Van Tax Relief for Mobile Mechanics: Mileage Rate or Capital Allowances?

The van is the biggest single cost in a mobile mechanic business, and there are two ways to get tax relief on it. You pick one, and for that vehicle you are largely stuck with it. Getting it wrong at the start costs you for as long as you own the van, which is why it is worth half an hour now.

Something changed this year that most people have not caught up with. The simplified mileage rate went up to 55p for the first 10,000 business miles, with 25p a mile after that, taking effect from 6 April 2026. The 45p figure had been in place since 2011, so every calculator, forum post and piece of advice written before this year is now out of date. If you are reading a comparison that says 45p, it is describing last year.

The two methods

Simplified mileage. You claim a flat rate per business mile and nothing else for that vehicle. No fuel, no insurance, no servicing, no road tax, and no relief for the purchase price. 55p a mile up to 10,000 miles, then 25p.

Capital allowances plus actual costs. You claim the van's cost through the capital allowances system, and separately deduct what you actually spend running it: fuel, insurance, repairs, tyres, road tax, breakdown cover. You need the records to back all of it.

A van qualifies for the Annual Investment Allowance, which lets you deduct the full cost in the year you buy it, up to £1 million a year. Cars do not qualify, vans do. If you trade through a limited company you may instead use full expensing, which gives 100% relief on new and unused plant and machinery and is permanent now, but it is available to companies only. Sole traders use the Annual Investment Allowance, which gets to the same place for a purchase of this size.

The rule that makes this close to permanent

This is the part people miss. Once you have claimed capital allowances on a vehicle, you cannot switch to the mileage rate for that vehicle. And once you have adopted the mileage basis for a vehicle, you cannot claim actual running costs or capital allowances on it.

So the choice is made per vehicle, at the start, and it follows that van until you dispose of it. It is not a decision you revisit each January.

A worked example

Say the van cost £18,000 and you do 12,000 business miles a year, with real running costs of around £4,500 a year once you add fuel, insurance, servicing, tyres and road tax.

On mileage: 10,000 miles at 55p is £5,500, plus 2,000 at 25p is £500. That is £6,000 of deduction a year, every year, with no receipts to keep beyond a mileage log.

On capital allowances: you deduct the full £18,000 in year one under the Annual Investment Allowance, plus the £4,500 of running costs. That is £22,500 in year one, then about £4,500 a year after that.

Over five years, mileage gives you £30,000 of relief. Capital allowances and actual costs give you roughly £40,500. The second method wins here, and it wins by more the more expensive the van.

Now change the mileage. At 20,000 business miles a year, the mileage method gives £8,000 a year, which is £40,000 over five years, and the two methods land in much the same place while the mileage route needs far less paperwork.

The pattern is straightforward. High mileage and a cheap van favours the mileage rate. An expensive van and moderate mileage favours capital allowances. The 55p increase has pushed the balance towards mileage compared with last year, which is exactly why the old 45p advice can lead you the wrong way.

Four things that catch people out

Private use cuts the claim. If the van is 60% business and 40% personal, you claim 60%. HMRC expects an honest apportionment, and a van you also use for the weekly shop is not 100% business.

The cash basis changes the mechanics. Most sole traders are now on the cash basis by default. GOV.UK's guidance is that cash basis users can only claim capital allowances on cars, because other equipment including vans is relieved as an ordinary expense when you pay for it. The relief is still there, it just arrives by a different route, and it follows the cash rather than the invoice.

Mileage does not cover everything. Tolls, congestion charges and parking at a job are not included in the rate, so you claim those separately whichever method you are on.

The zero emission van allowance has gone. The 100% first year allowance for zero emission goods vehicles applied to purchases made before April 2025 and is not available on new purchases now.

One more to keep an eye on. An October 2026 Budget costing document refers to increasing the higher mileage rate to 35p from April 2027. That has not been confirmed as law, so treat it as a proposal rather than something to plan around.

Check the figures, then keep the records

Rates move, and this year proved it after fourteen years of the same number. HMRC publishes the current travel and mileage rates, the Annual Investment Allowance rules and the simplified expenses guidance in full, and your accountant will want to see the actual numbers rather than an example.

Whichever method you choose, it only works if the underlying record exists. A mileage claim needs a log of business journeys, and an actual costs claim needs the receipts. If your jobs are already recorded against a date, a customer and a vehicle, most of that evidence is a by product of running the business properly rather than a separate chore. That is the case for keeping the whole thing in one place, which is what Autera is built to do, and there is more on the wider setup in how to start a mobile mechanic business in the UK and on the records side in Making Tax Digital for garages.