HMRC Mileage Allowance Rate Increase

Louise Walker
Legal Director
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HMRC has announced the first increase to the UK approved mileage rates in 15 years. From 6 April 2026, the rate for cars and vans rises from 45p to 55p per mile for the first 10,000 business miles in a tax year — a 22% uplift, and the first change since 2011/12.

The change was announced in May 2026 and has been backdated to 6 April 2026, meaning it applies to the whole of the 2026/27 tax year, including journeys already completed and claims already reimbursed.

This guide explains what has changed, what employers are (and are not) legally required to do, and the practical steps we recommend taking now.

What’s Changed?

Only one rate has actually changed for 2026/27. The table below compares the new approved mileage rates with last year’s, so you can see at a glance what’s increased and what’s stayed the same — the first-10,000-mile car and van rate is up 10p, while everything else is frozen.

Effective date: 6 April 2026 (backdated — the new rate covers the full 2026/27 tax year, which runs to 5 April 2027).

What Are Approved Mileage Allowance Payments (AMAPs)?

Approved Mileage Allowance Payments are the maximum amounts an employer can pay an employee, free of Income Tax and National Insurance, when the employee uses their own vehicle for business travel.

Rather than reimbursing individual costs separately, the flat pence-per-mile rate is designed to cover the full cost of running a vehicle for work purposes, including:

• Fuel (or electricity)
• Servicing and maintenance
• Insurance
• Depreciation and general wear and tear

The 45p rate had been frozen since the 2011/12 tax year, despite sustained pressure from motoring and tax bodies — including the AA, the RAC and the Association of Taxation Technicians — who argued it no longer reflected the real cost of motoring. The 2026/27 increase is a direct response to that pressure.

Do Employers Have to Pay the New 55p Rate?

No — there is no legal obligation on employers to reimburse business mileage at the approved rate, or at any particular rate. The approved rates set the tax-free ceiling, not a statutory minimum.

However, the rate an employer chooses to pay has different consequences for both parties:

Mileage Allowance Relief in practice

If an employer reimburses at, say, 30p per mile, an employee driving within the first 10,000 business miles can claim tax relief on the remaining 25p per mile (55p − 30p). The relief is on the shortfall amount at the employee’s marginal rate of tax — it is not a cash refund of the full difference.

The gap between many employers’ contractual mileage rates and the approved rate has just widened by 10p per mile. Employees who previously had little to claim may now have a meaningful MAR claim — and employers paying below 55p should expect questions from staff.

Worked Examples

Three quick examples show how the new rates play out — paying the full rate, a high-mileage driver who crosses the 10,000-mile threshold, and an employer paying below the approved rate where Mileage Allowance Relief comes into play. All figures assume qualifying business mileage.

Example 1 — Employer pays the full approved rate

An employee drives 8,000 business miles in 2026/27.

• Reimbursement: 8,000 × 55p = £4,400, paid entirely tax-free
• Under the old rate this would have been 8,000 × 45p = £3,600 — an £800 difference

Example 2 — High-mileage employee

An employee drives 14,000 business miles in 2026/27.

• First 10,000 miles: 10,000 × 55p = £5,500
• Remaining 4,000 miles: 4,000 × 25p = £1,000
• Total tax-free reimbursement: £6,500

Example 3 — Employer pays below the approved rate

An employer reimburses 40p per mile and an employee drives 6,000 business miles.

• Reimbursement received: 6,000 × 40p = £2,400 (tax-free)
• Approved amount: 6,000 × 55p = £3,300
• Shortfall eligible for Mileage Allowance Relief: £900
• A basic-rate (20%) taxpayer could claim tax relief worth £180; a higher-rate (40%) taxpayer, £360

Passenger Payments: The Often-Missed 5p

Employers can also pay drivers an additional 5p per passenger per business mile, tax-free, for carrying fellow employees — provided the journey is a qualifying business journey for the passenger as well as the driver.

Key points:

• The 5p passenger rate is unchanged for 2026/27
• It applies per passenger, so a driver carrying two colleagues can receive an extra 10p per mile
• Unlike the main mileage rate, employees cannot claim tax relief on passenger payments their employer chooses not to pay — it is only available where the employer actually pays it

This allowance is frequently overlooked in expenses policies and is worth flagging to staff who regularly share journeys to client sites, training events or meetings.

What Counts as Business Mileage?

Not every journey qualifies. As a general rule:

Qualifying business travel includes:

• Travel to a temporary workplace
• Visits to clients, customers or suppliers
• Travel between different work sites or offices
• Journeys to off-site meetings, training, conferences or networking events

Does not qualify:

• Ordinary commuting between home and a permanent workplace
• Private journeys, or the private portion of a mixed journey

Roles involving multiple daily locations — care workers, engineers, consultants, construction and field-based staff — typically generate the most qualifying mileage, and these are the workforces where the rate increase will be felt most.

The Backdating Question: What About Mileage Already Claimed?

Because the new rate applies retrospectively from 6 April 2026, many employers will already have processed claims at the old 45p rate. HMRC has addressed this in Agent Update 143, and the position is as follows:

In short: topping up is a choice, not an obligation — but payroll corrections may be required where amounts above 45p were taxed earlier in the year.

Employer Action Checklist

1. Review your current mileage reimbursement rate. Decide whether to adopt 55p, retain your existing rate, or set something in between — and document the rationale.
2. Update employment documentation. Identify any policies, handbooks, contracts or expense guidance that quote a specific rate (most commonly expenses policies and driving-for-work policies) and amend them to reflect the revised figures.
3. Decide your position on backdating. Determine whether you will top up claims submitted since 6 April 2026, and communicate that decision clearly to staff.
4. Check payroll for April and May 2026. If you paid above 45p and taxed the excess, corrections may be needed.
5. Update expense systems and templates. Amend any rates hard-coded into expense software, claim forms or spreadsheets.
6. Communicate the change to employees. Particularly those who drive regularly for work — and remind eligible staff about the 5p passenger payment if you offer it.
7. Brief line managers and finance teams so that claims are approved consistently under the new rates.

Frequently Asked Questions

Still got questions about the 2026/27 mileage rates? Below are concise answers to the points employers raise most often — whether you have to pay the full 55p, what happens if you pay above or below it, and how the rules apply to the self-employed. Tap a question to read the answer.

How Just Employment Can Help You

If you would like support reviewing your expenses policy, updating employment documentation, or working through the payroll implications of the backdated increase, our team would be happy to assist. For this or any other employment law matter, contact a member of the team on 0141 331 5150.

This article is provided for general information only and does not constitute legal or tax advice. Rates correct as at June 2026. For the latest official figures, see HMRC’s guidance on travel — mileage and fuel rates and allowances at GOV.UK.

Topics: Business, HMRC, Mileage, Rates, Tax