Set the scope, units and VAT basis
Include the movement from the vehicle’s starting position to its planned next position, not only the loaded leg. List collection, loading, travel, unloading and waiting time. Check the legal driving/rest plan separately; paid hours and driving hours are not interchangeable.
Use one distance unit and one fuel-consumption convention throughout. Keep revenue and costs on a consistent VAT basis: exclude recoverable VAT when appropriate, include irrecoverable VAT in costs and confirm the treatment for your own business. VAT registration and recovery rules vary; consult HMRC or your accountant.
Keep cost categories separate
- Distance: fuel, maintenance and tyres, using records appropriate to the vehicle and work.
- Time: driver pay and employment costs, including the paid loading, waiting or other time covered by your arrangements.
- Fixed allocation: vehicle ownership or lease, insurance, licensing and overheads divided by realistic productive capacity.
- Job-specific charges: tolls, parking, ferries and agreed handling or overnight costs.
Avoid double counting. If a maintenance package is already in the lease allocation, do not add the same expense again per kilometre. A low-activity period changes fixed cost per productive hour; do not divide by a full calendar year of imaginary billable hours.
A complete fictional job example
All figures below are invented for teaching, not UK market averages, a wage recommendation or a haulage quote. Assume 240 loaded km plus 60 empty km, 9 paid/job-allocated hours, 30 litres per 100 km and fuel at £1.30 per litre.
Driver cost is £22 per hour including the assumed employment on-costs. Maintenance/tyres cost £0.12 per km. The fixed-cost pool is £30,000 divided by 2,500 productive vehicle hours = £12 per hour; it excludes the fuel, driver, maintenance and toll items shown separately. Tolls are £20. All amounts use an ex-recoverable-VAT basis; this example assumes no additional irrecoverable VAT.
- Fuel: 300 × 30 ÷ 100 = 90 L; 90 × £1.30 = £117.
- Driver: 9 × £22 = £198.
- Maintenance/tyres: 300 × £0.12 = £36.
- Fixed allocation: 9 × £12 = £108.
- Tolls: £20.
| Cost item | Amount (£) |
|---|---|
| Fuel | £117.00 |
| Driver time | £198.00 |
| Maintenance & tyres | £36.00 |
| Allocated fixed costs | £108.00 |
| Tolls | £20.00 |
| Total modelled cost | £479.00 |
Revenue, contribution and modelled profit
At a fictional agreed revenue of £575, job-specific costs are £371: fuel £117 + driver £198 + maintenance £36 + tolls £20. Contribution before the fixed allocation is £204. After the £108 fixed allocation, modelled profit is £96.
That £96 is only the result of this stated model, before tax and any omitted costs; it is not guaranteed cash or an accounting net-profit figure. The full cost is about £1.60 per total km or £2.00 per loaded km. Changing the denominator does not change the £479 cost.
Markup is different from margin
Markup = profit ÷ cost; margin = profit ÷ revenue. For the example, £96 ÷ £479 = 20.04% markup, while £96 ÷ £575 = 16.70% margin.
A 20% markup gives £479 × 1.20 = £574.80. A 20% margin requires £479 ÷ 0.80 = £598.75. These are arithmetic comparisons, not recommended prices. Do not use the two percentages interchangeably.
Test waiting time and the commercial terms
If this example takes 2 extra paid and vehicle-allocated hours with distance, fuel and other assumptions unchanged, driver cost rises by £44 and fixed allocation by £24. Cost becomes £547 and modelled profit at the same £575 revenue falls to £28. This does not establish a lawful duty schedule; recheck the driving/rest plan.
Agree waiting allowances, additional charges, cancellation and payment terms before work begins. Record assumptions and exclusions. A future return load is not guaranteed: cost the planned empty movement unless a separate movement is actually agreed.
Why haulage rates per mile vary
Vehicle and equipment, total distance, site time, location, timing and commercial risk all affect a quote. A published average without its date, sample and method is not a substitute for your cost base. Convert distances consistently when comparing per-mile and per-kilometre quotes.
This is a worked guide, not a full-job calculator. The separate Empty Miles guide and existing tools examine empty-running costs or an incremental return decision; they do not replace the full-job model above.