The HMRC mileage rate has just gone up. If you or your employees use a personal car or van for business travel, there is welcome news. HMRC has confirmed that the Approved Mileage Allowance Payment (AMAP) rate is increasing from 45p to 55p per mile for the first 10,000 business miles, with the change backdated to 6 April 2026. Here is what the increase means in practice for employers, employees and the self-employed.
What Has Changed
- The rate for cars and vans for the first 10,000 business miles in a tax year rises from 45p to 55p per mile
- The rate for business miles over 10,000 in a tax year stays at 25p per mile
- The same simplified mileage rates apply to self-employed sole traders and partnerships using fixed rate deductions for vehicle costs
- The increase applies retrospectively from 6 April 2026, the start of the 2026 to 2027 tax year
- The amount employers can disregard from an employee’s Class 1 National Insurance earnings for Relevant Motoring Expenditure also rises to a flat 55p per mile
Why the Rate Has Increased
The mileage rate had been frozen at 45p per mile for a number of years, despite rising fuel, insurance and maintenance costs. According to HMRC, the increase to 55p is intended to help the rate better reflect the real cost of running a vehicle for business purposes, following a period of elevated motoring costs. The government has also confirmed that AMAP and simplified mileage rates will be reviewed again beyond the 2026 to 2027 tax year, with further detail expected at the next Budget.
What This Means If You Are an Employer
The AMAP rate is advisory rather than compulsory, so employers can choose whether to reimburse staff at the new 55p rate, stick with 45p, or pay something different entirely. However, there are tax consequences either way. If you pay your employees less than the approved rate, they are entitled to claim Mileage Allowance Relief from HMRC on the shortfall. If you pay more than the approved rate, the excess is treated as taxable income for the employee and needs to be reported and taxed accordingly. Many employers choose to move to the new 55p rate to keep things simple and to make sure staff are fairly compensated for the real cost of using their own vehicle.
What This Means If You Are Self-Employed
If you are a sole trader, freelancer or landlord and use the simplified mileage rate method to claim vehicle expenses, you can now deduct 55p per business mile for the first 10,000 miles when calculating your taxable profit, up from 45p. This is a straightforward way to increase your allowable expenses without any extra record keeping beyond the mileage log you should already be keeping. Remember that once you choose to use simplified mileage rates for a particular vehicle, you must continue using that method for as long as you use that vehicle in the business, rather than switching to claiming actual costs and capital allowances.
A Simple Example
Suppose you drive 4,000 business miles over the course of the 2026 to 2027 tax year. At the old 45p rate, that would give you an allowable deduction, or a tax-free reimbursement, of 1,800 pounds. At the new 55p rate, the same mileage is worth 2,200 pounds, an extra 400 pounds either in your pocket as an employee, or as additional expenses reducing your taxable profit if you are self-employed. For anyone who drives a significant amount for work, this adds up to a meaningful saving over the course of a year.
Get the New Rate Right
Whether you need to update your payroll and expenses system, work out whether to claim Mileage Allowance Relief, or simply want to make sure you are claiming everything you are entitled to as a sole trader, our Southampton team can help. Contact Power Accountax today and we will make sure your mileage claims reflect the new 55p rate correctly.