HMRC Mileage Allowance for London Ride-Hailing Drivers: Complete Guide

The HMRC mileage allowance for a self-employed London driver is a flat rate of 55p per business mile for the first 10,000 miles and 25p after that, for 2026/27. The allowance replaces your actual fuel, insurance, repairs and servicing costs, so London's constant stop-start traffic never changes the rate. What changes is how well you can prove which miles were business miles.

This guide is for ride-hailing and private hire drivers working in the capital, independent of any ride-hailing app. It answers the questions that general mileage guides skip: which miles count while you wait or cruise between jobs, what the flat rate leaves out, and how to keep a London log that survives an HMRC enquiry. For the basic mechanics of the rate itself, we link to our other guides rather than repeat them.

Key takeaways

• The HMRC mileage allowance is 55p a mile for the first 10,000 business miles in 2026/27 and 25p after that, according to HMRC's simplified expenses guidance.
• Miles driven to pick-ups, with passengers, and positioning yourself for the next job are business miles. Home-to-work commuting and personal trips are not.
• The flat rate covers running costs. GOV.UK says parking can be claimed on top; for tolls and zone charges, HMRC's manual says incidental costs are allowable when incurred solely for business, so check GOV.UK for your exact charge.
• Fines and penalty charges are never claimable, and you cannot use the flat rate for a vehicle where you already claimed capital allowances.
• A daily, dated London log is the single best protection you have.

What is the HMRC mileage allowance for London drivers?

The HMRC mileage allowance, formally called simplified expenses for vehicles, is an optional flat rate per business mile that sole traders use instead of tracking actual car costs. It is 55p for the first 10,000 miles and 25p afterwards in 2026/27. It covers buying and running the car, but not every journey-related cost.

London does not have its own mileage allowance rate. A driver in Hackney and a driver in Hull get the same 55p and 25p, as set out in HMRC's vehicle rates page. The difference is practical: London drivers face dense traffic, zone charges, short hops and long airport runs, so the log and the side costs need more care than elsewhere. If you are based in the capital, our London location page lists the local services we cover.

The HMRC mileage allowance applies to ordinary cars, vans and motorcycles. HMRC excludes cars designed for commercial use, such as black cabs and hackney carriages, so this guide is aimed at private hire drivers using standard saloon or hybrid cars. Black cab drivers should check GOV.UK before relying on the rate.

Which mileage allowance rate applies for the 2025/26 and 2026/27 tax years?

For 2025/26 the first 10,000 business miles are paid at 45p, and your tax return due on 31 January 2027 uses that figure. From 6 April 2026 the first 10,000 miles rise to 55p. Miles above 10,000 stay at 25p in both years. The two tax years are calculated separately.

The mileage allowance rise was announced in May 2026 with effect from the start of the 2026/27 tax year, as reported by ICAEW. If you were logging at 45p on 6 April, your records need no change; only the rate applied at year-end does. Our 2026 MTD update on mileage explains how this feeds quarterly updates, and our guide to the 10,000-mile switch shows the bookkeeping.

Which London miles count towards the 10,000-mile band?

Miles count when you drive for the business: to a pick-up, with a passenger, back from a drop-off to work, or between jobs. Commuting from home to a regular workplace and any personal driving do not count. Every counted mile of your HMRC mileage allowance goes into the same 10,000-mile pot, in the order you drive them.

Because the mileage allowance pot fills in date order, your first business miles of the tax year earn 55p and the later ones 25p. That means a busy London driver covering 28,000 business miles will cross the 10,000 line sometime in the first half of the tax year, and every later mile earns less. Your log should show the date each mile was driven so the split can be proved.

Miles with a passenger and miles to the pick-up

Driving to a booked passenger and driving them to the destination are plainly business miles. GOV.UK's expenses guidance lists travel costs for business purposes as allowable and non-business driving as not allowable, so the test is whether the journey was for the trade.

Cruising and waiting between jobs

Many London drivers claiming the HMRC mileage allowance reposition towards a busier area, sit in a car park or circle a station while waiting for the next booking. In our view the miles driven while you are working, switched on and available are business miles, because they are driven for the trade. HMRC has no specific page on this, so check GOV.UK or ask us if your pattern is unusual. Log the area and times so the purpose is clear.

The first and last miles of the day

This is the grey area. If you leave home and drive straight to your first pick-up, HMRC may argue that part of that trip is ordinary travel from home. We cannot give a universal answer here, because it depends on your facts, so a cautious approach is to count miles from the point your app goes live and your first booking begins. Check GOV.UK before claiming from your front door.

Do airport and outer-borough runs change the HMRC mileage allowance?

No. Every business mile of the HMRC mileage allowance earns the same rate whether it is a three-mile hop in Zone 1 or a 40-mile transfer to an airport. What changes is the volume: long runs push you through the 10,000-mile band sooner, so more of your year is claimed at 25p.

The empty return leg matters. If you drop at an airport or an outer borough and drive back towards central London to find your next job, those miles are normally business miles because you are travelling to work. If you drive home after your last job, treat that as ordinary travel and keep it out of the log unless your accountant advises otherwise.

Long waits at an airport car park are not miles at all, so they never enter the log, but any parking fee you pay there is a separate cost. See the next section.

What does the flat rate not cover in London?

The HMRC mileage allowance covers the costs of buying and running your car: fuel, insurance, repairs and servicing, according to GOV.UK. It does not cover parking, which you can claim on top. For tolls and zone charges, HMRC's manual treats them as incidental costs, so check GOV.UK for your specific charge.

HMRC's business income manual states that the mileage rate does not include incidental expenses connected with a particular journey, and that such costs are allowable where incurred solely for business purposes (BIM75005). That wording names tolls, congestion charges and parking. It does not say how it applies to every London charge or to a charge you pay on a mixed business and personal trip, so we hedge below.

Congestion Charge, ULEZ, tolls and parking

Parking is claimable on top of the flat rate. Tolls and congestion charges are named in HMRC's manual as separately allowable when solely for business. For the Ultra Low Emission Zone, river crossing charges and any other TfL scheme, check GOV.UK and TfL's current rules, because charges change. See our London charges FAQ walks through the paperwork.

Fines and penalty charge notices

Fines and penalty charges are not allowable, as GOV.UK's travel expenses page says. A parking ticket or a bus lane penalty never reduces your tax bill, whatever the rate.

Counts in the band, claimed separately or not claimable?

Use this table to sort a London driver's costs into three buckets: mileage in the 55p/25p pot, a separate claim, or nothing. Where the position is unverified, the table says so and points you to GOV.UK. It is general guidance, not a ruling on your own facts.

How do I keep an HMRC mileage allowance log in London?

For your HMRC mileage allowance, record a start and end odometer reading for every working day, then classify the day's miles. GOV.UK says to keep records of your business miles for vehicles. For any HMRC mileage allowance claim, a dated log that reconciles to the odometer is the strongest evidence you can produce if HMRC asks.

1. Photograph the odometer at the start and end of each tax year, and write the readings in your log.
2. Log each shift with date, odometer start, odometer end and the area worked.
3. Split the day's total into business and personal miles, and note the reason for any personal trip.
4. Record parking, tolls and zone charges separately with the receipt or statement line, so they never get lost inside the mileage figure.
5. Run a monthly total and compare it with your app earnings: very high miles for low earnings invites questions.
6. Back up the log monthly and keep it for at least the period HMRC requires; check the current rule on GOV.UK.

Our HMRC mileage allowance log and bookkeeping guide covers the record formats HMRC accepts. If your day mixes private and work use, our mixed-day log steps show the split, and our free mileage calculator works out the 55p and 25p bands for you.

Illustrative example: a London driver across 2026/27

This illustrative example uses an invented driver, who works full time in Greater London in an ordinary hybrid saloon. The figures are made up to show the method and are not a forecast of your claim.

• Total miles driven in the car in 2026/27: 34,000.
• Personal and commuting miles removed from the log: 6,000. Business miles: 28,000.
• First 10,000 business miles at 55p: £5,500.
• Remaining 18,000 business miles at 25p: £4,500.
• Flat-rate mileage deduction: £10,000.
• Parking (separate claim): £180. Tolls (separate claim, if solely for business): £60.
• Total vehicle-related deduction: £10,240.

Now compare the actual-cost method. Suppose fuel, insurance, servicing and repairs came to £9,400 for the whole year. Business use is 28,000 of 34,000 miles, about 82.4%, giving £7,746 before capital allowances on the car. The mileage allowance looks better on these made-up numbers, but your own figures decide the answer, and once you pick the flat rate for a vehicle you must stay with it (GOV.UK).

If the driver is VAT registered, the fuel element changes the position, so read our VAT and mileage FAQ. The VAT registration threshold is £90,000 of taxable turnover, per GOV.UK.

Should I use the mileage allowance or actual costs in London?

Use the HMRC mileage allowance if your running costs per mile are lower than 55p or 25p, and you want simple records. Use actual costs if you drive an expensive-to-run car or have claimed capital allowances. You usually cannot switch back and forth for the same vehicle.

In London, high insurance and servicing bills make actual costs tempting, but they need receipts and a business-use percentage. Whichever you choose, it is binding. HMRC's vehicle page says that once you use flat rates for a vehicle you keep using them while it is in the business. Our personal tax checklist for the mileage allowance sets out the decision steps.

Common mistakes and the penalty each triggers

The penalty depends on whether HMRC thinks an error was careless or deliberate, and we cannot predict the amount for your case. Check the current penalty rules on GOV.UK, and get professional help if HMRC opens an enquiry. Here is what usually goes wrong.

• **Claiming commuting miles.** The cost is an over-claim that HMRC can reverse, with interest and possibly a penalty if the error was careless.
• **Claiming miles without a log.** HMRC can reject the figure, which raises your profit and your tax bill.
• **Counting a fine as an expense.** Fines are not allowable, so the deduction is removed.
• **Mixing methods on one car.** Claiming flat-rate mileage and actual running costs for the same vehicle double-counts the same expense.
• **Using the wrong rate for the tax year.** Applying 55p to 2025/26 miles understates profit; the error can lead to an amended assessment and a penalty.
• **Missing the self-assessment deadline.** The online deadline is 31 January; see GOV.UK deadlines for late-filing penalties.

If HMRC questions your mileage, our 55p enquiry guide explains the process, and professional representation is recommended.

Key terms

• **Simplified expenses:** HMRC's flat-rate method for vehicle, home-working and business-premises costs.
• **Business mile:** a mile driven for the trade, not for commuting or personal use.
• **ULEZ:** the Ultra Low Emission Zone, a TfL (Transport for London) charging zone.
• **PHV:** private hire vehicle.
• **Capital allowances:** tax relief on buying a car or equipment, which cannot be combined with the flat rate on the same vehicle.
• **MTD:** Making Tax Digital, HMRC's digital record-keeping and quarterly update system.

How UK Driver Accountants helps

UK Driver Accountants works only with drivers, on fixed fees from £20 a month, and is independent of any ride-hailing app. We check your log, choose between the flat rate and actual costs, and file your return. See our personal tax service and pricing, or read our Self Assessment guide for London drivers.

Conclusion

The HMRC mileage allowance is simple on paper and fiddly in London traffic. Know which miles count, keep parking, tolls and zone charges apart, and keep a dated log. Contact us and we will review your records before the 31 January 2027 deadline.

This article is general information and is not personal tax advice. Speak to a qualified accountant about your own circumstances; if HMRC disputes a claim or proposes a penalty, professional representation is recommended.

Last reviewed 14 November 2026 by the UK Driver Accountants tax team