Mileage Rates Increased for the First Time in 15 Years
The government has announced a significant increase to Approved Mileage Allowance Payments (AMAPs), Mileage Allowance Relief (MAR) and self-employed mileage rates, marking the first increase to mileage rates since 2011. The changes will be backdated to 6 April 2026.
New Mileage Rates from 6 April 2026
The main change is an increase in the approved mileage rate for cars and vans from 45p per mile to 55p per mile for the first 10,000 business miles travelled in a tax year.
| Business Mileage | Old Rate | New Rate |
| Frist 10,000 miles | 45p per mile | 55p per mile |
| Over 10,000 miles | 25p per mile | 25p per mile |
All other approved mileage rates remain unchanged.
Why Have the Rates Changed?
The review follows growing concern that mileage rates had remained frozen despite substantial increases in fuel, insurance, servicing and vehicle maintenance costs.
In March 2026, Chancellor Rachel Reeves acknowledged that approved mileage rates had not kept pace with the real cost of motoring. The government subsequently launched a review focused on ensuring workers who rely on their vehicles for work are not left out of pocket.
In a statement, Dan Tomilinson, The Exchequer Secretary to the Treasury, said ‘This will represent the largest ever increase to these mileage rates, benefitting around 2 million employees and 1 million self-employed individuals, saving over £120 a year for a worker doing 6,000 business miles.’
What Does This Mean for Employers?
Employers can now reimburse employees for business mileage using the new 55p rate for the first 10,000 miles without creating a taxable benefit.
As the change is retrospective to 6 April 2026, employers should review mileage payments already made during April and May.
In particular, businesses that reimbursed mileage above the previous 45p rate and subjected the excess to PAYE tax and National Insurance may need to revisit payroll calculations and consider whether adjustments are required.
If you operate an expense policy based on HMRC approved mileage rates, now is a good time to update internal procedures and employee guidance.
Mileage Allowance Relief (MAR)
Employees who receive less than the approved mileage rate from their employer can continue to claim tax relief on the difference through Mileage Allowance Relief (MAR).
For example, if an employer pays 40p per mile and the approved rate is 55p per mile, the employee may claim tax relief on the 15p shortfall.
HMRC has confirmed that its job expenses claim forms are being updated to reflect the new rates.
Impact on the Self-Employed
Self-employed individuals using the simplified mileage method will also benefit from the increase.
The new rates can be applied when completing 2026/27 Self Assessment tax returns, increasing the allowable deduction for business travel costs.
For many sole traders and partnerships, this will provide a welcome increase in tax-deductible expenses without the need to maintain detailed records of actual vehicle running costs.
New Advisory Fuel Rates from 1 June 2026
Separate from the AMAP changes, HMRC has also published updated Advisory Fuel Rates (AFRs) effective from 1 June 2026.
These rates apply only to employees using company cars and are used when:
- Reimbursing employees for business journeys in a company car; or
- Calculating repayments for fuel used on private journeys.
Petrol Cars
| Engine Size | Rate |
| Up to 1400cc | 14p |
| 1401cc – 2000cc | 17p |
| Over 2000cc | 26p |
Diesel Cars
| Engine Size | Rate |
| Up to 1600cc | 15p |
| 1601cc – 2000cc | 17p |
| Over 2000cc | 23p |
LPG Cars
| Engine Size | Rate |
| Up to 1400cc | 11p |
| 1401cc – 2000cc | 13p |
| Over 2000cc | 21p |
HMRC allows employers to continue using the previous rates for up to one month after the new rates come into effect.
Advisory Electricity Rates
HMRC has also confirmed the following Advisory Electricity Rates for fully electric company cars:
| Charging Method | Rate |
| Home Charging | 7p per mile |
| Public Charging | 15p per mile |
It is important to note that electricity is not treated as a fuel for company car fuel benefit purposes.
What Should Employers Do Now?
With the changes backdated to April and new fuel rates taking effect from June, employers should:
- Review employee mileage reimbursement policies.
- Consider whether payroll adjustments are required for April and May 2026.
- Update expense claim systems and employee handbooks.
- Check company car fuel reimbursement arrangements.
- Communicate the changes to affected employees.
Self-employed individuals should also ensure they apply the revised mileage rates when preparing their 2026/27 tax returns.
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