From 6 April 2026, the main approved mileage allowance payment rate for cars and vans increased from 45p to 55p per business mile for the first 10,000 business miles in the tax year. This is the first increase to the main rate since 2011. HMRC confirms that the rate for cars and vans is now 55p per mile for the first 10,000 business miles and 25p per mile above 10,000 miles.

The change is designed to help with rising motoring costs, including fuel, insurance, servicing and general vehicle running costs.

For business owners, employers and directors, this is a useful change — but only where the journeys qualify as business travel.

What are approved mileage allowance payments?

Approved mileage allowance payments, often called AMAPs, are the tax-free mileage payments an employer can make to an employee who uses their own vehicle for business journeys.

They apply where an employee uses their own car, van, motorcycle or bicycle for qualifying business travel. The rules can also be relevant to company directors using their own cars for business journeys.

For cars and vans, the approved rate from 6 April 2026 is:

HMRC also confirms that passenger payments for cars and vans remain at 5p per passenger per business mile where a fellow employee is carried on a journey that is also a work journey for them.

Merranti has a separate guide explaining how mileage allowance works for employees using their own vehicles.

What does this mean for employees and directors?

An employer can reimburse an employee or director for the cost of using their own vehicle for qualifying business journeys.

If the payment is at or below the approved mileage amount, it can usually be paid without income tax or National Insurance. If the payment is above the approved amount, the excess can be taxable and subject to National Insurance.

The key point is that the journey must be a qualifying business journey. Ordinary commuting does not qualify. That means travel between home and a normal workplace is usually private travel, not business travel.

This is where many mistakes happen. A director visiting a client site may be making a qualifying journey. A director travelling from home to the company’s normal office will usually not be.

What if the employer pays less than 55p per mile?

If an employer pays less than the approved mileage rate, the employee may be able to claim tax relief on the shortfall.

For example, if an employee drives 1,000 qualifying business miles in their own car during 2026/27 and the employer pays 35p per mile, the approved amount is 55p per mile. The employee may be able to claim tax relief on the 20p per mile difference.

The claim is for tax relief, not a full reimbursement. The actual cash benefit depends on the employee’s tax rate.

What if the employer pays nothing?

Where no mileage payment is made, an employee may be able to claim tax relief based on the approved mileage amount for qualifying business journeys.

Again, the journey must qualify. HMRC will not allow mileage relief for ordinary commuting.

What does this mean for the self-employed?

The self-employed can usually claim a deduction for business travel costs when calculating taxable profits.

There are two broad options:

1. Claim actual vehicle costs, with an adjustment for private use.
2. Use simplified mileage rates for business miles.

Under the simplified mileage approach, the self-employed claim a fixed amount per business mile rather than separately claiming fuel, insurance, repairs, servicing and similar running costs.

Merranti’s expenses guide notes that sole traders can claim either mileage rates or actual running costs, depending on the circumstances.

Once the simplified mileage method is chosen for a vehicle, care is needed before switching approach. It is worth checking the position before making claims.

Why accurate mileage records matter

The increased rate is helpful, but it also increases the tax value of each claim. That means HMRC may look closely at whether the journeys were genuinely business journeys.

Businesses should keep clear records showing:

• the date of the journey;
• the start and end point;
• the reason for the journey;
• the number of business miles;
• the vehicle used;
• whether any business passenger was carried.

Merranti’s mileage guide also highlights the importance of setting up compliant systems for mileage logs, director reimbursements and HMRC checks.

Other motoring-related changes

The Government has also announced further fuel duty support. GOV.UK confirms that the temporary 5p per litre fuel duty cut has been extended to 31 December 2026. The Government has also announced a further temporary reduction to the rebated rate for gas oil, biodiesel and bioblend, including red diesel, from 15 June 2026 to 31 December 2026.

These measures may be relevant to businesses with significant fuel costs, particularly in sectors such as construction, agriculture, transport and plant-heavy trades.

Be careful: business travel is not always straightforward

The biggest risk is not the rate itself. It is whether the journey qualifies.

The rules for employees and the self-employed are not identical, and ordinary commuting is a common problem area. Mistakes can create income tax, National Insurance, penalties and interest.

For employers, the practical risk is reimbursing mileage tax-free when the journey does not qualify. For employees and directors, the risk is claiming tax relief for journeys that HMRC treats as private travel.

Final thought

The increase to 55p per mile is welcome, especially after years of rising motoring costs.

But the higher rate does not make every journey allowable. Businesses should update their expenses policies, check payroll treatment and make sure mileage records are accurate.

If you use your own vehicle for business, or reimburse employees and directors for mileage, Merranti Accounting can help you check that the claims are being made correctly.

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FAQs

What is the HMRC mileage rate from 6 April 2026?

For cars and vans, the approved mileage rate is 55p per mile for the first 10,000 business miles and 25p per mile after that.

Has the motorcycle mileage rate changed?

No. The motorcycle rate remains 24p per mile. The bicycle rate remains 20p per mile.

Can employees claim mileage for commuting?

Usually no. Ordinary commuting between home and a normal workplace is not a qualifying business journey.

Can directors claim the 55p mileage rate?

Yes, where the director uses their own car or van for qualifying business journeys and keeps proper mileage records.

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

The excess over the approved amount can be taxable and may also be subject to National Insurance.