HMRC increases mileage rate for first time in 15 years

After remaining unchanged for more than 15 years, HMRC has confirmed an increase to the Approved Mileage Allowance Payment (AMAP) rate for cars and vans.

From 6 April 2026, employees and self-employed individuals using their own vehicle for business journeys will be able to claim 55p per mile for the first 10,000 business miles travelled during the tax year, up from the previous rate of 45p per mile. The rate for mileage over 10,000 miles will remain at 25p per mile.

A welcome change

To put this change into context, the 45p rate was introduced in April 2011, having previously been set at 40p per mile since the simplified mileage system was introduced in 2002. As such, the increase to 55p represents the first uplift to the main rate in over a decade and reflects a significant shift after a long period of stability.

The change has been widely welcomed by businesses and employees alike, particularly following years of rising fuel, insurance and vehicle maintenance costs. Many employers have continued to reimburse mileage at the longstanding 45p rate despite increasing pressure on employees using their own vehicles for work purposes, so the increase brings the approved allowance more in line with current motoring costs.

Change across the board

The revised rate applies specifically to cars and vans and it is worth noting that it is not limited by fuel type. The same rate applies regardless of whether the vehicle is petrol, diesel, hybrid or electric, as HMRC’s mileage system is designed to reflect overall running costs rather than fuel expenditure alone. While the increase will help to subsidise the gap in diesel and petrol, it now makes more sense than ever to drive an electric vehicle, which offers cheaper charging then petrol or diesel, but the 55p rate still applies. HMRC’s mileage rates for motorcycles and bicycles are unchanged and remain at 24p per mile and 20p per mile respectively.

The allowance can be used by employers reimbursing employees for business travel, as well as by sole traders and self-employed individuals using HMRC’s simplified expenses method. It is important to remember that the relief applies only to genuine business mileage. Ordinary commuting between home and a permanent workplace does not qualify under HMRC rules.

Typical examples of qualifying business travel include journeys to visit clients, travel between temporary workplaces or attending meetings and training away from an employee’s normal place of work.

Time to review policies

For businesses, the change means now is a good time to review mileage reimbursement policies and ensure payroll and expense systems are updated for the 2026/27 tax year. Employers who reimburse below the approved HMRC rates should also be aware that employees may be entitled to claim Mileage Allowance Relief from HMRC on the difference.

Claims can also be backdated to April, so it’s a good time to make sure those claims are put in – even more importantly for those using Making Tax Digital dashboards, as you will need to update claims in time for your quarterly submissions to HMRC.

If you would like advice on how the new mileage rates may affect your business, payroll procedures or employee expense policies, our team would be happy to help.

Stephanie Hurst