HMRC raises approved mileage rate for the first time in 15 years

HMRC has announced an increase to the Approved Mileage Allowance Payment (AMAP) for employees and self-employed individuals who use their own vehicles for business journeys.

Effective from 6 April 2026, the approved rate for cars and vans will increase from 45p to 55p per mile for the first 10,000 business miles driven during a tax year. The rate for any mileage exceeding 10,000 miles will remain unchanged at 25p per mile.

The approved mileage rates for motorcycles and bicycles are unaffected by this change.

Why has the mileage allowance been increased?

The previous rate of 45p per mile had remained unchanged since 2011.

During that time, the costs associated with vehicle ownership and operation including fuel, insurance and maintenance have risen considerably. As a result, many individuals using their personal vehicles for work-related travel may not have been adequately compensated for the actual costs incurred.

The revised rate applies equally to petrol, diesel, hybrid and electric vehicles. HMRC’s mileage allowance is designed to cover the overall expenses of operating a private vehicle for business purposes, rather than simply reimbursing fuel costs.

What are the implications for employers?

The updated allowance provides employers with a valuable opportunity to reassess their mileage reimbursement arrangements for the 2026/27 tax year.

Businesses should review their payroll, expenses and accounting systems to ensure the new 55p rate is correctly reflected. Existing travel and expenses policies should also be evaluated and updated where necessary.

Where employees are reimbursed at a rate lower than the HMRC-approved amount, they may be able to claim Mileage Allowance Relief on the shortfall.

As the revised rate takes effect from 6 April 2026, eligible claims may be backdated to the start of the tax year. This could be particularly relevant for individuals required to submit quarterly updates under the Making Tax Digital regime.

Which types of journeys are covered?

The AMAP rules apply when employees or qualifying self-employed individuals use their own vehicle for business-related travel.

They do not apply to company vehicles, which are subject to separate tax treatments covering benefits in kind, fuel benefits and capital allowances.

Organisations should therefore ensure that the correct tax rules are applied depending on the vehicle ownership arrangement in place.

What action should businesses take?

Employers should review their mileage reimbursement procedures and make any required changes to payroll, accounting and expenses processes.

It is equally important to communicate the new rates to employees, explain the process for submitting mileage claims and highlight any circumstances where tax relief may be available if reimbursement is below the approved rate.

How can Simmons Gainsford help?

The increase in the approved mileage rate may have implications for payroll administration, expense management policies and the tax position of staff who regularly use their own vehicles for business travel.

Our specialists can provide guidance on the impact of these changes, assist with reviewing your current arrangements and help ensure your mileage reimbursement processes remain compliant and effective.