Mileage allowance has risen to 55p – what does it mean for you?
The approved mileage rate for cars and vans has gone up from 45p to 55p per business mile from 6 April 2026.
For anyone who uses their own car or van for work, this is a useful change. Motoring costs have climbed in recent years, while the main mileage rate had stayed at 45p for a long time.
Although the government announced the increase on 21 May 2026, it applies from the start of the 2026/27 tax year. That means qualifying business journeys made from 6 April 2026 fall under the new rate.
The main change
The increase applies to cars and vans.
For income tax, the approved rate for the first 10,000 business miles in the tax year is now 55p per mile. Once you go above 10,000 business miles, the rate remains 25p per mile.
For National Insurance, the 55p rate applies to every business mile. The rates for motorcycles and bicycles stay the same.
What approved mileage payments cover
Approved Mileage Allowance Payments, or AMAPs, set the amount an employer may pay an employee tax-free when they use their own vehicle for work.
They apply to business travel. They don’t apply to normal commuting.
So, your usual trip from home to your normal workplace doesn’t count as business mileage.
Business mileage may include journeys such as:
· Travelling to meet a client
· Going to a temporary workplace
· Driving between different work sites
· Attending work training away from your normal base
· Making business deliveries or collections
The key point is simple. The journey must have a genuine business purpose.
What employees need to check
Do you use your own car or van for work?
Your employer may pay you a mileage rate for those journeys. Where that payment stays within the approved limit, it will usually have no income tax or National Insurance charge.
The position changes where your employer pays less than the approved amount. In that case, you may claim tax relief on the gap between what your employer paid and the approved mileage amount.
Here’s a simple example.
You drive 4,000 business miles in your own car during 2026/27.
Your employer pays you 30p per mile.
The approved amount is:
4,000 miles x 55p = £2,200
Your employer has paid:
4,000 miles x 30p = £1,200
The shortfall is:
£2,200 - £1,200 = £1,000
You may claim tax relief on the £1,000 shortfall. The amount you receive depends on your tax rate.
Where your employer pays no mileage at all, you may claim tax relief using the full approved mileage amount.
What employers need to review
Employers don’t have to pay staff the full approved mileage rate. The rate sets the tax-free ceiling. It doesn’t force employers to reimburse at that level.
That said, the increase gives employers a clear reason to review their mileage policy.
You’ll want to check:
· The mileage rate you currently pay
· Whether you plan to move to 55p per mile
· How you’ll handle qualifying journeys made from 6 April 2026
· Whether payroll needs any changes for April and May 2026
· How clearly your team understands business mileage rules
· How staff should record and submit mileage claims
The timing matters because the rate applies from 6 April 2026. Employers who treated payments above 45p as taxable after that date may need to revisit their payroll treatment.
What this means for self-employed people
Self-employed people usually deal with business vehicle costs in one of two ways.
You may claim actual vehicle costs, then adjust for private use.
Or you may use flat-rate mileage.
The flat-rate method keeps things simpler for many people. You record your business miles, then apply the approved rate. For cars and vans in 2026/27, that means 55p per mile for the first 10,000 business miles, then 25p per mile for any business miles above that.
You should choose your method with care. Once you use flat-rate mileage for a vehicle, you’ll usually need to keep using that method for the same vehicle.
That makes the decision worth reviewing properly, especially where your actual vehicle costs are high.
What records should you keep?
Good mileage records matter. A rough total at the end of the year may not give you enough support for a claim.
Keep a clear record of:
· The date of each journey
· Where the journey started
· Where you travelled to
· The reason for the trip
· The business miles travelled
· Any mileage paid by your employer
You might use a spreadsheet, mileage app or accounting software. The best choice is the one you’ll keep up to date.
Why the rate has changed
The government has linked the mileage rate increase to higher motoring costs and pressure on drivers.
It also announced wider fuel-related measures, including the extension of the 5p per litre fuel duty cut until the end of 2026, a short-term reduction in red diesel duty and a 12-month vehicle excise duty holiday for most heavy goods vehicles.
For most employees and self-employed people, the main point remains straightforward. For cars and vans, the first 10,000 business miles in 2026/27 now use the higher 55p approved mileage rate.
What should you do now?
Employees should check the mileage rate their employer pays. Where it falls below 55p per mile for the first 10,000 business miles, a tax relief claim may apply.
Employers should review mileage policies, payroll treatment and staff guidance. The backdated start date means April and May 2026 need particular care.
Self-employed people should review whether flat-rate mileage still gives the right outcome. Changes in business mileage, fuel costs, insurance, repairs or vehicle use may affect the best route.
A final point
Mileage rules often look simple, but the detail matters.
Business travel, commuting, employer payments, payroll treatment and self-employed expenses all come with rules you need to follow.
Before you make a claim or change your mileage policy, check the latest HMRC guidance or speak to your accountant.
The new 55p rate will help many drivers. The key is making sure you apply it in the right way.
Speak to Liondaris for clear, practical help with the new mileage rates for 2026.
We’re ready to help!