For the first time since 2011, the government has increased the approved mileage allowance rate for cars and vans — from 45p to 55p per mile. If you drive for work, this change puts more money back in your pocket.

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What Has Changed?

On 21 May 2026, Chancellor Rachel Reeves announced a 10p per mile increase to the tax-free mileage rate, backdated to 6 April 2026 — meaning the new rate applies for the full 2026/27 tax year. HMRC has since updated its official guidance to confirm the change.

The Approved Mileage Allowance Payment (AMAP) rate for cars and vans now stands at 55p per mile for the first 10,000 business miles in a tax year. The rate above 10,000 miles remains at 25p per mile. Rates for motorcycles and bicycles are unchanged.

“The previous rate of 45p had been frozen since 2011. In that time, the cost of fuel, insurance and running a vehicle for work has risen considerably.” — IPSE (The Association of Independent Professionals and the Self-Employed), May 2026

The announcement forms part of a wider package of transport and cost-of-working measures, including a 12-month HGV road tax holiday and temporary relief on red diesel duty for farmers and rail freight operators.

The New Approved Mileage Rates at a Glance

Note: If you use your own electric car for business, the same AMAP rates apply as for petrol or diesel. Different advisory rates apply for company electric cars.

Who Can Claim?

The AMAP rate applies to employees and the self-employed who use their own personal vehicle for qualifying business journeys.

Employees

If you use your own car for work trips and your employer reimburses you at or below the HMRC rate, those payments are tax-free. If your employer pays less than 55p per mile, you may now be able to claim Mileage Allowance Relief on the difference through a Self Assessment tax return or a P87 form.

Self-Employed

If you are self-employed and use your own car or van for business travel, you can use the AMAP rate to deduct vehicle costs as a business expense through your Self Assessment tax return. This covers fuel, insurance, servicing, depreciation and general wear and tear — you cannot then claim these separately on top.

What Does It Mean in Pounds and Pence?

The practical difference can be significant. Consider a driver covering 8,000 business miles in the 2026/27 tax year:

That is an additional £800 in approved tax-free mileage — for the same journeys, at no extra cost to you. For a higher-rate taxpayer, each extra penny per mile is worth even more in real tax saved.

What Doesn’t Count as Business Mileage?

Your ordinary daily commute from home to your regular workplace does not count as business mileage. Qualifying journeys typically include:

• Travel to a client’s premises or a temporary workplace
• Travel between two different work sites
• Travel from home directly to a temporary location (e.g. a client meeting)
• Travel on behalf of your employer that is not your ordinary commute

Record Keeping — Don’t Skip This

Whether you are an employee or self-employed, HMRC expects you to maintain accurate mileage records. Inadequate records can lead to disallowed claims and penalties. Your mileage log should include:

• Date of the journey
• Start and end location
• Business purpose of the trip
• Miles driven
• Running total for the tax year

A simple spreadsheet works well — but a dedicated mileage tracking app that captures journeys automatically can make this much easier.

What About Making Tax Digital?

From April 2026, Making Tax Digital (MTD) applies to qualifying taxpayers above the income threshold. If you are within scope, digital record-keeping is now mandatory — making accurate mileage tracking more important than ever.

“If you are close to the higher-rate tax threshold, an unclaimed mileage allowance can have double the tax value it would at the basic rate.” — Beck Hill Ltd

What Should You Do Now?

The rate is backdated to 6 April 2026, so it applies from the very start of this tax year. Here is what we recommend:

• Update your mileage log or tracking app to the new 55p rate
• If your employer reimburses at less than 55p, check whether you can claim Mileage Allowance Relief for the shortfall
• Self-employed? Confirm your bookkeeping software is updated and capturing the new rate
• Review any journeys made since 6 April 2026 and recalculate where necessary
• Speak to your accountant if you are unsure whether your travel qualifies

This is genuinely good news for anyone who drives for work. After 15 years of the rate standing still while motoring costs climbed, the increase to 55p is a meaningful step in the right direction. Make sure you are not leaving it unclaimed.