HMRC Mileage Rate Increases to 55p Per Mile

After 15 years without a change, the approved mileage rate for cars and vans has been increased from 45p to 55p per mile for the first 10,000 business miles each tax year. These rates apply only for using your own vehicle. Employees using company cars for business travel are subject to HMRC's separate Advisory Fuel Rates.

The increase has been backdated to 6 April 2026.

What are the New Mileage Rates?

Rate	Before	Now
Cars & Vans (first 10,000 miles)	45p	55p
Cars & Vans (over 10,000 miles)	25p	25p
Passenger Rate	5p	5p
Motorcycles	24p	24p
Bicycles	20p	20p

Only the main car and van rate has increased. All other mileage rates remain unchanged.

Still Below Inflation

Although the increase is welcome, it does not fully reflect rising motoring costs. Had the 45p rate been increased in line with inflation since 2011, it would be worth around 68p per mile today.

What Does It Mean for Employees?

Employers are not required to pay the full rate and, where employees receive less than 55p per mile, they may be able to claim tax relief on the shortfall from HMRC, but accurate mileage records would be essential. The actual tax saving depends on the employee's rate of tax.

For example, if an employer pays 45p per mile, the employee can claim tax relief on the missing 10p per mile.

What Does It Mean for Employers?

Businesses now have the option to increase mileage payments to the new rate without incurring a Class 1A National Insurance charge.

Employers considering an increase should review employment contracts, staff handbooks and expense policies before making any changes.

What Does It Mean for Partnerships and the Self-Employed?

Those using HMRC's simplified mileage method for 2026/27 can now claim:

55p per mile for the first 10,000 business miles.

25p per mile thereafter.

This increases the tax deduction available for business travel and may reduce taxable profits.

However, there is an important restriction. If you have already claimed actual vehicle costs (including capital allowances) for a vehicle, you cannot later switch to the mileage basis for that same vehicle.

The choice is made when the vehicle is first used in the business, but the higher rate may mean the mileage option becomes a more attractive option.

Temporary or Permanent?

The Government has not described the increase as a temporary measure and no end date has been announced. The new 55p rate should therefore be regarded as the approved rate unless HMRC announces further changes.

Summary

The increase to 55p per mile is the first mileage rate rise in 15 years and will provide additional tax-free reimbursement for employees and larger tax deductions for many self-employed individuals.

However, with an inflation-adjusted rate estimated to have been around 68p per mile, the increase does not fully reflect the rise in motoring costs over the same period.

If you have any questions about the new mileage rates, or would like advice on claiming business travel expenses, please get in touch with us. We'll be happy to help.