HMRC Mileage Rate Increased to 55p Per Mile

For the first time in more than 15 years, HMRC has increased the approved mileage rate for business travel.

The mileage rate for cars and vans has risen from 45p per mile to 55p per mile for the first 10,000 business miles travelled in a tax year. The change was announced by Chancellor Rachel Reeves in May 2026 and has been backdated to 6 April 2026.

This means employees, company directors and self-employed individuals can now claim more tax-free mileage relief when using their own vehicle for business journeys.

For businesses that reimburse staff mileage, the change may also require updates to expense policies and payroll procedures.

What Is the HMRC Mileage Rate?

The HMRC mileage rate is the approved amount that can be paid or claimed for business travel using a personal vehicle.

Rather than keeping records of fuel, servicing, insurance and repair costs, HMRC allows individuals to use a simplified mileage rate.

The allowance is intended to cover:

• Fuel costs
• Vehicle maintenance
• Insurance
• Road tax
• Depreciation
• General running costs

If you use the mileage rate method, you cannot separately claim these vehicle expenses.

Current HMRC Mileage Rates for 2026/27

The current approved mileage rates are:

Vehicle Type	Mileage Rate
Cars and Vans (first 10,000 miles)	55p per mile
Cars and Vans (over 10,000 miles)	25p per mile
Motorcycles	24p per mile
Bicycles	20p per mile

Only the car and van rate has increased. Motorcycle and bicycle rates remain unchanged.

Why Did HMRC Increase the Mileage Rate?

The previous mileage rate of 45p per mile had remained unchanged since 2011.

During that period, motorists experienced significant increases in:

• Fuel prices
• Insurance premiums
• Vehicle maintenance costs
• Parts and servicing costs
• General inflation

Many employers, industry bodies and tax advisers had argued that the previous rate no longer reflected the true cost of using a personal vehicle for work.

The Government responded by increasing the mileage rate by 10p per mile and applying the change retrospectively from April 2026.

What Counts as Business Mileage?

Not every journey qualifies for mileage claims.

Business mileage generally includes:

Travel to Clients

Driving to meet customers or suppliers.

Travel Between Work Locations

Moving between offices, sites or temporary workplaces.

Business Meetings

Travelling to meetings, conferences or networking events.

Site Visits

Construction workers, consultants, engineers and care workers often travel between multiple locations during the working day.

What Does Not Count as Business Mileage?

The following journeys are normally excluded:

• Travel between home and your permanent workplace
• Personal trips
• School runs
• Shopping journeys
• Family travel

HMRC generally treats normal commuting as a private expense.

How Much More Can You Claim Under the New Mileage Rate?

The increase may appear small, but it can create a meaningful tax saving over the course of a year.

Example: 6,000 Business Miles

Under the old rate:

6,000 × 45p = £2,700

Under the new rate:

6,000 × 55p = £3,300

Additional deductible amount:

£600

Potential tax saving:

• Basic rate taxpayer (20%) = £120
• Higher rate taxpayer (40%) = £240

The more business miles you drive, the greater the benefit.

Mileage Rate for Employees

Employees can receive mileage payments from their employer up to the approved HMRC mileage rate without paying Income Tax or National Insurance.

For example:

If your employer pays:

• 55p per mile → No further claim required.
• 40p per mile → You may be able to claim tax relief on the remaining 15p per mile.
• Nothing → You may be able to claim relief on the full 55p per mile.

Many employees fail to claim this relief and end up missing out on valuable tax savings.

Mileage Rate for Company Directors

Directors often use their own vehicle for:

• Client meetings
• Networking events
• Site visits
• Travel between business locations

Where a director uses a personally owned vehicle for business purposes, the company can reimburse mileage at HMRC’s approved rates.

This can be a tax-efficient way of extracting value from the company without creating additional tax liabilities.

Accurate mileage records should always be maintained.

Mileage Rate for Sole Traders and Freelancers

For many sole traders, using the mileage rate method is the simplest approach.

Instead of tracking every fuel receipt and repair bill, you simply record your business miles and multiply them by the approved rate.

This method is particularly popular with:

• Consultants
• Tradespeople
• Estate agents
• Freelancers
• Care workers
• Delivery professionals

The new 55p mileage rate means a larger deduction against taxable profits and potentially a lower tax bill.

What Happens After 10,000 Miles?

The higher mileage rate only applies to the first 10,000 business miles in a tax year.

After that:

• First 10,000 miles = 55p per mile
• Additional miles = 25p per mile

Example

15,000 business miles:

10,000 × 55p = £5,500

5,000 × 25p = £1,250

Total claim: £6,750

What Records Should You Keep?

HMRC expects mileage claims to be supported by accurate records.

A mileage log should include:

• Date of journey
• Start location
• Destination
• Business purpose
• Number of miles travelled

Many businesses now use mileage tracking apps to simplify record keeping.

The Backdated Change Creates an Immediate Opportunity

One important aspect of this announcement is that the increase has been backdated to 6 April 2026.

This means:

• Employees may need to review mileage claims already submitted.
• Employers may need to update reimbursement policies.
• Sole traders can apply the higher rate to qualifying miles already driven during the current tax year.
• Directors should ensure their records reflect the updated rate.

Reviewing your mileage claims now could result in additional tax relief or reimbursements.

How AccounTax Zone Can Help

Many business owners, directors and self-employed individuals either underclaim mileage expenses or use the wrong method entirely.

At AccounTax Zone, we help clients:

• Calculate allowable mileage claims
• Review historic claims
• Optimise business expense deductions
• Prepare Self Assessment tax returns
• Manage company expense policies
• Ensure HMRC compliance

If you are unsure whether the new mileage rate affects you or your business, our tax advisers can help you maximise your claim while staying fully compliant with HMRC requirements.

Book a FREE 30-minute consultation today to discuss your mileage claims and tax position

Final Thoughts on the New HMRC Mileage Rate

The increase in the HMRC mileage rate from 45p to 55p per mile is one of the most significant changes to mileage allowances in over 15 years.

Whether you are an employee, company director, contractor, freelancer or sole trader, the higher rate means you may be entitled to claim more tax relief or receive greater tax-free reimbursements for business travel.

Because the change has been backdated to 6 April 2026, it is worth reviewing any mileage claims already made this tax year to ensure you are not missing out on valuable tax savings.

Many business owners unknowingly underclaim mileage expenses, use the wrong method, or fail to keep the records HMRC requires. A simple review could potentially save hundreds or even thousands of pounds over the course of a year.

Need Help Claiming Mileage Expenses?

If you are unsure:

• Whether your journeys qualify as business mileage
• How much mileage you can claim
• Whether the mileage method or actual vehicle costs would be more tax efficient
• How the new 55p mileage rate affects your business

Our tax advisers can help.

At AccounTax Zone, we support company directors, sole traders, contractors and growing UK businesses with practical tax advice designed to maximise legitimate tax relief while remaining fully compliant with HMRC rules.

Book Your FREE 30-Minute Consultation

Speak to our team today and find out whether you are claiming everything you are entitled to.

020 3740 7074 | info@accountaxzone.com

Don’t leave tax relief unclaimed. A quick review today could put more money back in your pocket!