HMRC has increased the Approved Mileage Allowance Payment rate for employees and self-employed individuals who use their own vehicle for business travel.
From 6 April 2026, the approved rate for cars and vans rises from 45p to 55p per mile for the first 10,000 business miles travelled during the tax year. The rate for mileage above 10,000 miles remains at 25p per mile.
The rates for motorcycles and bicycles have not changed.
Why has the mileage rate increased?
The previous 45p rate had been in place since 2011.
Over that period, fuel prices, insurance premiums and the wider cost of running a vehicle have increased significantly. For many employees using their own car for work, the amount reimbursed by their employer may not have reflected the true cost of business travel.
The new rate applies to petrol, diesel, hybrid and electric cars. HMRC’s mileage allowance is intended to reflect the overall cost of using a private vehicle for business journeys, rather than fuel costs alone.
What does this mean for employers?
The increase gives businesses an opportunity to review their mileage reimbursement arrangements for the 2026/27 tax year.
Employers should check whether payroll, accounting and expenses systems need to be updated to reflect the new 55p rate. Mileage and expenses policies should also be reviewed to make sure they remain clear and up to date.
Where an employer reimburses mileage below the HMRC-approved rate, an employee may be able to claim Mileage Allowance Relief on the difference.
As the new rate applies from 6 April 2026, claims may also be backdated to the beginning of the tax year. This may be particularly relevant for people submitting quarterly updates under Making Tax Digital.
Which journeys does the rate cover?
The Approved Mileage Allowance Payment rate applies where employees or eligible self-employed individuals use their own vehicle for business travel.
It does not apply to company-owned cars and vans, which are covered by separate tax rules relating to benefits in kind, capital allowances and fuel benefits.
Businesses should therefore make sure the correct rules are being applied to each type of vehicle arrangement.
What should businesses do now?
Businesses should review their mileage and expenses policies and make any necessary updates to their payroll and accounting systems.
It is also important to make sure employees understand the new rate, how mileage claims should be submitted and whether they may be entitled to claim tax relief where reimbursement falls below the approved amount.
How Sumer can help
The increase may affect payroll processes, expenses policies and the tax position of employees who regularly use their own vehicle for work.
Our Business Champions can help you understand what the new rate means for your organisation and identify any changes needed to your mileage reimbursement arrangements.
Get in touch to find out how Sumer can support your business.
