What the increase in mileage rates for 2026/27 means for you
The Government has announced a 10p increase in certain mileage rates for business journeys. The mileage rate for cars and vans is now 55p per mile for the first 10,000 business miles in the tax year for 2026/27. In this article we take a look at what this change means for you and your tax, and provide a timely reminder of some key mileage expense rules.
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What is the increase in mileage rates for 2026/27?
The Government has announced an increase in certain mileage rates for business travel when using your own vehicle.
The change was announced on 21 May 2026, but is backdated to 6 April 2026 and will have effect for the whole of the 2026/27 tax year.
The main mileage rate has increased from 45p to 55p per mile.
The increase affects cars and vans only and the first 10,000 miles in the tax year only. All other rates for cars and vans and other vehicles remain unchanged.
The increase applies to approved mileage allowance payments (also known as AMAPs), mileage allowance relief (also known as MAR) and self-employed mileage.
This table sets out the rates for 2026/27:
| First 10,000 business miles in the year | Each business mile over 10,000 miles in the tax year | |
| Cars and vans | 55p | 25p |
| Motorbikes | 24p | 24p |
| Bicycles | 20p | 20p |
Does my employer have to reimburse my business mileage?
There is no legal obligation on an employer to pay or reimburse an employee’s business mileage. Although, if your employer pays you the national minimum wage, they probably have to reimburse any business mileage you do, to ensure they follow the minimum wage rules. You can find out more in our recent news article. Your employment contract is likely to set out whether your employer pays business mileage or not.
If your employer pays you for business mileage, you will automatically receive relief from income tax and National Insurance contributions. If your employer pays you more than the allowable mileage rates, the excess is considered extra wages, so it is subject to income tax and National Insurance contributions.
If your employer does not pay you for your business mileage, or pays you at less than the allowable mileage rates, then you can claim a deduction from your wages. Provided you are a taxpayer, this deduction will give you tax relief. Because of the level of the personal allowance (£12,570 for 2026/27), some people on low wages may not pay tax – this means they cannot claim tax relief.
Benefits
The treatment of expenses for benefits often follows the treatment for tax purposes. This means that if your business mileage meets the tax rules, even if you cannot claim tax relief (because you are not a taxpayer), you may be able to deduct the expenses from your income for the purposes of the benefits you claim.
We have more information about the interaction between benefits, such as universal credit, and business mileage costs in our recent news article.
What does the increase mean for me?
Employees – reimbursed business mileage
If your employer fully reimburses your business mileage according to the approved mileage allowance payment rates, this reimbursement is free of income tax and National Insurance contributions.
As a result of the increase in rates, if you use your own car or van for your business journeys, your employer may increase the amount they reimburse you per mile, to match the new rate. So, you may find you receive 55p per mile rather than 45p per mile for your first 10,000 business miles in 2026/27.
If you are reimbursed at a higher rate
If your employer reimburses your business mileage at rates that exceed the approved mileage allowance payments rates, the excess is taxable. This means your employer must deduct income tax and National Insurance contributions from the amount they pay to you. Your employer should either:
- enter the amount of the excess on your P11D in the section for expenses (this document details certain expenses and benefits that you are liable to pay tax on) – your employer will still put the amount through payroll to collect the income tax and National Insurance, as the excess counts as extra salary rather than a benefit in kind, or
- add the amount to your normal pay, and deduct income tax and National Insurance contributions under PAYE (if your employer payrolls benefits and expenses).
If you are reimbursed at a lower rate
If your employer only partially reimburses your business mileage (that is, they reimburse you at rates lower than the approved mileage allowance payments rates), you can claim income tax relief on the difference – this is mileage allowance relief.
You might be able to claim mileage allowance relief if you have always been paid less than the approved rate, or if your employer decides not to increase the mileage rate they pay you in line with the new approved rates for journeys from 6 April 2026.
Employees – no reimbursement for mileage
If your employer does not reimburse your business mileage at all, then provided you are a taxpayer, you can claim mileage allowance relief according to the mileage rates.
If you use your own car or van for your business journeys, for 2026/27, you can claim mileage allowance relief at 55p per mile, rather than 45p per mile, for the first 10,000 miles. As mentioned above, the tax relief is given as a deduction from your income before income tax is calculated – therefore you do not receive the full amount of the mileage rate as a repayment from HMRC, the relief just represents the income tax on the mileage allowance figure.
Self-employed business mileage
If you are self-employed, and you use the simplified method of calculating your expenses, you can claim tax relief using a flat business mileage rate rather than working out your actual vehicle expenses. This means you claim a flat rate amount based on the number of business miles in the accounting period.
For 2026/27, you can claim at the rate of 55p per mile for the first 10,000 miles for a car or van, rather than 45p per mile.
What is business mileage?
Business mileage relates to business travel that you carry out using your own vehicle, for example, a car, van, motorcycle or bicycle. Business mileage provides a system for obtaining tax relief for this type of business travel. Rather than having to keep records of all your vehicle expenses, you only have to keep a record of the miles travelled (see the heading below for more information on business mileage records).
The mileage rates are intended to cover the costs of running and maintaining your vehicle, such as fuel, oil, servicing, repair, insurance, vehicle excise duty and MOT. It also covers depreciation of the vehicle.
The rules on what travel qualifies for tax relief are quite strict. It is not generally possible to claim tax relief for costs of travel between your home and a permanent workplace, that is, ordinary commuting.
Journeys that are allowable for tax purposes are:
- Made in the performance of the duties of your employment; or
- Made to or from a place you have to attend in the performance of your duties. This can include travel between your home and a temporary workplace.
Permanent and temporary workplaces
It is important to understand what these terms mean, as they are key to understanding whether travel between your home and a workplace is allowable for tax purposes.
For most workers, the place they regularly work is their permanent workplace. It is possible to have more than one permanent workplace. Travel between your home and any permanent workplace is not allowable for tax purposes.
A temporary workplace is somewhere you attend irregularly or for a limited period of time. If you attend a workplace for a period of continuous work that lasts more than 24 months, that workplace is not temporary.
There is more information on the travel rules and how HMRC apply them in our guidance on travel expenses. This includes guidance on journeys that are substantially the same as your ordinary commute and travel expenses when you normally work from home.
What records should I keep of business mileage?
You should keep a record of the number of miles you travel using your own vehicle for business. This should include the type of vehicle, the date of the journey, destination, purpose of the journey, and the number of miles for each journey.
If you are an employee, you should keep a note of any reimbursement you have received from your employer. This will help you work out what, if any, mileage allowance relief you can claim.
Where can I find more information?
Our guidance contains more information on how tax relief on mileage works:
- Approved mileage allowance payment (AMAP)
- Mileage allowance relief (MAR)
- Self-employed business mileage – simplified expenses
We also have guidance on how to claim a repayment related to employment expenses and business mileage, at Tax relief for employment expenses.
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