HMRC Mileage Rates Increase to 55p: Here's What It Means for Your Business
After more than 15 years without a change, HMRC has finally increased its approved mileage allowance for cars and vans.
From 6 April 2026, employees using their own vehicle for business journeys can now receive 55p per mile for the first 10,000 business miles, replacing the long-standing rate of 45p.
It may sound like a relatively small increase, but for businesses with employees regularly travelling for work, and for self-employed business owners, the change could make a noticeable difference to annual costs and tax relief.
The important question is simple.
Is your business still paying the old rate?
Why has HMRC increased the mileage rate?
Fuel, insurance, servicing, repairs and vehicle ownership costs have all increased significantly over recent years.
The previous 45p rate had remained unchanged since 2011, despite rising motoring costs across the UK.
The new allowance is designed to better reflect the real cost of using a personal vehicle for business purposes.
For someone travelling 10,000 business miles each year, the increase is worth an additional £1,000 in tax-free mileage payments.
What are HMRC Approved Mileage Allowance Payments?
Approved Mileage Allowance Payments, often referred to as AMAPs, are the maximum tax-free amounts an employer can reimburse employees who use their own vehicle for business travel.
As long as payments stay within HMRC's approved limits:
Employees do not pay Income Tax.
Employers do not pay National Insurance.
No taxable benefit arises.
If an employer pays above the approved rate, the excess may become taxable.
If they pay below the approved rate, employees may be able to claim Mileage Allowance Relief from HMRC for the difference.
Approved mileage rates at a glance
From 6 April 2026, the approved rate for cars and vans increased to 55p per mile for the first 10,000 business miles.
Cars & Vans
First 10,000 business miles
Cars & Vans
Over 10,000 business miles
Motorcycles
All business miles
Bicycles
All business miles
Passenger Allowance
Per passenger, per business mile
What should employers do now?
Many businesses have payroll and expense systems that still use the previous 45p rate.
Now is a good opportunity to review your processes.
You may wish to:
Update your mileage policy
Amend payroll or expenses software
Inform employees about the new rates
Review business mileage already paid since April 2026
Consider making tax-free top-up payments where appropriate
Updating your systems now helps ensure compliance and avoids confusion later in the tax year.
What if you continue paying 45p?
You are not legally required to increase your reimbursement rate.
However, employees may claim tax relief from HMRC on the difference between what you pay and the approved allowance.
While this provides some compensation, it is not the same as receiving the full additional reimbursement directly from an employer.
Good news for the self-employed
The increase also benefits sole traders and self-employed individuals who use HMRC's simplified expenses method.
From the 2026/27 tax year, you can claim:
55p per mile for the first 10,000 business miles
25p per mile thereafter
If you regularly visit customers, travel between sites or attend meetings, this could increase your allowable business expenses and reduce your tax bill.
A simple example
Imagine a consultant who drives 8,000 business miles each year.
Under the previous rate:
8,000 × 45p = £3,600
Under the new rate:
8,000 × 55p = £4,400
That's £800 more available as a tax-free mileage reimbursement.
For businesses with several travelling employees, the impact can quickly become significant.
Frequently Asked Questions
When did the new mileage rate start?
The new HMRC approved mileage allowance applies from 6 April 2026.
Do employers have to pay 55p?
No. Employers can choose their own reimbursement rate, but employees may be able to claim tax relief if they receive less than HMRC's approved rate.
Does the 55p rate apply forever?
No. It applies to the first 10,000 business miles in each tax year.
Mileage above this is reimbursed at 25p per mile.
Does this affect company cars?
No.
The approved mileage allowance applies to employees using their own vehicles for business journeys.
Separate Advisory Fuel Rates apply to company cars.
How Zyla Accountants can help
Changes like this often seem straightforward, but they can have wider implications for payroll, tax reporting and employee expenses.
Whether you're an employer reviewing your mileage policy or a self-employed business owner looking to maximise your allowable expenses, our team can help ensure you're claiming everything you're entitled to while remaining fully compliant with HMRC requirements.
If you'd like advice tailored to your business, we'd be delighted to help.
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