HMRC has confirmed a significant update to the Approved Mileage Allowance Payments (AMAPs), increasing the standard tax-free mileage rate for business travel. From 6 April 2026, the mileage rate for cars and vans rises from 45p to 55p per mile for the first 10,000 business miles, marking the first increase in over 15 years.
This change has important implications for employees, sole traders, company directors and employers, particularly those who rely on personal vehicles for business travel.
At Your Ledger, we help businesses across Essex and the UK stay compliant with HMRC mileage rules, bookkeeping, VAT and financial reporting, ensuring expenses are recorded correctly and tax-efficiently.
What Has Changed with HMRC Mileage Rates?
The updated HMRC mileage rates for the 2026/27 tax year are:
- 55p per mile for the first 10,000 business miles (previously 45p)
- 25p per mile for business miles over 10,000 (unchanged)
- 24p per mile for motorcycles
- 20p per mile for bicycles
The increase applies retrospectively from 6 April 2026, meaning all qualifying business mileage in the 2026/27 tax year benefits from the new rate.
Why Has HMRC Increased the Mileage Rate?
The mileage rate had remained unchanged since 2011, despite significant increases in:
- Fuel prices
- Insurance costs
- Vehicle maintenance and servicing
- General inflation
HMRC has updated the rate to better reflect the true cost of using a personal vehicle for business purposes, particularly for employees and small business owners who do not use company cars.
What Does the Mileage Rate Increase Mean in Practice?
For businesses and individuals using the simplified mileage method, the increase can make a noticeable difference.
For example:
- 8,000 business miles at 45p = £3,600
- 8,000 business miles at 55p = £4,400
This results in an additional £800 of tax-free reimbursement or allowable expense, depending on how the mileage is claimed.
Who Can Claim the 55p Mileage Rate?
The HMRC approved mileage rate applies to:
- Employees using their own car for business travel
- Sole traders and freelancers
- Company directors using personal vehicles for business journeys
It does not include ordinary commuting between home and a permanent workplace.
Qualifying business travel typically includes:
- Visiting clients or customers
- Travelling to temporary workplaces
- Attending business meetings
- Inter-site travel
Employees and Mileage Allowance Relief
If an employer pays less than the approved HMRC rate, employees may be able to claim Mileage Allowance Relief (MAR) for the difference.
This allows individuals to receive tax relief on the gap between:
- What their employer pays
- The approved HMRC mileage rate
This can reduce overall income tax liability for employees who travel frequently for work.
Self-Employed Mileage Claims
For sole traders and self-employed individuals, the mileage rate can be used as part of the simplified expenses method.
This avoids the need to calculate actual running costs such as:
- Fuel
- Insurance
- Repairs
- Servicing
- Depreciation
Instead, a flat rate per business mile is claimed, making bookkeeping simpler and more consistent.
Business and Employer Considerations
Employers should review their mileage policies following this update, particularly if they reimburse staff below the approved rate.
Key considerations include:
- Ensuring mileage policies reflect the new 55p rate
- Reviewing payroll and expense systems
- Updating bookkeeping and accounting software
- Communicating changes to employees
Paying at the approved rate allows employers to reimburse staff tax-free, avoiding unnecessary tax and National Insurance charges.
Why Accurate Mileage Records Matter
With updated rates, maintaining accurate mileage records is more important than ever. Businesses should ensure they record:
- Date of journey
- Start and end locations
- Purpose of travel
- Total business miles
Poor record keeping can lead to lost tax relief or HMRC compliance issues if claims are challenged.
How Your Ledger Can Help
At Your Ledger, we support businesses with:
- Bookkeeping and expense tracking
- Mileage and travel expense management
- VAT returns and HMRC compliance
- Management accounts
- Cash flow forecasting
- Cloud accounting support (Xero, QuickBooks, Sage)
As a dedicated two-person team based in Mid Essex, we provide a personal, one-to-one service helping businesses stay compliant while maximising tax efficiency.
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