Uber Drivers: Mileage Allowance vs Actual Car Costs

Uber and other private hire drivers can usually claim their car costs in one of two ways: a flat mileage rate per business mile, or the actual running costs plus capital allowances on the vehicle. Once you use the mileage rate for a car, you generally have to stick with it for as long as you drive that car for work.

Because that choice can last years, it is worth getting right. This guide explains both methods, shows how to compare them with your own figures, and lists the records you need whichever one you choose.

Key takeaways

• You choose between simplified mileage and actual costs for each vehicle.
• Once you use mileage for a vehicle, you usually cannot switch to actual costs for it.
• Actual costs need apportioning between business and private use.
• Parking and tolls can generally be claimed on top of the mileage rate; fines cannot.
• Either way, keep a mileage log and your app trip records.

What "simplified mileage" means

Simplified expenses for vehicles let a self-employed person claim a flat amount for each business mile instead of adding up fuel, insurance, repairs, servicing and the cost of the car itself. For cars, the rates have been 45p per mile for the first 10,000 business miles in the tax year and 25p per mile after that. Check the current rates and conditions on GOV.UK's simplified expenses for vehicles page.

The alternative is claiming actual costs: the business share of what you really spent running the car, plus capital allowances for the cost of the vehicle. HMRC's guidance on travel costs is on GOV.UK's self-employed travel expenses page.

Mileage rate vs actual costs compared

Which suits a private hire driver?

Private hire drivers cover a lot of miles, and much of the cost of running a private hire car is insurance, licensing and wear. If your car is efficient and modest in price, the mileage rate is often competitive and far simpler. If you drive a more expensive vehicle, pay high private hire insurance, or face big repair bills, actual costs plus capital allowances may give a larger claim. Our guide to private hire insurance and your tax return explains how insurance fits in. Whichever you choose, other costs that are not about running the car — such as your phone, platform fees and licence fees — are claimed separately.

Keeping a mileage log that stands up

Whichever method you choose, your business mileage matters. With the flat rate it is the whole claim; with actual costs it sets the business-use percentage. Ride hailing apps record trips with passengers, but they may not capture every business mile, such as driving to a pick-up or to a busier area to wait for work, and they certainly do not record your private driving.

A simple log is enough: the date, your starting and finishing odometer readings for each shift, and a note of any private trips. Many drivers use a mileage app on their phone, which is fine as long as the records are kept. At the start and end of each tax year, note the total odometer reading so business and private miles can be checked against the total. Keep the log together with your app statements in case HMRC asks how your figure was worked out.

Step by step: making the choice

1. Estimate your business miles for a year using app data and a mileage log.
2. Work out the mileage claim at the current HMRC rates.
3. Add up actual running costs: fuel, insurance, repairs, servicing, tax, MOT and cleaning.
4. Work out your business-use percentage from business and total miles.
5. Add capital allowances on the vehicle, which your accountant can calculate.
6. Compare the totals, remembering the choice usually lasts for the life of the car.
7. Keep the records that support whichever method you choose.

Worked example (illustrative example)

"Daniel", an invented illustrative example, drives for a ride hailing app in London in a hybrid saloon he has just bought. He expects 30,000 business miles a year and about 3,000 private miles.

At rates of 45p for the first 10,000 miles and 25p after, the mileage claim would be £4,500 plus £5,000, a total of £9,500 a year. His actual running costs, including private hire insurance, fuel, servicing and repairs, come to about £11,000. With business use of roughly 91%, that is around £10,000, before any capital allowances on the car. Because the car was expensive, adding capital allowances makes actual costs the bigger claim for him, so he keeps every receipt and a full mileage log. A driver with a cheaper car and lower insurance could easily find the opposite. The person and figures are invented, and the rates used should be checked on GOV.UK.

Common mistakes

• Switching methods for the same car from year to year.
• Claiming fuel on top of the mileage rate, which counts it twice.
• Counting private trips as business miles.
• Claiming fines, which are never allowable.
• No mileage log, leaving your claim hard to support.

Get your driving costs claimed correctly

Our Uber driver accounting service starts from £49 per month, and our private hire driver service from £249 per year. We compare both methods before your first claim for a new car. For the full filing process, read our Uber driver tax return guide.

Just bought a new car for driving? Talk to us before you file or see our pricing.