Significant Increase in Business Mileage Reimbursement Rates Announced
Drivers using their personal vehicles for business purposes are set to benefit from a substantial increase in tax-free mileage allowance. HM Revenue and Customs (HMRC) has confirmed a 10 pence per mile rise for car and van users, marking the first adjustment to these rates in 15 years.
New Rates for the 2026-2027 Tax Year
Effective for the upcoming 2026 to 2027 tax year, the Approved Mileage Allowance Payments (AMAPs) for the first 10,000 business miles driven will increase from 45p to 55p per mile. This updated rate also applies to personally owned electric vehicles and will remain in effect until April of next year.
These rates are utilized by employers to reimburse staff for expenses incurred during business journeys. The intention behind the allowance is to cover the operational costs of a vehicle, including fuel, maintenance, and repairs. The specific amount per mile can vary based on the type of vehicle and the annual mileage covered.
Details of the Mileage Allowance Adjustments
For personally owned cars and vans, the rate for the first 10,000 business miles has been elevated to 55p. However, for any business mileage exceeding 10,000 miles annually, the rate remains unchanged at 25p per mile, a figure that has been consistent since 2001.
An additional allowance of 5p per business mile is available for each fellow employee transported as a passenger on a business journey. Furthermore, HMRC has confirmed updated rates for other vehicle types: 24p per mile for motorcycles and 20p per mile for bicycles. These rates for motorcycles and bicycles have not seen an update since 2011.
Industry Reaction to the Increased Allowance
The Association of Taxation Technicians (ATT) has welcomed the revised rates. “Following the announcement, AMAPs, Mileage Allowance Relief (MAR) and self-employed mileage have now increased from 45p to 55p per business mile for the first 10,000 business miles travelled in the tax year,” stated a representative from the ATT. They also noted that the rates for mileage over 10,000 miles (25p), passenger payments (5p), motorcycle travel (24p), and bicycle travel (20p) remain unchanged.
The ATT had previously advocated for a review of these rates, citing the significant increase in vehicle running costs since the last update in 2011. While ing satisfaction with the current increase, they emphasized the need for more regular reviews in the future to keep pace with ongoing expenses.
Impact on Self-Employed Individuals
Accountancy experts believe the mileage allowance increase will provide some relief for self-employed individuals, particularly those who drive less than 10,000 business miles annually. Lee Murphy, Managing Director at The Accountancy Partnership, commented, “Many self-employed people like tradespeople will rely on their personal vehicle to drive between jobs, be it a van or a car. They’ve likely been absorbing persistent cost of living increases associated with that vehicle, such as rising fuel and maintenance fees.”
Murphy added, “The change in allowance marks a step in the right direction, something that can make a practical and meaningful difference to their taxable profits. As small as it sounds, that 10p extra can provide cash flow relief and increase financial security on something relied upon for work.” He also highlighted the backdated nature of the new 55p rate to April 2026, advising clients to maintain accurate mileage records to claim the full benefit.
However, the limitations of the increased rate for high-mileage drivers were also pointed out. “It’s also important to point out the rate above 10,000 miles remains unchanged. This still sits at a lower rate of 25p. So, for self-employed people who drive frequently for work, the overall benefit may not carry you all the way down the road,” Murphy cautioned.
Summary of Updated Approved Mileage Rates (2026/2027 Tax Year)
Cars and Vans
- First 10,000 business miles: Increased from 45p to 55p per mile (effective from 6 April 2026)
- Over 10,000 business miles: Remains unchanged at 25p per mile
Unchanged Vehicle Rates
- Motorcycles: 24p per mile
- Bicycles: 20p per mile
Passenger Payments
- 5p per mile per passenger for carrying fellow employees on business journeys.
