HMRC and the Government have recently announced a change in the approved mileage rate, which will affect employers and business owners.
From 6 April 2026, HMRC increased the approved mileage allowance rates (AMAPs) for cars and vans. The approved mileage rate is now:
- 55p per mile for the first 10,000 business miles (previously 45p)
- 25p per mile for business miles over 10,000 (unchanged)
- Motorcycles: 24p per mile (unchanged)
- Bicycles: 20p per mile (unchanged)
The updated rates apply for the 2026/27 tax year, and although they were announced on 21 May 2026 and they have been backdated to 6 April 2026.
There is also still a 5p per passenger per business mile allowance where an employee carries colleagues on the same business journey.
A key point that is often misunderstood is that employers do not have to pay the approved mileage rate.
The HMRC mileage rates are not mandatory. Instead, they are the maximum amount that can be paid tax-free.
In practice, this means:
- Employers can choose to pay less than 55p per mile, or even set their own rate higher
- Payments up to 55p are free of Income Tax and National Insurance
- Payments above 55p are taxable
- If an employer pays less than 55p, the employee can claim Mileage Allowance Relief from HMRC on the difference
More information on HMRC’s guidance is here
Why this matters
Many businesses will choose to adopt the 55p rate because:
- It keeps things simple from a payroll and reporting perspective
- It avoids employees needing to make tax relief claims
- It is generally seen as a fair reflection of costs
However, there is flexibility depending on your organisation’s policy and budget.
Practical steps for businesses
If you reimburse employees, directors or yourself for business mileage, we recommend:
- Reviewing your expense policies to reflect the new rate
- Updating payroll systems and mileage claim processes
- Ensuring bookkeeping systems (e.g. Xero) use the correct rates
- Checking whether any mileage since 6 April 2026 needs adjusting
- Continuing to keep clear mileage records, including:
- Date of journey
- Destination
- Business purpose
- Miles travelled
