Vehicle insurance
Last checked 13 October 2026 · HMRC source
A sole trader working out actual vehicle costs can claim the insurance, restricted to the business proportion where the vehicle is also used privately — and HMRC allows that proportion only where the insurance covers business use (BIM37600). The flat-rate mileage method already covers insurance, so it cannot be claimed on top. An employee using their own car cannot claim the insurance separately: relief comes through the approved mileage rate.
Conditions
- GOV.UK lists vehicle insurance among the costs a sole trader or individual in a business partnership can claim as allowable business expenses. For a car used partly for the trade and partly for other purposes, HMRC says to allow a proportion of the licence, insurance (provided the insurance covers business use), repairs and finance costs (BIM37600).
- If you use HMRC's flat rate for mileage instead, insurance is already covered: HMRC states the mileage rate covers the costs of buying, running and maintaining the vehicle, including insurance (BIM75005). Once you use the flat rates for a vehicle, you must continue to do so as long as you use that vehicle for your business, and you cannot claim simplified expenses for a vehicle you've already claimed capital allowances for (GOV.UK). Simplified expenses cannot be used by limited companies.
- For a company the statutory test is the same wholly-and-exclusively rule, in section 54 CTA 2009, and HMRC's guidance on apportioning a car's running costs is written for both regimes (BIM37600). How private use of a company car by a director or employee affects the company's own deduction for the insurance is not covered on this page; ask an accountant.
- Where an employer insures a company car, section 239 ITEPA 2003 means no liability to income tax arises on the employer discharging a liability of the employee, or paying the employee's expenses, in connection with a taxable car, and no residual benefits charge arises in respect of a benefit connected with a taxable car. The car itself is the benefit: GOV.UK says the employer will usually need to report company cars used for private journeys.
- An employee who uses their own car for work cannot claim its insurance. GOV.UK says the approved mileage rate covers the cost of owning and running your vehicle. Section 359 ITEPA 2003 stops a deduction for travel expenses incurred in connection with the use of a vehicle that is not a company vehicle where mileage allowance payments are made or mileage allowance relief is available, and HMRC states that no relief is permitted for actual costs that are incurred in connection with the use of that vehicle (EIM31820).
Common mistakes
- Claiming insurance separately while also using the flat-rate mileage method — the rate covers insurance (BIM75005).
- Claiming the full premium on a vehicle that is also used privately. HMRC allows a proportion of the insurance on a car used partly for the trade (BIM37600).
- Claiming a share of a policy that does not cover business use. BIM37600 allows the proportion provided the insurance covers business use.
- An employee claiming insurance on their own car on top of mileage — the approved mileage rate covers the cost of owning and running the vehicle.
What to keep
- Insurance schedule showing that the policy covers business use.
- A mileage record or other basis for the business proportion of the premium.
Real-world example
A sole trader who claims actual running costs for their van includes the business proportion of the van insurance, under a policy that covers business use (BIM37600). A different trader using the flat-rate mileage method for their car does not claim the insurance separately, because the mileage rate already covers it (BIM75005).
Frequently asked
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Where this answer comes from
Every figure, rule and status on this page traces to these GOV.UK and legislation.gov.uk pages, all read on 13 October 2026.
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