The Government has announced an increase to HMRC’s Approved Mileage Allowance Payments (AMAPs), raising the tax-free mileage rate for cars and vans from 45p to 55p per mile for the first 10,000 business miles travelled each tax year. The new rate applies from 6 April 2026 and has been backdated to the start of the current tax year.

This marks the first increase to the approved mileage rate since 2011 and is intended to reflect the rising costs associated with business travel, including fuel, insurance, servicing and general vehicle maintenance.

What Are the New Mileage Rates?

From the 2026/27 tax year, the approved mileage rates are:

• Cars and vans: 55p per mile for the first 10,000 business miles, then 25p per mile thereafter
• Motorcycles: 24p per mile
• Bicycles: 20p per mile
• Passenger payments: 5p per passenger per business mile for carrying colleagues on work journeys

What Does This Mean for Employers?

Employers who reimburse staff for using their own vehicles for business travel should review their mileage and expenses policies promptly.

Where employers reimburse at or below HMRC’s approved rates, payments can generally be made free of tax and National Insurance contributions. However, any payments above the approved amount may be treated as taxable earnings and could need to be reported through payroll or on a P11D.

Because the increase has been backdated to 6 April 2026, employers may also need to revisit mileage claims already processed this tax year and consider whether top-up payments are required.

For example:

• An employee who has already claimed 1,000 business miles at 45p per mile may now be entitled to an additional £100 reimbursement under the revised rate.

Organisations should also ensure that:

• payroll and expenses systems are updated
• employee handbooks and travel policies reflect the revised rates
• managers and employees are informed about the changes and any revised claims process

What Does This Mean for Employees?

Employees who use their own vehicles for business travel could benefit from higher tax-free reimbursements moving forward.

If an employer pays less than the approved HMRC rate, employees may still be able to claim Mileage Allowance Relief from HMRC on the difference between what they received and the approved amount.

For many employees who regularly travel for work, particularly field-based workers and those travelling between client sites, the increase may provide welcome additional financial support as motoring costs continue to rise.

A Long-Awaited Change

The previous 45p rate had remained unchanged for more than 15 years despite significant increases in the cost of running a vehicle. The uplift to 55p per mile is therefore a notable development for both employers and employees alike.

If your organisation needs support reviewing mileage policies, expenses procedures or wider employment documentation, our HR and employment law specialists can help. Call us on 0333 888 1360 or complete our enquiry form.