HMRC Mileage Rates 2026/27: What Business Owners Need to Know

After years of rising fuel, insurance and running costs, HMRC has finally increased the approved mileage rate for cars and vans.

From the 2026/27 tax year, the approved mileage rate for cars and vans is now 55p per mile for the first 10,000 business miles, rising from the long-standing 45p rate. Mileage above 10,000 business miles remains at 25p per mile.

For employees, directors, sole traders and small business owners, this is a genuinely practical change. It affects how mileage claims are calculated, how staff are reimbursed, how expenses policies are written, and how businesses manage tax-free travel payments.

It is not the most headline-grabbing tax change of the year. But for businesses where people regularly use their own cars or vans for work, it is one worth getting right.

What are the HMRC mileage rates for 2026/27?

The approved mileage rates for the 2026/27 tax year are:

These are the approved mileage allowance payment rates. In simple terms, they are the amounts an employer can usually pay an employee for business mileage in their own vehicle without creating an income tax or National Insurance charge, provided the journeys are genuinely business-related and properly recorded.

Why has the mileage rate changed?

The previous 45p rate for cars and vans had been in place for many years, despite significant increases in the cost of running a vehicle. Fuel, insurance, servicing, repairs and general motoring costs have all become more expensive for many drivers.

The new 55p rate recognises that the old allowance was becoming increasingly disconnected from real-world costs, especially for employees and directors who use their own vehicle regularly for work.

For business owners, this change is useful, but it also creates an admin point. If your expenses policy, payroll process, mileage claim forms or internal guidance still refer to 45p per mile, they now need reviewing.

Who does the 55p mileage rate apply to?

The 55p mileage rate applies to business mileage in an employee’s own car or van. This can include company directors, employees and other workers who are reimbursed by their employer for qualifying business journeys.

It can also be relevant for sole traders using simplified expenses, although the rules work differently depending on how the vehicle is treated in the business accounts.

The key point is that the mileage must be for business travel. Ordinary commuting between home and a normal workplace does not usually count as business mileage.

What counts as business mileage?

Business mileage normally includes journeys made wholly and exclusively for business purposes. Common examples include:

• travelling to visit a client;
• driving to a temporary workplace;
• travelling between different business sites;
• attending a work-related meeting away from the normal workplace;
• making business deliveries or collections.

What it does not usually include is ordinary commuting. For example, if an employee drives from home to their normal office, that journey is generally private travel, not business mileage.

This distinction matters. Paying mileage at the approved rate is only tax-free where the mileage itself qualifies.

What does this mean for employers?

Employers should review their mileage policy now. This is especially important if the business has staff who regularly use their own vehicles for work.

The increase does not necessarily mean every employer must reimburse staff at 55p per mile. Some businesses may choose to pay less. However, if you pay below the approved rate, employees may be able to claim tax relief on the difference through HMRC.

If you pay more than the approved rate, the excess may become taxable and may need to be reported correctly.

In practical terms, employers should check:

• whether the business mileage policy has been updated for 2026/27;
• whether payroll or expenses software uses the new rate;
• whether employees understand what counts as business travel;
• whether mileage logs are detailed enough to support the claim;
• whether historic claims from 6 April 2026 need reviewing if the old rate was used.

What does this mean for employees and directors?

If you use your own car or van for business travel, the increase may improve the amount you can receive tax-free from your employer.

For example, if you drive 8,000 qualifying business miles in your own car during 2026/27, the approved mileage amount would be:

8,000 miles x 55p = £4,400

Under the previous 45p rate, the equivalent amount would have been £3,600. That is a difference of £800 for the same mileage.

However, the increase only helps if the mileage is recorded and claimed properly. Employees and directors should keep clear mileage records showing the date, destination, reason for travel and number of business miles.

What about mileage over 10,000 miles?

The higher 55p rate only applies to the first 10,000 business miles in the tax year for cars and vans. Once the 10,000-mile threshold has been reached, the approved rate falls to 25p per mile.

This threshold applies across the tax year. It is not reset each month, and it is not applied separately to every journey.

Where employees drive high annual mileage, the business should have a clear process for tracking when the 10,000-mile point is reached.

Can employees claim tax relief if they are paid less than 55p per mile?

Yes, in many cases, employees can claim tax relief from HMRC if their employer pays less than the approved mileage rate.

For example, if an employer pays 40p per mile for qualifying business mileage in a car, but the approved rate is 55p per mile, the employee may be able to claim tax relief on the 15p per mile difference.

This is not the same as receiving the full shortfall back in cash. The employee normally receives tax relief based on their tax rate.

What records should businesses keep for mileage claims?

Mileage claims should be backed up by proper records. A mileage claim should usually include:

• the date of the journey;
• the start and end points;
• the number of business miles travelled;
• the business reason for the journey;
• the employee or director making the claim;
• the vehicle type used.

Businesses should avoid vague claims such as “client visit” with no destination, mileage or supporting detail. If HMRC ever asks questions, the quality of the records matters.

Does the new mileage rate apply to company cars?

No, not in the same way.

The approved mileage allowance payment rates are designed for employees using their own vehicles for business travel. Company cars are subject to different rules, including advisory fuel rates and benefit-in-kind considerations.

This is a common area of confusion. If your business provides company cars, pays fuel costs, or reimburses directors for vehicle use, it is worth checking the correct treatment before changing your policy.

Why this is a good time to review your expenses policy

The mileage rate increase is helpful, but it should not be looked at in isolation.

Business expenses policies are often created once and then ignored for years. That can lead to outdated rates, inconsistent claims, weak record-keeping and unnecessary tax risk.

A good expenses policy should make it clear:

• which journeys qualify for mileage claims;
• which rate applies to each vehicle type;
• what evidence employees must provide;
• how often claims should be submitted;
• who approves claims;
• how the business treats late or incomplete claims.

This protects both the business and the employee. It also reduces the risk of awkward corrections later.

Final thought: small change, real cash impact

A 10p per mile increase may not sound dramatic at first. But across thousands of business miles, it can make a meaningful difference.

For employees and directors, it may mean fairer reimbursement for using their own vehicle. For employers, it is a reminder to keep policies current and records clean.

As with many tax changes, the risk is not usually the headline rate. The risk is assuming the admin will take care of itself.

FAQs about HMRC mileage rates 2026/27

What is the HMRC mileage rate for 2026/27?

For 2026/27, the HMRC approved mileage rate for cars and vans is 55p per mile for the first 10,000 business miles, then 25p per mile after that. Motorcycles remain at 24p per mile and bicycles remain at 20p per mile.

When did the new 55p mileage rate start?

The new 55p mileage rate applies from the start of the 2026/27 tax year, which began on 6 April 2026.

Does the 55p mileage rate apply to commuting?

No. Ordinary commuting between home and a normal workplace does not usually count as business mileage. The rate applies to qualifying business journeys, such as client visits, temporary workplaces and other work-related travel.

Can an employer pay less than the HMRC mileage rate?

Yes. An employer can choose to pay less than the approved mileage rate. However, where an employee is paid less than the approved amount for qualifying business mileage, they may be able to claim tax relief from HMRC on the difference.

What happens if an employer pays more than the approved mileage rate?

If an employer pays more than the HMRC approved mileage rate, the excess may be taxable and may need to be reported correctly. Businesses should take advice before paying above the approved rate.

Does the 55p rate apply to company cars?

No. The approved mileage allowance payment rates are for employees using their own vehicles for business travel. Company cars are covered by different rules, including advisory fuel rates and benefit-in-kind rules.

What mileage records should employees keep?

Employees should keep records showing the date of travel, start and end locations, number of business miles, the reason for the journey and the vehicle used. Businesses should keep these records with their expenses records.

This article is for general information only and should not be treated as tax advice. The correct treatment can depend on your business structure, vehicle arrangements and the nature of the journeys involved.