Approved mileage rates increase from April 2026

The first increase to approved mileage rates in 15 years

The government has announced the first increase to approved mileage rates for cars and vans in 15 years.

From 6 April 2026, the approved mileage allowance payment (AMAP) rate for the first 10,000 business miles will increase from 45p to 55p per mile. The rate for business mileage above 10,000 miles remains unchanged.

The government announced the increase on 21 May 2026 and will legislate retrospectively so the higher rate applies from the start of the 2026/27 tax year. The government says the change recognises the pressures facing drivers arising from the effects of the conflict in Iran and the resulting recent impact on fuel and transport costs.

Approved mileage rates for 2026/27

Employers can continue to make passenger payments of 5p per passenger per business mile where employees carry fellow employees on qualifying business journeys.

Employers should also note that HMRC increased advisory fuel rates for company car users from 1 June 2026 following recent increases in fuel prices. Advisory fuel rates apply where employers reimburse employees for business travel in company cars or require employees to repay fuel costs relating to private journeys.

Separate advisory rates continue to apply for electric vehicles. HMRC also allows employers to use a fair and reasonable apportionment where employees charge company vehicles at both public charging points and residential locations. Businesses reviewing these arrangements may also find our guide to company car tax and benefits in kind useful.

What do the approved mileage rates mean?

Approved Mileage Allowance Payments (AMAPs) allow employers to reimburse employees who use their own vehicle for qualifying business journeys without creating an income tax or National Insurance (NIC) liability.

Where an employer reimburses mileage below the approved rate, employees can generally claim Mileage Allowance Relief on the difference. Employees who receive no mileage reimbursement can generally claim tax relief on the full approved mileage amount.

The approved rates apply only to qualifying business travel. Journeys between home and a permanent workplace do not qualify.

Example of how AMAPs work

An employee who travels 8,000 business miles during the 2026/27 tax year can receive up to £4,400 tax-free from their employer under the approved mileage rules.

Under the previous rate of 45p per mile, the same mileage would have generated £3,600. The increase therefore allows an additional £800 of tax-free reimbursement for qualifying business travel.

Where an employer reimburses mileage below the approved rate, the employee can generally claim Mileage Allowance Relief on the shortfall. If an employer does not reimburse business mileage, the employee can generally claim tax relief on the full approved amount.

What about self-employed individuals?

Self-employed individuals can deduct the cost of qualifying business journeys when calculating taxable profits. They can either claim actual vehicle running costs, adjusted for any private use, or use the approved mileage rates under the simplified expenses rules.

For many sole traders and partnerships, the simplified mileage method provides a straightforward way to calculate allowable business travel expenses.

How Rayner Essex can help

This above provides a summary of the approved mileage rate changes announced by the government. Before making a claim or deduction, employees, self-employed individuals and employers should review the relevant HMRC guidance and consider how the rules apply to their circumstances.

If you would like advice on mileage allowances, employee expenses, payroll obligations or tax relief claims, our accounting solutions, payroll and tax specialists can help.

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