Introduction
The new HMRC mileage rate brings the first increase in 15 years. From 6 April 2026, the approved rate for cars and vans rose to 55p per mile for the first 10,000 business miles. For a figure frozen at 45p since 2011, this is a meaningful shift.
This change matters whether you employ one person or fifty. The mileage rate applies to any business that reimburses staff for using their own vehicle on work journeys. So if even one person claims mileage, this reaches you. In short, the size of your business makes no difference here.
It is worth understanding what has changed, what you must do, and what stays a matter of choice. This article sets out the new rates in plain terms. It also explains the practical steps to take now.
What Has Changed
HMRC sets approved rates for business travel in personally owned vehicles. These are known as Approved Mileage Allowance Payments, or AMAP. In short, the rates define how much an employer can pay per mile without it counting as taxable pay.
The New HMRC Mileage Rates
From 6 April 2026, the rates for the tax year work as follows. For cars and vans, the rate is 55p per mile for the first 10,000 business miles, then 25p per mile after that. Motorcycles stay at 24p per mile. Bicycles stay at 20p per mile.
In addition, you can pay 5p per mile for each fellow employee carried on the same business journey. Only the car and van rate has actually changed. By contrast, the motorcycle, bicycle, and passenger rates all stay the same.
Why the Change Matters Now
The car rate had not moved since 2011, despite years of rising fuel, insurance, and running costs. As a result, the old 45p rate increasingly fell short of what driving for work really costs. The rise to 55p closes some of that gap.
Furthermore, HMRC backdated the change to 6 April 2026, the start of the current tax year. The higher rate therefore already applies to business miles driven since then. This holds true even where a business has been paying the old rate in the meantime.
What the Rate Actually Means
The approved rate is widely misunderstood. It is not a bill you have to pay. Nor is it a rate every employer must match. Instead, it is the ceiling for tax-free reimbursement.
What Counts as Business Mileage
The rate only applies to business travel. Ordinary commuting does not count, so an employee cannot claim for travelling between home and their normal place of work. Business mileage instead covers journeys to a temporary workplace, travel between work sites, and trips to client or other work meetings. As a result, only those qualifying miles attract the approved rate.
A Maximum, Not a Minimum
You can pay your people up to 55p per mile for business travel with no tax or National Insurance to worry about. Pay at or below that figure, and you have nothing to report to HMRC and nothing to tax. In effect, the rate simply marks where the tax line sits.
Importantly, no law requires you to pay any particular mileage rate. What you pay comes down to your employment contracts and your own expenses policy. The approved rate only tells you the point at which tax becomes a factor.
Paying Less Than the Approved Rate
You can choose to pay less than 55p. However, your employees then have a right to claim tax relief on the shortfall. This is called Mileage Allowance Relief.
For example, suppose you reimburse at 45p while the approved rate sits at 55p. Your employee can then claim tax relief on the 10p difference for every business mile. So an employee who spots the gap is effectively telling HMRC that you pay below the going rate.
Paying More Than the Approved Rate
You can also choose to pay more than 55p per mile. In that case, the extra counts as taxable pay. As a result, the amount above the approved rate goes through payroll and attracts tax and National Insurance in the normal way.
For most employers, matching the approved rate is the simplest course. It keeps reimbursement tax-free, avoids extra payroll work, and keeps staff whole against the recognised cost of driving.
Balancing Cost and Fair Treatment
Moving to 55p is a straightforward decision for many employers, yet it carries a real cost. Every business mile now costs more to reimburse. For a team that drives a lot, that adds up over a year.
So there is a balance to weigh. On one side sits the extra cost your business absorbs. The other side is the value of treating staff fairly when they use their own cars for work. People notice when reimbursement keeps pace with the true cost of driving.
Matching the approved rate is usually the fairer choice, and the simplest one for tax. Even so, take a clear-eyed look at your likely mileage before you commit. That way you choose the rate knowingly, rather than drifting into a cost you have not planned for.
Keeping Accurate Mileage Records
Good records sit behind every clean mileage claim. Ask staff to log the date, the journey, the reason, and the miles for each business trip. A simple shared spreadsheet or an expenses app does the job well.
Accurate logs protect both sides. They support what you reimburse, and they back any tax relief an employee claims through Mileage Allowance Relief. For that reason, it pays to keep the habit in place all year, not just at the point of a claim.
What Employers Should Do Now
A short, practical review will cover most of what you need. Work through the following steps.
- Find your current mileage policy and check the rate you pay staff for cars and vans.
- Decide whether to move to 55p. Matching the approved rate is the cleanest option, but weigh the added cost to the business first.
- Update your expenses policy and your claim form so they show the chosen rate and the date it takes effect.
- Tell your team what is changing and when, so claims come in correctly.
- Brief whoever processes expenses and payroll, so the new rate flows through your systems.
- Keep a record of business mileage as you go, since accurate logs support both reimbursement and any tax relief claim.
You can confirm the current figures on the GOV.UK page for travel, mileage and fuel rates and allowances. For the employee side, GOV.UK also explains how staff claim tax relief on business mileage.
How We Can Help
A rate change sounds simple, yet it touches contracts, policies, and payroll at once. At Bespoke HR, we help businesses keep these moving parts aligned.
For a start, we can review and update your expenses policy so it reflects the new rate clearly. In addition, we can check your employment contracts for any mileage wording that needs attention. Where you want to explain a change to your team, we can also help you draft clear, professional communication.
For clients on a support plan, this kind of review falls within the HR guidance we already provide. Equally, we can support one-off reviews for businesses that simply want a second pair of eyes before they update their policy.
Final Thoughts
The mileage increase is welcome news for anyone who drives for work. For employers, it is mostly a piece of housekeeping, though not always a cost-free one. The point to hold onto is this: 55p is the tax-free ceiling, not an obligation. You choose what you pay, and the approved rate tells you where tax begins.
Ultimately, it comes down to balance. Set what you pay against the cost your business carries, while keeping staff fairly recognised for using their own vehicles. So take a little time now to update your policy and brief your team. A small amount of admin today avoids confusion and missed claims later.
Get in Touch
If you would like help reviewing your mileage policy or your employment contracts, we are happy to talk it through. Reach out to the Bespoke HR team and we will point you in the right direction.
Frequently Asked Questions
What is the HMRC mileage rate for 2026/27?
For cars and vans, the rate is 55p per mile for the first 10,000 business miles, then 25p per mile after that. Motorcycles are 24p per mile and bicycles are 20p per mile.
When did the new 55p rate take effect?
The rate applies from 6 April 2026, the start of the 2026/27 tax year. HMRC backdated it to that date, so business miles driven since then qualify for the higher rate.
Do I have to pay my staff 55p per mile?
No. The approved rate is a maximum for tax-free reimbursement, not a legal requirement. You can pay less, although your employees may then claim tax relief on the difference.
What happens if I pay more than 55p per mile?
The amount above the approved rate counts as taxable pay. It goes through payroll and attracts tax and National Insurance in the usual way.
Can employees claim tax back if I pay below the approved rate?
Yes. Employees can claim Mileage Allowance Relief on the gap between what you pay and the approved rate. For miles reimbursed at 45p against a 55p rate, they can claim relief on the 10p difference.
Do I need to update my expenses policy?
Yes, if your policy names a specific rate. Update the figure and the effective date, then tell your team. A policy that simply refers to the approved rate updates automatically, although it is still worth confirming your systems use 55p.
Does the rate apply to electric vehicles?
Yes. The approved mileage rates apply to business travel in an employee's own car regardless of fuel type, including electric vehicles. A separate set of advisory rates applies to company cars, which work differently.