The Logbook

Electric car for private hire: why cheaper charging does not always mean the mileage rate wins

Driver's view of a UK motorway from an electric car, both hands on the wheel, the dashboard showing battery level and range
AI-generated illustration. Dashboard figures shown are not real data.

If you drive an electric car for private hire or ride-hailing work, the mileage rate can look like an easy win. Charging usually costs less per mile than petrol or diesel, so a rate built around average running costs often leaves you better off, mile for mile, than actual costs.

That comparison is only half the picture for a new electric car.

The part the mileage rate leaves out

The mileage rate is a flat amount per business mile. It is meant to stand in for all the costs of buying, running and maintaining the car. If you use it, you cannot also claim fuel or charging, insurance, repairs, servicing, MOT, vehicle tax, or capital allowances on that car.

Capital allowances are the part that matters here. A new, unused electric car can qualify for a 100% first-year allowance under actual costs: the car's full cost, reduced for any private use, can be claimed as a business expense in the year you buy it, for cars bought up to and including 5 April 2027. That is a large deduction, available once, in year one.

If you later sell the car, what you sell it for is added back to your profits (a "balancing charge"). So over the life of the car, the allowance comes to roughly what the car cost you minus what you sold it for.

Choose the mileage rate for that car instead, and you give up the capital allowance on it. The choice is not just about this year's running costs. It is a choice for as long as you keep and use that car in the business: once you pick the mileage rate for a car, you have to keep using it for that car.

A worked example (figures invented for illustration only)

Say a driver buys a new electric car for £28,000 and drives 15,000 business miles a year.

Mileage rate: 10,000 miles at 55p, plus 5,000 miles at 25p, comes to £6,750 for the year. No other car costs can be claimed on top.

Actual costs: the 100% first-year allowance lets the driver claim the car's full business-use share of £28,000 in year one, on top of actual running costs for the year (charging, insurance, servicing, and so on) at their business-mileage share. In a simplified example with no private use at all, actual costs give far more than the mileage rate in year one.

Over four years, if the miles and the rate stay the same, the mileage rate gives about £27,000 (4 x £6,750), close to the car's £28,000 price. Under actual costs, the £28,000 is reduced by whatever the car sells for, and each year's running costs (business share) are added. So the answer depends on how long you keep the car, what it sells for, your running costs and your private use.

This example is deliberately simple. Real figures depend on private use of the car, actual running costs, how many years you plan to keep the car, and how your business miles compare to your total miles. The point is not the exact numbers: it is that for a new electric car the two methods can come out very differently, and the choice is hard to undo, so work out both before you choose.

Why this is a whole-life choice, not a this-year choice

Running costs change year to year. The capital allowance does not come back once you have chosen the mileage rate for a car: the choice locks in for as long as that car stays in the business. A driver who picks the rate in year one because charging is cheap cannot switch to actual costs in year two to pick up the capital allowance they missed.

It works the other way too: once you have claimed capital allowances on a car, you cannot move that car to the mileage rate.

What to do next

Last checked 6 October 2026. General information, not tax advice. Your accountant or HMRC has the final word.

Drafted with AI help. Every fact is checked against the official sources listed, and a person at SEEKRESOLVE. LTD reads each article before it is published.