Mileage Allowance HMRC: FAQ Answered for VAT-Registered Drivers

The mileage allowance HMRC gives self-employed drivers for 2026/27 is 55p a mile for the first 10,000 business miles, then 25p after that. If you are VAT-registered, the flat rate itself does not carry a separate VAT reclaim, but you may be able to recover VAT on the fuel portion using HMRC's Advisory Fuel Rates.

That gap between the income tax mileage rate and the VAT rules trips up a lot of VAT-registered Uber and Bolt drivers, because most guidance online is written for either employers reimbursing staff, or sole traders who are not VAT-registered at all. This FAQ answers the questions in between, with figures verified on GOV.UK.

Key takeaways

• The 2026/27 simplified mileage rate for cars and vans is 55p a mile for the first 10,000 business miles, then 25p a mile, set by HMRC.
• You cannot reclaim VAT on the whole 55p or 25p rate. VAT recovery is limited to the fuel element, worked out with HMRC's Advisory Fuel Rates (AFR), and you need a valid VAT receipt.
• If you use the VAT Flat Rate Scheme, you cannot reclaim input VAT on fuel or most other purchases at all, so there is no mileage VAT calculation to do.
• The VAT fuel scale charge is a separate mechanism for businesses reclaiming all fuel VAT on a mixed-use car. Most drivers using the mileage method avoid it.
• Keep a mileage log and fuel VAT receipts together. A missing log or receipt is the most common reason a VAT reclaim gets disallowed.

What is the mileage allowance and how does VAT fit in?

The mileage allowance is HMRC's flat per-mile rate for using your own car for business travel, covering fuel, wear, insurance and servicing in one figure. VAT is a separate tax on actual purchases, so only the fuel cost inside that rate, not the whole allowance, can ever carry a VAT reclaim.

What is the mileage allowance HMRC sets for 2026/27?

For the 2026/27 tax year, HMRC's simplified mileage rate for the self-employed is 55p a mile for the first 10,000 business miles in a car or van, then 25p a mile after that. The rate rose from 45p on 6 April 2026, and it is the same figure used for limited company mileage payments.

According to HMRC's guidance on simplified expenses for vehicles, motorcycles get 24p a mile and bicycles 20p a mile, both flat regardless of distance. Black cabs and hackney carriages are excluded from the simplified mileage scheme, so if you drive one, check the taxi driver tax guide for hackney carriages instead.

For a wider look at what counts as a claimable journey, our guide to allowable expenses for Uber drivers covers the full list. The mileage calculator works out your total once you know your annual business miles.

Can I reclaim VAT on the mileage allowance?

No, not on the full 55p or 25p rate. VAT law only lets a VAT-registered business recover the VAT it was actually charged on a taxable purchase, and the mileage rate is a flat allowance, not an invoice. What you can potentially reclaim is the VAT on the fuel element hidden inside that rate.

This is the single most misunderstood point in mileage VAT guidance, and it is why the answer differs from what many general mileage articles imply. According to HMRC's guidance on VAT and mileage payments, the mileage figures are set for income tax and National Insurance purposes; VAT recovery sits under separate VAT rules and needs its own calculation and evidence.

How do I work out the VAT element of my mileage?

Multiply your business miles by HMRC's Advisory Fuel Rate for your car's engine size and fuel type, to isolate the fuel cost. Apply the VAT fraction of 1/6 to that fuel figure, since VAT is charged at 20%. You must hold fuel VAT receipts that cover at least the amount you are reclaiming.

1. Find your car's fuel type and engine size, and look up the current rate on HMRC's Advisory Fuel Rates page.
2. Multiply your total business miles for the VAT period by that pence-per-mile fuel rate.
3. Divide the result by 6 to get the VAT element, since the fuel figure already includes VAT at the standard 20% rate.
4. Check you hold fuel VAT receipts, dated within the VAT period, covering at least that VAT amount.
5. Add the VAT figure to your VAT return as input tax, and keep your mileage log and receipts together in case HMRC asks.

According to HMRC's Advisory Fuel Rates, the rates from 1 September 2026 include 14p a mile for petrol cars up to 1,400cc, rising to 27p for petrol cars over 2,000cc, with diesel and LPG on separate scales. Rates change roughly every quarter, so always check the current table before you calculate.

Does the VAT Flat Rate Scheme change the answer?

Yes. On the VAT Flat Rate Scheme you pay HMRC a fixed percentage of your turnover instead of the usual difference between output and input VAT, and you cannot reclaim input VAT on purchases, including fuel, other than on certain capital assets over £2,000. There is no mileage VAT calculation to do at all.

According to HMRC's guidance on the VAT Flat Rate Scheme, the scheme is open to businesses with expected VAT-exclusive turnover of £150,000 or less. Many smaller-turnover drivers use it for simplicity, but it means giving up the fuel VAT reclaim covered above, so it is worth comparing both methods with real numbers before choosing.

What is the VAT fuel scale charge and when does it apply?

The VAT fuel scale charge is a flat add-back HMRC uses when a VAT-registered business reclaims all the input VAT on fuel for a car with both business and private use, to account fairly for the private mileage. It applies by the car's CO2 emissions band and your VAT accounting period length.

Most sole trader Uber drivers using the mileage method never meet this charge, because they only reclaim VAT on the business-mileage fuel portion in the first place, not on all their fuel purchases. According to HMRC's guidance on VAT road fuel scale charges, a car in the 170g/km CO2 band on a 12-month VAT period carries a VAT-inclusive scale charge of £1,576, of which £262.67 is VAT. Check your own CO2 band on GOV.UK, since the charge varies by band and period length.

Comparing your VAT options as a driver

Which route makes sense depends on how much fuel VAT you would actually recover, set against the paperwork and, for the flat rate scheme, the fixed percentage you pay. The table below sets out the main choices side by side.

If you are still deciding whether to register for VAT at all, our guide on registering for VAT as an Uber driver covers the £90,000 threshold and the registration process. For a broader introduction to VAT for drivers, see VAT for Uber drivers.

Illustrative example: reclaiming VAT on fuel

This is an illustrative example using an invented driver. Priya is a VAT-registered sole trader driving for Uber, on standard VAT accounting rather than the Flat Rate Scheme. She is not a real person. Figures are rounded for clarity.

• Priya drives 12,000 business miles in a quarter in a 1,600cc diesel car.
• The relevant Advisory Fuel Rate for her car is 16p a mile, so her fuel cost for the quarter is 12,000 x 16p = £1,920.
• The VAT element is £1,920 / 6 = £320.
• Priya holds diesel VAT receipts for the quarter covering more than £320 of VAT, so she reclaims the full £320 as input tax on her VAT return.
• Her income tax mileage deduction for the same 12,000 miles, using the 55p/25p bands, is separate: (10,000 x 55p) + (2,000 x 25p) = £6,000.

Priya's VAT reclaim and her income tax mileage deduction are two different calculations, from two different sets of rules, done at two different times of year. Keeping her mileage log and fuel receipts filed together each quarter makes both straightforward.

What are the common mistakes and what penalties can they trigger?

The usual mistakes are reclaiming VAT on the whole mileage rate instead of just the fuel element, reclaiming without fuel VAT receipts, or mixing up the Flat Rate Scheme's rules with standard VAT accounting. Each can lead to an assessment, interest and a penalty if HMRC finds the error.

• Reclaiming VAT on the full 55p or 25p rate: HMRC can disallow the excess reclaim and charge interest on the VAT wrongly recovered.
• No fuel VAT receipts held: the input tax claim can be refused outright, since VAT recovery needs evidence of an actual VAT-bearing purchase.
• Reclaiming fuel VAT while on the Flat Rate Scheme: this is not permitted other than for qualifying capital assets, and a careless error can attract a penalty based on the extra VAT due.
• Forgetting the fuel scale charge when reclaiming all fuel VAT on a mixed-use car: under-declaring the scale charge understates VAT due.
• Mixing the income tax mileage claim and the VAT fuel reclaim into one figure: this causes errors in both the Self Assessment return and the VAT return.

HMRC sets penalty percentages according to whether an inaccuracy is careless or deliberate, and interest runs on top. If you have an open HMRC enquiry into a VAT mileage claim, our HMRC support service provides professional representation.

Key terms

• AFR: Advisory Fuel Rates, HMRC's fuel-only pence-per-mile rates by engine size and fuel type.
• Input tax: VAT a business pays on its own purchases, which it may be able to reclaim from HMRC.
• Output VAT: VAT a business charges its customers on sales.
• Fuel scale charge: a flat VAT add-back for private fuel use when a business reclaims all fuel VAT on a mixed-use car.
• Flat Rate Scheme: a VAT scheme where a business pays a fixed percentage of turnover and generally cannot reclaim input VAT.
• VAT fraction: the 1/6 fraction used to extract VAT from a VAT-inclusive figure at the 20% standard rate.

How Uber Driver Accountant helps

We work only with private hire and taxi drivers, on fixed fees from £20 a month, so you always know the cost. We are independent of Uber and Bolt and are not endorsed by either platform.

For VAT-registered drivers we handle the VAT return, the fuel VAT calculation and the choice between standard accounting and the Flat Rate Scheme together, alongside your Self Assessment mileage claim. See our VAT service for what is included, or view our pricing.

Conclusion

The mileage allowance HMRC sets for 2026/27 is 55p a mile for the first 10,000 business miles, then 25p, but VAT recovery is a separate calculation limited to the fuel element using Advisory Fuel Rates, and it disappears entirely on the Flat Rate Scheme. Getting the two systems straight avoids both an under-claim and an HMRC assessment.

If you want your VAT return and mileage claims checked by someone who works with drivers every day, contact us and we will go through your numbers with you.

This article is general information and is not personal tax advice. Rates and thresholds change, and your circumstances matter. Speak to a qualified accountant before acting, and take professional representation if HMRC raises a dispute or penalty.

Last reviewed 23 September 2026 by the Uber Driver Accountant tax team.