After more than a decade frozen at the same figure, the UK’s approved mileage rate for cars and vans has increased. If you drive your own vehicle for work, whether you are an employee, self-employed, or a business owner, this change affects you. Here is a clear breakdown of what has changed, what it means in practice, and what action you need to take.
What Has Changed?
The Government has increased the Approved Mileage Allowance Payment (AMAP) rate for cars and vans from 45p per mile to 55p per mile for the first 10,000 business miles in the 2026/27 tax year. That is a 10p increase and the first change to this rate since 2011.
The announcement was made on 21 May 2026, but it applies backdated to 6 April 2026, covering the entire tax year. Beyond 10,000 miles, the rate remains at 25p per mile. Rates for motorcycles (24p) and bicycles (20p) are unchanged.
Why Does This Matter?
The AMAP rate is the benchmark HMRC uses to determine how much employers can reimburse employees tax-free for using their own vehicle on business journeys. It is designed to cover fuel, insurance, wear and tear, and general running costs, all in one flat rate.
At 45p, the rate had become increasingly out of step with the actual cost of running a vehicle. The jump to 55p brings some welcome relief, particularly for those who cover significant business mileage every year.
What It Means for You
If you are an employee, your employer may now increase their reimbursement rate to the new 55p figure. However, they are not legally required to do so. If your employer pays you less than 55p per mile, you can claim Mileage Allowance Relief (MAR) from HMRC on the difference, effectively getting tax relief on the shortfall.
For example, if your employer pays you 30p per mile, you can claim tax relief on the remaining 25p per mile on your first 10,000 business miles. Over a full year of regular driving, this could add up to a meaningful reduction in your tax bill. Pay close attention to what rate your employer uses and whether they make any backdated payments for mileage already claimed since 6 April 2026, as this will affect how much relief you can claim.
If you are self-employed, there is nothing urgent to do right now. When preparing your 2026/27 tax return, simply use the new 55p rate for your business mileage records. No additional steps are needed until then.
If you are an employer, now is a good time to review your mileage reimbursement policy. Paying at the AMAP rate of 55p means you avoid any tax or National Insurance implications, and you can claim corporation tax relief on these payments. You may also want to consider backdating any increases to 6 April 2026 for mileage already paid out to staff.
Key Rules to Keep in Mind
- The 55p rate applies to cars and vans only, and only for the first 10,000 miles in the tax year.
- If your employer reimburses you above the approved rate, the excess is treated as taxable income.
- If you claim the flat mileage rate, you cannot also claim individual costs like fuel, insurance, or servicing separately. The rate is designed to cover all of these.
- Keep a mileage log with dates, destinations, and business purpose for each journey. HMRC expects you to have this if you claim relief.
The Bottom Line
Whether you drive occasionally for work or rack up thousands of miles a year, the increase from 45p to 55p is a meaningful change and the first update to this rate in 15 years. Make sure you and your employer are using the correct rate, and if there is a gap between what you are being paid and the new approved figure, do not leave that tax relief unclaimed.
Chart Accountancy can help
If you are unsure about your specific situation, it is always worth speaking to a qualified accountant. Get in touch with Chart Accountancy today to find out how we can help.
