The first rise in fifteen years, backdated to April, and worth up to £1,000 a year to somebody doing ten thousand business miles. Here is what changed, what it is worth, and what you need to do about the months already paid at the old rate.
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The approved mileage rate is the amount an employer can pay somebody for using their own car on business without either of you paying tax on it. It had been 45p since 2011. From the 2026/27 tax year it is 55p for the first 10,000 business miles, and because the announcement came in May, it applies to journeys you had already made by the time you heard about it.
That last part is the bit worth acting on. If you run payroll and you have been reimbursing at 45p since April, there is money you can pay across now, tax and National Insurance free, and a short window in which doing so is tidy rather than awkward.
The rate for cars and vans rose from 45p to 55p per mile for the first 10,000 business miles in a tax year. It applies from 6 April 2026, the start of the 2026/27 tax year, and GOV.UK was updated with the new figures on 21 May 2026.
The sequence is worth having straight, because the rate arrived part-way through the year it applies to. The tax year began on 6 April. The increase was announced on 21 May 2026 and applies retrospectively from 6 April 2026. It was subsequently enacted in the Taxation (Energy and Vehicles) Act 2026, which received Royal Assent on 15 July 2026.
Practically, that means the weeks between the start of the tax year and the announcement are the part worth looking back at. Employers who reimbursed mileage using the previous rate from 6 April 2026 may wish to review those payments. Where tax or National Insurance was deducted from payments that now fall within the revised limits, previous payroll treatment may also need correcting.
Only one line of this table moved. The rest is worth printing anyway, because the headline figure has been reported on its own so widely that people have started assuming everything went up.
| Vehicle | First 10,000 miles | Each mile after that |
|---|---|---|
| Cars and vans, 2026/27 | 55p | 25p |
| Cars and vans, 2011/12 to 2025/26 | 45p | 25p |
| Motorcycles | 24p | 24p |
| Bicycles | 20p | 20p |
There is also a passenger rate, which did not change and which almost nobody claims. It is worth reading in HMRC's own words, because the condition attached to it is easy to skim past.
5p per passenger per business mile for carrying fellow employees in a car or van on journeys which are also work journeys for them.
The phrase that does the work is "which are also work journeys for them". Two people driving to the same site in one car can both be on a work journey, and the driver can be paid an extra 5p a mile for carrying the passenger, tax free, on top of the 55p. Give one of them a lift home afterwards and that leg is not a work journey for the passenger, so the 5p does not apply to it. It is a small amount of money that adds up on a job with a regular crew, and it is claimed far less often than it could be.
The 25p band did not move. If your people regularly clear 10,000 business miles, the increase is worth less to them than the headline suggests, because every mile above the threshold is still paid at the rate it was in 2002/03.
Ten pence a mile, on the first 10,000 miles only. So the most anybody can gain is £1,000 in a tax year, and most people will gain considerably less.
| Business miles in the year | At 45p | At 55p | Difference |
|---|---|---|---|
| 2,000 | £900 | £1,100 | £200 |
| 5,000 | £2,250 | £2,750 | £500 |
| 10,000 | £4,500 | £5,500 | £1,000 |
| 15,000 | £5,750 | £6,750 | £1,000 |
The 15,000 mile row is the one that surprises people. The extra 5,000 miles are paid at 25p whether the first band is 45p or 55p, so the gain stops growing the moment you cross the threshold.
Start with the thing most coverage skips: you are not obliged to pay 55p. The approved rate is a ceiling for tax purposes, not a minimum wage for driving. Unless your employment contracts or your expenses policy specifically refer to "HMRC approved rates", you can carry on paying whatever you were paying.
Employers are not generally required to reimburse at the HMRC approved rate. However, where an employment contract or expenses policy links reimbursement to HMRC's approved rates, the wording should be reviewed to determine whether the reimbursement rate should change.
Either way, three things are worth doing this month:
Payments at or below the approved rate are not normally treated as taxable pay, which is what makes this one of the cleaner ways to put money in somebody's pocket. National Insurance runs on its own rules though, and the difference is the part worth knowing. For 2026/27 the Income Tax rate is 55p for the first 10,000 business miles and 25p after that, while for National Insurance the rate is 55p for every qualifying business mile, with no 10,000 mile threshold at all. On a driver who clears the threshold, that means the same payment can be right for National Insurance and wrong for Income Tax. If you would rather this was handled with the rest of the month, that is what our payroll service is for.
You may be able to go back and pay the difference. HMRC has confirmed that an employer who has been reimbursing at the old 45p rate since 6 April 2026 may revisit those payments and pay the shortfall at 55p, without Income Tax or National Insurance arising on the top-up.
For somebody who did 800 business miles between April and the announcement, that is £80. Not life-changing, but it is £80 that costs the business nothing in employer's National Insurance and costs the employee nothing in tax, which is a rare combination.
There is a second, less obvious case. If you were already paying more than 45p and treating the excess as taxable, some of that excess is now inside the approved rate and should not have been taxed. April and May payroll records can be corrected for it.
You may be able to claim tax relief on the shortfall, subject to the conditions being met. It is called Mileage Allowance Relief, and it works on the difference between what you were actually paid and what the approved rate would have allowed.
Relief on the shortfall is not a refund of the shortfall. HMRC does not pay you the difference. You claim tax relief on it, so what you get back is the tax you would have paid on that amount. This is the single most common misunderstanding about mileage claims.
Say you are paid 35p a mile against an approved rate of 55p. The shortfall is 20p a mile, so on 6,000 business miles there is £1,200 to claim relief on. A basic-rate taxpayer would see £240 of that, not £1,200.
You claim it through HMRC's job expenses process, or on your Self Assessment return if you file one. What you cannot do is claim it without records, which brings us to the part everybody skips.
If you are self-employed and you use the simplified mileage method, your rate moved too. GOV.UK gives the same figures: 55p for the first 10,000 business miles, 25p after that, and 24p for motorcycles.
The rate covers fuel, servicing, insurance and depreciation for that vehicle, so you do not also claim those separately. And there is a rule that catches people out, in HMRC's own words: "Once you use the flat rates for a vehicle, you must continue to do so as long as you use that vehicle for your business."
If you are within Making Tax Digital for Income Tax, you must keep the underlying business records digitally and send quarterly summaries to HMRC. Simplified-expense adjustments do not necessarily have to be finalised in each quarterly update and can be dealt with when finalising your Income Tax position, so the effect here is on the records rather than on the quarterly return. You cannot try the flat rate one year, discover that actual costs would have been better, and switch back for the same car. If you use actual vehicle costs instead, separate capital-allowance rules may also apply, and those rates changed in April 2026. That decision is made once per vehicle, and with the rate now 10p higher, it is worth making deliberately rather than by default. It is one of the things we look at when we prepare a Self Assessment return.
Simplified expenses do not apply to limited companies. Where a director or employee uses their own vehicle for company business, the employee mileage rules apply instead.
A mileage claim is only as good as the log behind it. Keep a clear record of each qualifying business journey, including the date, the business mileage, the purpose and the journey details. Employers should retain adequate evidence supporting mileage reimbursements, and employees claiming Mileage Allowance Relief should also follow HMRC's current evidence requirements, including start and end postcodes.
Commuting does not count. The journey between home and your usual place of work is not a business journey, however early it starts or however much of the day it takes up. Ordinary commuting is a common area of error in mileage claims, and it is not because people are trying it on. It is because a year of driving gets reconstructed in January from memory and a diary, and memory is generous.
We work with construction and trades businesses and with transport and taxi operators, where business mileage is not an occasional extra but most of the working day, and the difference between a claim that stands up and one that does not is almost always the record rather than the rate. How long those records have to survive afterwards is a separate question, and we have written about how long to keep business records in full.
It is also worth being straight about where the line is. A cost does not become a business cost because it would be convenient if it were, and mileage is the single easiest place for that line to get blurred, because the same car does the school run and the site visit. Keeping the log as you go is what keeps the two apart.
If your records for this year are already in a state, a clean-up is the place to start. How much work it is depends on the volume and condition of the records, so we review the books before agreeing the scope.
The increase is real and it was overdue. It is also narrower than the headlines suggest, and it is worth knowing what it does not reach.
The Association of Taxation Technicians welcomed the increase and then, in the same breath, asked for something the announcement did not include.
We therefore welcome the announcement of increased rates for 2026/27, but would like to see the rates reviewed in a more regular basis in future.
Read that as a warning rather than as a quibble. The problem the last fifteen years exposed was never the level of the rate on the day it was set, it was that nothing existed to move it afterwards: 45p was generous in 2011 and threadbare by 2025, and the only thing that changed in between was the cost of running a car. There is still no automatic indexation of the mileage rate. However, the government has committed to review the rates beyond 2026/27 and says further details will be set out at Budget 2026. So if you are setting a mileage policy now, write it to follow the approved rate rather than to name a figure, and you will not have to remember to revisit it.
Ten pence a mile on the first ten thousand is genuinely useful and it is not a windfall. The most valuable thing you can do with it is the least exciting: make sure your system is paying the right number, and make sure the log behind the claim is good enough to support it.
55p per mile for the first 10,000 business miles in the tax year, and 25p for every mile after that, when an employee uses their own car or van. Motorcycles stay at 24p and bicycles at 20p.
It applies from 6 April 2026, the start of the 2026/27 tax year. The increase was announced in May 2026, so it covers journeys made before most people had heard about it, and GOV.UK was updated with the new figures on 21 May 2026.
No. Every business mile above 10,000 in the tax year is still paid at 25p, which is the rate it has been since the approved mileage system began in 2002/03. Only the first band moved, so somebody doing 15,000 miles gains exactly the same £1,000 as somebody doing 10,000.
No. The approved rate is a ceiling for tax purposes rather than an obligation. Unless your employment contracts or your expenses policy specifically refer to HMRC approved rates, you can keep paying what you were paying. If they do refer to the approved rates, the rate you owe has changed.
Yes, through Mileage Allowance Relief. If you are paid 35p a mile against an approved rate of 55p, the shortfall is 20p a mile, and you claim tax relief on that difference. On 6,000 business miles that is £1,200 of relief, and a basic-rate taxpayer would see £240 of it.
Yes, if you use the simplified mileage method. The rate is the same 55p for the first 10,000 business miles and 25p after that. It covers fuel, servicing, insurance and depreciation for that vehicle, so you do not claim those separately as well.
No. The approved mileage rates are for journeys in your own vehicle. If the business owns or leases the car, a separate set of rates applies instead, so do not use the 55p figure for a company car.
For every business journey: the date, the destination, the reason for the journey and the number of business miles. Commuting between home and your usual workplace is not a business journey and does not count, which is where most disallowed claims come from.
Every figure on this page was checked against the sources above on . Rates and thresholds change. If you are reading this long afterwards, check the current position before you act on it.
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