After 15 years without a change, the Government has finally increased the approved mileage allowance rate for business drivers.
From the 2026/27 tax year, the HMRC mileage rate for cars and vans will rise from 45p to 55p per mile for the first 10,000 business miles. That’s a noticeable increase for anyone using their own car for work.
This is a long-awaited announcement given the huge increase in motoring costs since the last mileage rate update in 2011.
The New Mileage Allowance Rate
The new mileage allowance rate applies to your first 10,000 business miles. The rate increases from 45p to 55p per mile, backdated to April 2026.
The rate for over 10,000 business miles has not changed … it’s still 25p per mile. The mileage allowance rates apply to business travel in your own car or van. The rates for motorcycles and cycles also remain the same, at 24p and 20p per business mile respectively.
It’s important to remember that ordinary commuting still doesn’t qualify. HMRC only allows claims for genuine business journeys. If you’re claiming mileage using HMRC’s approved rate, you generally can’t separately claim fuel costs for the same journeys.
A full list of mileage allowances is available on the GOV.UK website.
An Important Point for Employees
Some employers do not reimburse the full HMRC rate. This may mean that employees can claim tax relief on the difference. For example:
HMRC approved rate = 55p- Employer pays = 35p
- Difference = 20p per mile
You may be able to claim tax relief on that 20p difference through HMRC.
While this isn’t the same as receiving the full allowance, it can still make a difference if you are regularly driving to meetings or work locations.
What Happens Next?
‘At long last, the mileage allowance rate has been updated!’ says Emily Bridges of re:accounts Chartered Accountants in Stevenage. ‘As a first step, employers should review and update their mileage policy and payroll systems to reflect the new rate.
‘In addition, all businesses need to decide if they are going to increase the mileage rate. If so, they need to update their bookkeeping systems to ensure they are reimbursing mileage at the increased rate. It’s important to remember that the change is backdated to April 2026, so additional payments for mileage from April onwards may be needed.’
If you have any concerns, please talk to the friendly team at re:accounts. We stay up to date with all the current rates and allowances and are happy to reassure you or outline the steps you need to take.
