

Work out your real cost per mile and compare it to the allowance. For an ordinary petrol hatchback doing serious delivery mileage, fuel is somewhere around 15p a mile, and everything else together rarely doubles it.

That is a high bar for a car costing a few thousand pounds. It is a much lower bar for a newly bought van, which is where the comparison genuinely goes the other way.

When actual costs win

• A high-value vehicle bought outright, where capital allowances are worth a great deal in the early years.
• A van used almost entirely for the business, so the private-use restriction barely bites.
• An unusually expensive year of repairs on an older vehicle.
• Very high mileage on a thirsty vehicle, where the drop to the lower rate after the threshold hurts.

The hidden costs of actual costs

The relief is only half the story. Actual costs means keeping every receipt for every fuel stop, service and repair, and working out a defensible business percentage for a vehicle you also use privately. That is real work every month, and it is work HMRC can ask to see.

The mileage method needs a mileage log and nothing else. For a driver doing this alongside the driving itself, that difference is worth something on its own.

The rule that makes this a one-off decision

So the sensible order is: work it out before your first claim, not after. If you are somewhere near the line, an hour with an accountant is cheap against a decision you are stuck with for the life of the car.

What JoltMile does

JoltMile is built around the mileage method, because that is what nearly all its users should be on. It applies 55p and 25p at the right point, tracks cumulative miles across the tax year so the 10,000 threshold is handled automatically, and splits the shift you cross on between the two rates.

It also tracks your real fuel and insurance costs separately, which is how you see whether your actual running cost is anywhere near the allowance. If it ever is, that is the signal to look at this again.