In a widely welcomed move, the Government has announced an increase to HMRC’s mileage allowance rates for the 2026/27 tax year – the first rise in over a decade.
The Key Change
From 6 April 2026, the approved mileage rate for cars and vans has increased:
- 55p per mile for the first 10,000 business miles (previously 45p)
- 25p per mile for any miles above 10,000 (unchanged)
This increase has also been backdated to the start of the 2026/27 tax year.
Why This Matters
The mileage allowance rate had been frozen at 45p per mile since 2011, despite rising fuel, insurance, and maintenance costs.
The increase aims to better reflect the real cost of motoring, particularly for workers who rely heavily on their cars, such as:
- Care workers travelling between clients
- Sales representatives and field-based staff
- Self-employed individuals and sole traders
For many, this change means higher tax-free reimbursements or increased tax relief on business travel.
How the Mileage Allowance Works
HMRC’s Approved Mileage Allowance Payments (AMAPs) are designed to cover the full cost of running a vehicle, including:
- Fuel or electricity
- Insurance
- Servicing and repairs
- Vehicle tax and depreciation
If your employer reimburses mileage at or below the approved rate, the payment is tax-free and does not attract National Insurance.
What If You’re Paid Less?
If your employer pays you less than the approved rate – or nothing at all – you may be able to claim tax relief on the difference.
For example:
- If you are paid 30p per mile and the HMRC rate is 55p
- You can claim tax relief on the remaining 25p per mile
This is known as Mileage Allowance Relief and can be claimed through your Self Assessment tax return or via HMRC forms.
What About the Self-Employed?
If you are self-employed, you can use these mileage rates under the simplified expenses method when completing your tax return.
This offers a straightforward way to claim vehicle costs without tracking every individual expense.
Important Points to Remember
- The rates apply only to business travel, not commuting
- The 55p rate applies only to the first 10,000 miles per tax year
- You must keep accurate mileage records to support any claims
Need Help Claiming Mileage?
Whether you’re employed, self-employed, or a company director, understanding how to correctly claim mileage can make a significant difference to your tax position?
Davenports can help you:
- Claim the correct mileage allowance
- Maximise your tax relief
- Stay compliant with HMRC requirements
Get in touch with our team for tailored advice and support.
