What Are the HMRC Mileage Rates for 2026/27?
These are the approved mileage allowance payment rates, usually shortened to AMAP. They apply when someone uses their own vehicle for business travel.
| Vehicle | First 10,000 business miles | Above 10,000 business miles |
|---|---|---|
| Cars and vans | 55p | 25p |
| Motorcycles | 24p | 24p |
| Bicycles | 20p | 20p |
There is also a passenger rate of 5p per mile for each fellow employee carried on a journey that is a business journey for them too.
The 10,000 miles is counted per tax year, across all business mileage in that vehicle. It resets on 6 April.
If an employer pays at or below these rates, the payment is free of income tax and National Insurance and does not need to be reported. If it pays above them, the excess is taxable. If it pays below them, the employee can usually claim tax relief on the shortfall.
What Changed, and When
The Chancellor announced the increase on 21 May 2026 and backdated it to 6 April 2026, so it covers the whole 2026/27 tax year.
The car and van rate went from 45p to 55p. That 45p had been in place since 2011/12. Fifteen years, six Prime Ministers and a great deal of fuel price movement later, it finally moved.
Two things about that announcement matter more than most coverage suggested.
Only one number changed. The rate above 10,000 miles is still 25p, exactly where it was set in 2011. The motorcycle rate is still 24p and the bicycle rate is still 20p. The passenger rate is still 5p. One figure in the table was updated and the rest of it is still fifteen years old.
It was announced after it took effect. Employers who ran payroll and expenses normally in April and early May were paying 45p under rules that had already changed. That created a tidy-up job that a lot of businesses still have not done, which we come back to below.
AMAP or Advisory Fuel Rates? The Distinction That Causes Most Errors
This is the single most common mileage mistake we see, and the 55p headline has made it worse because people apply the new number to the wrong situation.
Whose car is it?
- The employee's own car (including a car bought with a car allowance): use the AMAP rates above. 55p, then 25p. The rate covers everything, because the driver is paying for the fuel, the insurance, the servicing, the tyres and the depreciation.
- A company car: use the advisory fuel rates. These cover fuel only, because the employer already owns the car and bears every other cost.
Paying 55p a mile to someone driving a company car is not a mileage reimbursement. It is mostly taxable pay.
Advisory fuel rates from 1 June 2026
| Engine size | Petrol | Diesel | LPG |
|---|---|---|---|
| Up to 1400cc | 14p | n/a | 11p |
| Up to 1600cc | n/a | 15p | n/a |
| 1401cc to 2000cc | 17p | n/a | 13p |
| 1601cc to 2000cc | n/a | 17p | n/a |
| Over 2000cc | 26p | 23p | 21p |
Electric cars now have two rates: 7p per mile for charging at home and 15p per mile for public charging.
That split is a genuinely useful change and almost nobody noticed it, because it landed in the same few weeks as the 55p story. A single electric rate never worked. Charging at home on an overnight tariff and charging on a motorway rapid unit differ by a factor of five or more in real cost, and drivers who could only charge in public were quietly subsidising their employers for years. If you run electric company cars, your expenses policy needs to distinguish between the two, and your drivers need to be able to say which one applies.
HMRC reviews advisory fuel rates quarterly, on 1 March, 1 June, 1 September and 1 December. You can keep using the old rates for up to a month after new ones take effect. Diarise the review dates, because these rates change far more often than the AMAP figures and a stale rate in an expenses system runs for months before anyone notices.
What Counts as a Business Mile
Not everything you drive for work qualifies.
Ordinary commuting does not count. Travel between home and a permanent workplace is private travel, however early the start or long the drive. This is the rule people find hardest to accept, and it is not negotiable.
Travel to a temporary workplace does count. A site, a client, a supplier, a one-off meeting elsewhere. The usual test is whether you expect to attend for less than 24 months. Once attendance at a place is expected to exceed 24 months, or to last for all or almost all of the engagement, it becomes a permanent workplace and journeys to it become commuting. The rule bites from the moment the expectation changes, not from the 24-month anniversary, which catches people out on extended contracts.
Travel between two workplaces counts, including from your normal office to a client and back.
You need records. Date, start and end point, miles and the business reason for each journey. HMRC will ask for these in an enquiry and a spreadsheet reconstructed afterwards from memory is a weak defence. This is one of the few areas where a phone app genuinely pays for itself.
How Employees Claim Tax Relief
If your employer reimburses you at less than the approved rate, or does not reimburse you at all, you can claim mileage allowance relief on the difference.
An employee who drives 8,000 business miles in their own car and is paid nothing can claim relief on 8,000 × 55p, which is £4,400 of allowable expense. That is worth £880 to a basic rate taxpayer and £1,760 to a higher rate taxpayer.
If your employer pays 30p a mile, you claim on the 25p shortfall: 8,000 × 25p is £2,000, worth £400 or £800 depending on your rate.
You claim through a Self Assessment return if you file one, or through a P87 claim if you do not. Claims can normally be backdated four tax years, which is worth knowing if nobody ever told you this was possible.
The uplift to 55p makes these claims meaningfully larger. Anyone who was already claiming should expect a bigger figure for 2026/27 without doing anything differently.
The National Insurance Rules Are Different, and the Gap Just Widened
This is where payroll teams get caught, and the 55p change has made the trap 50 percent bigger.
For income tax, the approved amount tapers: 55p for the first 10,000 business miles, then 25p.
For National Insurance, there is no 10,000 mile taper. The qualifying amount is 55p for every business mile in the earnings period.
So the two regimes now diverge by 30p a mile above 10,000 miles, where they used to diverge by 20p.
Take an employee doing 20,000 business miles a year, paid a flat 55p throughout, so £11,000 in total.
- Income tax: the approved amount is (10,000 × 55p) + (10,000 × 25p) = £8,000. The £3,000 excess is taxable and reportable on a P11D.
- National Insurance: the qualifying amount is 20,000 × 55p = £11,000. There is no excess, so there is no Class 1 National Insurance at all.
Same payment, same employee, same year, two completely different answers. Under the old rates the taxable excess would have been £2,000. It is now £3,000.
Two further National Insurance quirks are worth knowing. There is no mileage allowance relief for National Insurance, so an employee paid below the rate cannot recover anything on the NI side. And you cannot carry the difference forward between earnings periods, so a light month followed by a heavy month is not netted off. Income tax looks at the tax year; National Insurance looks at each earnings period on its own.
Self-Employed: Simplified Mileage or Actual Costs?
Sole traders and partners get the same rates through simplified expenses: 55p for the first 10,000 business miles, 25p above, 24p for motorcycles.
The alternative is to claim a business proportion of actual running costs, plus capital allowances on the vehicle itself.
Two rules make this choice more serious than it looks:
- It is a one-way door per vehicle. Once you use the flat rate for a particular vehicle, you must keep using it for as long as that vehicle is in the business.
- You cannot mix. If you have already claimed capital allowances on a vehicle, simplified mileage is not available for it.
So the decision is made once, usually when the vehicle enters the business, and then you live with it.
Here is the part nobody is joining up. Two changes landed in the same month and both push in the same direction.
The simplified mileage rate rose by 22 percent. At the same time, the main pool writing down allowance was cut from 18 percent to 14 percent from April 2026. Cars are excluded from the annual investment allowance, from full expensing and from the new 40 percent first year allowance, so a car in the business gets relief through the pool at 14 percent, or 6 percent in the special rate pool if its emissions are above 50g/km. That is a slow drip.
One side of the choice got 22 percent better and the other got materially worse, in the same six weeks. Anyone who last ran this comparison against the old numbers is working from arithmetic that no longer holds.
The flat rate now wins for a larger group than before: high mileage, moderately priced, reasonably economical vehicles. Actual costs still tend to win for expensive cars, low business mileage with high running costs, or vans used almost entirely for business. But the crossover point has moved, and it is worth ten minutes with real figures before a vehicle goes into the business, because you do not get to revisit it.
Reclaiming VAT on Mileage
A VAT registered business can reclaim the VAT on the fuel element only of a mileage payment, not on the whole 55p. The rest of the rate covers insurance, servicing and depreciation, which are not the employee's VATable supply to you.
You work out the fuel element using the advisory fuel rate for the vehicle, then take the VAT fraction. At the current 20 percent rate that means dividing by six.
A 1600cc petrol car doing 1,000 business miles: the advisory rate is 17p, so the fuel element is £170, and the reclaimable VAT is £170 ÷ 6, which is £28.33.
You must hold VAT fuel receipts to support the claim. Not receipts matching the exact journeys, but enough fuel purchases to cover the mileage claimed. This is where most businesses fall down. The reclaim is small per journey and adds up quickly across a team, and it is routinely abandoned because collecting receipts is a nuisance. If you are running bookkeeping through Xero or a receipt capture tool, this is close to free money you are probably leaving behind.
What Employers Should Do Now
Check what you paid in April and May. If you reimbursed at 45p between 6 April 2026 and the announcement, your employees were underpaid against a rate that already applied. You can pay the 10p a mile difference now, tax free and National Insurance free, because the increase is backdated. Very few businesses have done this.
Decide whether you are topping up. You are not legally obliged to. But an employee who was underpaid can claim mileage allowance relief on the shortfall themselves, which means they recover 20p or 40p in the pound of something you could have given them in full at no cost to you. The default outcome is that the employee quietly loses most of it. We think employers should top up, and say so.
Update your expenses system and policy document. Both the AMAP figure and the split electric advisory rates.
Check your car allowance arrangements. Someone taking a cash car allowance and driving their own car should be getting AMAP rates on top. Someone in a company car should be on advisory fuel rates. Mixing these up is the most expensive mistake in this whole area.
Review flat rate policies against the 10,000 mile line. If you pay a flat 55p to high mileage drivers, you have a growing P11D reporting obligation and no National Insurance consequence. That is manageable, but only if you know it is happening.
Our View
The 25p rate is the real story, and it went almost unreported. The people with the highest motoring costs are the people who drive the most, and they received the smallest uplift. Someone doing 10,000 business miles saw their effective rate rise 22 percent, from 45p to 55p. Someone doing 20,000 miles went from an average of 35p to 40p, a rise of 14 percent. At 30,000 miles it is under 11 percent. The relief tapers away exactly as the cost being relieved goes up. Whatever the original logic for the 25p step was in 2011, leaving it untouched while raising the headline rate has made the taper harder to defend, not easier.
55p is a partial catch-up, not a correction. A rate frozen from 2011/12 to 2026/27 lost a great deal of ground against fuel, insurance, servicing and replacement costs over that period. Professional bodies including the ATT, along with the motoring organisations, argued for years that a genuine like-for-like figure was well above 55p. The increase is welcome and overdue. It does not restore the position.
The bigger design flaw is that there is still no mechanism. Nothing in this change indexes the rate to anything. It moved because pressure accumulated for fifteen years until it became politically easier to move it than not to. That is not a policy, it is a pressure valve, and the clock on the next fifteen year freeze started on 6 April 2026. A rate linked to a published motoring cost index would remove an entire recurring argument and would cost the Exchequer nothing in years when costs are flat. We would like to see that, and we are not holding our breath.
Treat 55p as a ceiling, not a target. It is the maximum you can pay without a tax consequence. It is not a statement by HMRC that 55p is what driving costs. For a heavy, older or thirsty vehicle it is not close. Employers who genuinely want to cover their people's costs should model the real number and accept that anything above 55p is taxable, rather than assuming the approved rate is the right answer because it is the official one.
The passenger rate is a small piece of policy that has quietly become absurd. It has been 5p since it was introduced and has never moved. Worse, the relief is asymmetric: if your employer pays you less than 5p, or nothing at all, there is no relief on the shortfall, unlike the main rate where mileage allowance relief exists precisely for that situation. So the one part of the system that encourages people to share a car is the one part with no fallback for the employee. If the goal is fewer cars on the road, this is the wrong shape.
How IAK Can Help
Mileage sits in an awkward gap. It is not big enough to be a project, so it rarely gets reviewed, and it touches payroll, personal tax, VAT and capital allowances all at once, so it rarely sits cleanly with one person. That combination is why errors in it run for years.
For employer clients we check reimbursement rates against the current AMAP and advisory figures, identify where flat rate policies are creating P11D obligations, make sure the income tax and National Insurance treatments are being calculated separately rather than assumed to match, and set up the VAT fuel reclaim so it actually gets made. For sole traders and directors we run the simplified mileage against actual costs comparison before a vehicle goes into the business, while the decision is still reversible.
If you have not looked at your mileage rates since the 55p change, or you are about to put a vehicle into your business, or you think you have been underclaiming for years, contact us for a free consultation. You may also find our guides to what a P11D is, capital allowances, PAYE, VAT, Self Assessment and choosing between sole trader and limited company useful.
Sources
- Travel — mileage and fuel rates and allowances, GOV.UK, on the 2026/27 approved mileage rates of 55p and 25p for cars and vans, 24p for motorcycles, 20p for bicycles and the 5p passenger rate, including the note that there is no relief where less than 5p is paid.
- Expenses and benefits: business travel mileage for employees' own vehicles — rules for National Insurance, GOV.UK, on the 55p National Insurance qualifying amount applying to all business miles, the absence of mileage allowance relief for National Insurance and the rule against carrying differences forward between earnings periods.
- Advisory fuel rates, GOV.UK, on the rates applying from 1 June 2026, the separate 7p home and 15p public charging rates for electric cars, the quarterly review dates and the one month transition allowance.
- Simplified expenses if you're self-employed: vehicles, GOV.UK, on the flat rates available to sole traders and the restrictions on switching methods or combining flat rates with capital allowances.
- Approved mileage rate increased for first time in 15 years, ICAEW, on the 21 May 2026 announcement, the backdating to 6 April 2026 and the representations made by professional bodies before the change.
- Mileage Allowance Payments, House of Commons Library, on how approved mileage allowance payments operate in practice and the policy background to the rates.
- VAT input tax manual VIT55400: motoring expenses, GOV.UK, on recovering input tax on the fuel element of mileage payments and the requirement to hold supporting VAT receipts.