HMRC Increases Mileage Rate to 55p Per Mile
In a welcome (and long overdue!) move for employees, directors and self-employed individuals across the UK, HMRC has increased the Approved Mileage Allowance Payment (AMAP) rate for the first time in 15 years.
From 6 April 2026, the approved mileage rate for cars and vans has increased from 45p per mile to 55p per mile for the first 10,000 business miles travelled each tax year. The rate for mileage above 10,000 miles remains unchanged at 25p per mile.
Even better, the increase has been backdated to the start of the 2026/27 tax year, meaning qualifying business mileage undertaken since 6 April 2026 can benefit from the higher rate.
Why Has the Rate Increased?
The previous 45p rate had remained unchanged since 2011 despite significant increases in:
- Fuel costs
- Vehicle servicing and maintenance
- Insurance premiums
- Vehicle depreciation
- General motoring expenses
HMRC announced the increase to better reflect the true cost of using a personal vehicle for business purposes and to provide additional support for workers who rely on their own vehicles as part of their job.
What Are the New Rates?
| Vehicle Type | First 10,000 Business Miles | Previous Rate | Over 10,000 Business Miles |
|---|---|---|---|
| Cars and Vans | 55p per mile ▲ | 45p per mile | 25p per mile |
| Motorcycles | 24p per mile | 24p per mile | 24p per mile |
| Bicycles | 20p per mile | 20p per mile | 20p per mile |
| Passenger (per person) | 5p per mile | 5p per mile | 5p per mile |
The passenger rate applies when carrying fellow employees on business journeys and remains unchanged.
What Does the Mileage Rate Cover?
The mileage allowance is designed to cover all normal running costs associated with using a personal vehicle for business travel, including:
- Fuel
- Servicing and repairs
- Insurance
- Road tax
- Tyres
- General wear and tear
- Vehicle depreciation
This means these costs cannot be claimed separately if the mileage method is being used.
What Does This Mean for Employees and Directors?
Employers can reimburse employees and directors using their own vehicles for business travel at the HMRC approved rates without creating a tax charge.
For example, if a director travels 5,000 business miles during the tax year:
- Under the old rate: 5,000 x 45p = £2,250
- Under the new rate: 5,000 x 55p = £2,750
This results in an additional tax-free reimbursement of £500 per year.
Provided the reimbursement does not exceed HMRC's approved rate, there is no Income Tax liability, no National Insurance liability, and no P11D reporting requirement for the employee or director.
What About Self-Employed Individuals?
Those using HMRC's Simplified Expenses method will also benefit. Rather than claiming actual vehicle running costs, self-employed individuals can multiply their business mileage by the approved rate and claim the resulting amount as a business expense.
Someone driving 6,000 business miles per year can now claim:
- £3,300 using the new rate
- Compared with £2,700 under the old rate
This provides an additional £600 deduction against taxable profits.
Should Businesses Review Their Mileage Policies?
Many employers have continued to reimburse mileage at 45p because that was HMRC's approved benchmark. With the increase now in force, businesses may wish to review their expense policies and payroll systems to ensure employees are being reimbursed appropriately.
This is particularly important for businesses with:
- Sales teams
- Consultants
- Care workers
- Engineers
- Tradespeople
Where employees regularly use their own vehicles for work, the difference can be significant over the course of a year.
Record Keeping Remains Essential
As always, accurate mileage records should be maintained. HMRC expects records to include:
- Date of journey
- Purpose of the trip
- Start and end locations
- Number of business miles travelled
Good record keeping helps support claims and ensures compliance should HMRC ever request evidence.
In Conclusion
The increase to 55p per mile is a long-awaited and positive change that recognises the rising costs of motoring over recent years.
For employees and directors, it provides the opportunity to receive higher tax-free reimbursements. For self-employed individuals, it increases the level of allowable tax deductions. And for businesses, it offers a fairer framework for compensating staff who use their own vehicles for business travel.
If you would like advice on mileage claims, director expenses or the most tax-efficient way to claim motoring costs through your business, please do get in touch with us.
