Capital allowances on a vehicle
A capital allowance is tax relief on something you bought to keep and use, spread over years rather than deducted at once. You cannot claim capital allowances on a vehicle and use the mileage rate for it, so for most gig drivers this is a road not taken.
Correct for the 2026/27 tax year. Last checked 12/09/2026.
Most gig drivers will never claim capital allowances, and the reason is simple: they claim the mileage rate instead, and the two are mutually exclusive for the same vehicle. This page exists so that the choice is made deliberately rather than by default.
Revenue costs against capital costs
A tank of fuel is used up. It is deducted in the year you buy it. A car is not used up; you still have it at the end of the year, and it is worth something. The tax system handles that through capital allowances, which give relief on part of the cost each year.
Cars and vans are treated differently
| Car | Van or goods vehicle | |
|---|---|---|
| Annual investment allowance | Not available | Usually available |
| Relief in year one | A percentage of the cost | Potentially the whole cost |
| How the rate is set | By CO2 emissions | Standard plant and machinery treatment |
| Private use | Reduces the claim | Reduces the claim |
That difference is large. A courier buying a van to do parcel rounds is in a very different position from a driver buying a car for food delivery, and it is worth knowing which side of the line the vehicle falls before buying it.
The choice, worked
A driver buys a £12,000 car and does 14,000 business miles a year. Illustrative, and rates change, so treat the shape rather than the figures as the point.
| Method | Year one relief | Ongoing |
|---|---|---|
| Mileage rate at 55p and 25p | £6,000.00 | Roughly the same every year the mileage holds up |
| Actual costs plus capital allowances | Running costs, plus a percentage of £12,000 reduced for private use | A falling allowance each year as the pool shrinks |
The mileage rate wins for most gig drivers, because the mileage is high and the car is usually cheap. Actual costs can win where the vehicle is expensive and the business mileage modest, which is the opposite of the typical delivery pattern.
If you are considering actual costs
It is more work and it needs more evidence: every fuel receipt, every repair invoice, an apportionment between business and private use you can defend, and the capital allowance computation itself.
It is also the point at which an accountant earns their fee. If you are buying a van, or a car costing enough that this matters, an hour of advice before the purchase is worth more than a year of it afterwards.
Sources
Common questions
- Can I claim the cost of my car against tax?
- Not in one go, and not at all if you use the mileage rate for that vehicle. If you claim actual costs instead, relief comes through capital allowances, spread over years at a percentage of the remaining value.
- Can I use the mileage rate and claim capital allowances too?
- No. The mileage rate already includes the cost of owning the vehicle. Claiming both is claiming the same cost twice.
- Is a van treated differently from a car?
- Yes. A van is usually plant and machinery and can qualify for the annual investment allowance, which gives relief on the whole cost in the year of purchase. Cars are excluded from that and go into a pool instead.
- What about private use?
- The allowance is reduced by the private proportion. A vehicle used 30% privately gets 70% of the allowance, and that split has to be supportable rather than convenient.
- What happens when I sell the vehicle?
- There is a balancing adjustment. If you have claimed more relief than the fall in value justified, some is clawed back; if less, you get the difference. It is not a free ride either way.
About the author
Issac Davies, Founder of JoltMile
Issac Davies drives for gig apps in the UK and built JoltMile to show drivers what a shift actually pays once fuel, insurance and tax come off. Every guide here is checked against HMRC and gov.uk guidance, and is information rather than tax advice.
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