The approved mileage rate for cars and vans rose from 45p to 55p a mile for the first 10,000 business miles from 6 April 2026, the first change to the headline rate since 2011 [1] [7]. The rate above 10,000 miles stays at 25p, and an employee driving 12,000 business miles in a tax year can now receive £6,000 tax-free, up from £5,000 [2].
The increase was announced on 21 May 2026 and backdated to the start of the 2026-27 tax year, which left many payrolls processing April and May mileage at the old rate [7]. Employers that paid above 45p in those months and deducted tax and National Insurance on the excess may now need to correct their payroll [8].
This article sets out every HMRC mileage rate in force for the 2026-27 tax year, explains the separate rules for income tax and National Insurance, covers the advisory fuel rates for company cars, works through the reporting position when an employer pays more or less than the approved rate, and sets out the steps payroll teams should take to handle the backdated increase.
Key takeaways
- Approved mileage allowance payments (AMAPs) for cars and vans are 55p a mile for the first 10,000 business miles and 25p thereafter from 6 April 2026 [1] [2].
- Motorcycles remain at 24p a mile, bicycles at 20p, and passenger payments at up to 5p per passenger per mile [1] [4].
- For National Insurance, the 55p rate applies to every business mile, with no 10,000-mile step-down [3].
- Advisory fuel rates apply only to company cars and are reviewed quarterly, with separate home and public charging rates for electric cars [6].
- Employees paid less than the approved rate can claim Mileage Allowance Relief on the shortfall for the current and four previous tax years [5].
- Employers can top up April and May mileage paid at 45p to 55p without tax or National Insurance being due [7].
What HMRC mileage rates are and why they matter
When an employee uses a private vehicle for business travel, the employer can reimburse the cost through mileage allowance payments. Up to an approved amount, those payments are free of income tax and National Insurance and do not need to be reported to HMRC [2] [12].
HMRC operates two separate schemes for these payments, one for income tax and one for National Insurance [12]. The two use the same pence-per-mile figures but apply them differently, which is the source of most mileage errors in payroll.
Approved mileage allowance payments
The approved rates are set per business mile and vary by vehicle type. Miles driven in different vehicles of the same type during a tax year are added together before the 10,000-mile threshold is applied [2]. The approved amount for the year is simply business miles multiplied by the relevant rate [2].
The rates are a ceiling for tax-free treatment, not an obligation. Employers have no general legal duty to reimburse business mileage, and many pay a lower flat rate, leaving employees to claim tax relief on the difference [8] [5].
Business travel versus commuting
Only business miles qualify. Travel between home and a permanent workplace is ordinary commuting and attracts no relief, under section 338 of the Income Tax (Earnings and Pensions) Act 2003 [9] [10]. Travel to a temporary workplace, attended for a task of limited duration or a temporary purpose, is business travel [9].
A workplace stops being temporary once the employee attends it during a period of continuous work that lasts, or is expected to last, more than 24 months [10]. Continuous work for this purpose means spending 40% or more of working time at that location [9]. Payroll teams that reimburse a long-term site placement as business travel after the 24-month point are paying taxable earnings.
The approved mileage rates for 2026-27
The table below sets out the approved mileage allowance payment rates for the 2026-27 tax year against the rates that applied from 2011 to 2026 [1] [2].
| Vehicle | First 10,000 business miles | Each mile over 10,000 | Rate before 6 April 2026 (first 10,000) |
|---|---|---|---|
| Cars and vans | 55p | 25p | 45p |
| Motorcycles | 24p | 24p | 24p |
| Bicycles | 20p | 20p | 20p |
Electrically assisted pedal bikes use the bicycle rate, while other electric bikes use the motorcycle rate [2]. Electric and hybrid cars owned by the employee use the standard car rate, because AMAPs do not distinguish between fuel types [1] [2].
Why the car rate rose to 55p
The 45p rate had been fixed since 6 April 2011, despite sustained increases in fuel, insurance and maintenance costs over the period [1] [7]. The government announced the increase on 21 May 2026 and confirmed through a written ministerial statement that HMRC would apply the 55p rate informally from 6 April 2026 until legislation is updated for both income tax and National Insurance [7].
The new rate covers the whole 2026-27 tax year, running to 5 April 2027 [13]. It applies whether the mileage is reimbursed by an employer, claimed as tax relief by an employee, or claimed as a simplified expense by a self-employed business [7] [13].
Worked example: a high-mileage employee
An employee drives 12,000 business miles in a personal car during the 2026-27 tax year. The approved amount is 10,000 miles at 55p (£5,500) plus 2,000 miles at 25p (£500), a total of £6,000 that the employer can pay without tax or reporting [2]. Under the old rates, the same mileage produced an approved amount of £5,000 [2].
The £1,000 difference is worth £400 in income tax to a higher-rate taxpayer whose employer pays the full approved amount, because none of it is taxable [2] [5].
Passenger payments
An employer can also pay up to 5p per passenger per business mile when an employee carries fellow employees on a work journey in a car or van [1] [4]. Payments up to that rate are tax-free, do not need to be reported to HMRC and carry no National Insurance [4].
The passenger rate did not change when the car rate rose [7]. An employee carrying two colleagues on a 300-mile round trip can receive £30 in passenger payments on top of the mileage allowance. There is no equivalent to Mileage Allowance Relief for passenger payments, so if the employer does not pay them, the employee cannot claim the 5p from HMRC [4] [7].
How National Insurance treats mileage payments
The National Insurance scheme uses the same pence-per-mile figure but with one important difference: there is no lower rate above 10,000 miles. For cars and vans, the 55p rate applies to every business mile for National Insurance purposes [3].
The qualifying amount for each earnings period
National Insurance is calculated per earnings period, not per tax year. The qualifying amount is the business miles in the earnings period multiplied by the rate, and payments up to that amount carry no National Insurance and need no reporting [3]. An employee who drives 1,000 business miles in a van in a month has a qualifying amount of £550 for that month [3].
If the employer pays more than the qualifying amount, the excess is added to the employee's other earnings for that period when calculating Class 1 National Insurance through payroll [3]. Any shortfall cannot be carried forward to a later period [3].
How the two schemes diverge
The table below shows how the income tax and National Insurance schemes compare on the main design points, using the rules published on GOV.UK [2] [3].
| Feature | Income tax scheme | National Insurance scheme |
|---|---|---|
| Car and van rate | 55p first 10,000 miles, 25p after | 55p for every business mile |
| Measurement period | Tax year | Each earnings period |
| Excess over approved amount | Taxable, reported on P11D or payrolled | Added to Class 1 earnings in that period |
| Shortfall | Employee can claim Mileage Allowance Relief | No relief, not carried forward |
The divergence matters for high-mileage staff. An employee driving 14,000 business miles paid a flat 50p a mile receives £7,000. For income tax, the approved amount is £5,500 for the first 10,000 miles plus £1,000 for the remaining 4,000, a total of £6,500, so £500 is taxable [2]. For National Insurance, the qualifying amount is 14,000 miles at 55p, £7,700, so no Class 1 National Insurance is due on the payments, provided the mileage is spread evenly across the earnings periods [3].
When the employer pays more or less than the approved rate
The reporting obligation depends on which side of the approved amount the employer's payments fall. Getting the direction right decides whether the employer has a P11D or payroll entry, or nothing at all.
Paying above the approved rate
Where an employer pays more than the approved amount, it must report the excess to HMRC and treat it as taxable pay [2]. GOV.UK guidance states that the excess is reported on form P11D or added to the employee's pay with tax deducted as normal [2].
An employer paying 60p a mile for 6,000 business miles pays £3,600 against an approved amount of £3,300. The £300 excess is taxable for income tax and, because it also exceeds the National Insurance qualifying amount, attracts Class 1 National Insurance in the periods in which it is paid [2] [3]. The mechanics of year-end reporting are covered in the guide to the P11D form.
Paying below the approved rate
Where an employer pays less than the approved amount, there is nothing to report and no tax to deduct [2]. The employee can instead claim Mileage Allowance Relief on the unused balance [2] [5].
Employers can also choose to report unused balances to HMRC through the Mileage Allowance Relief Optional Reporting Scheme, which lets HMRC adjust an employee's tax code without a separate claim [2]. Joining the scheme requires contacting HMRC [2].
Mileage Allowance Relief for employees
Mileage Allowance Relief is calculated by multiplying business miles by the approved rate and deducting any mileage allowance the employer paid [5]. The relief is a deduction from taxable income, not a cash repayment of the full shortfall, so its value depends on the employee's marginal tax rate [8].
The table below shows the relief available to an employee who drives 8,000 business miles and is paid 40p a mile, using the 2026-27 approved rate [5] [8].
| Step | Amount |
|---|---|
| Approved amount (8,000 miles at 55p) | £4,400 |
| Paid by employer (8,000 miles at 40p) | £3,200 |
| Mileage Allowance Relief claimable | £1,200 |
| Tax saved, basic-rate taxpayer (20%) | £240 |
| Tax saved, higher-rate taxpayer (40%) | £480 |
Claims are made online, on form P87, or through a Self Assessment return, and the online route is available for claims up to £2,500 a year [5] [7]. Employees must keep logs showing the date, mileage, reason and start and end postcodes of each journey, and can claim for the current tax year and the four previous tax years [5].
Advisory fuel rates for company cars
Advisory fuel rates are a different set of figures for a different situation. They apply only to employees driving a company car, and HMRC states that they must not be used in any other circumstances [6].
When advisory fuel rates apply
The rates are used in two situations: when the employer reimburses business fuel in a company car, and when an employee repays the cost of fuel used for private travel [6]. If the employer pays no more than the advisory rate for the car's engine size and fuel type, there is no taxable profit and no Class 1A National Insurance [6].
Where private fuel is provided and not fully repaid at the correct rate, a car fuel benefit charge arises instead. The car fuel benefit multiplier for the 2026-27 tax year is £29,200 [1] [6]. Employers that report company car benefits through payroll can find the process explained in the guide to payrolling benefits in kind.
The current rate table
HMRC reviews advisory fuel rates quarterly, on 1 March, 1 June, 1 September and 1 December, and employers can keep using the previous rates for up to one month after a change [6]. The table below shows the rates in force from 1 September 2026 [6].
| Engine size | Petrol | Diesel | LPG |
|---|---|---|---|
| 1400cc or less (diesel 1600cc or less) | 14p | 15p | 11p |
| 1401cc to 2000cc (diesel 1601cc to 2000cc) | 17p | 16p | 13p |
| Over 2000cc | 27p | 22p | 20p |
Fully electric company cars have their own advisory electricity rate: 7p a mile when charged at home and 15p a mile when charged at a public charger [6]. Where a car is charged in both places, mileage can be split on a fair and reasonable basis, while hybrid cars are treated as petrol or diesel cars [6].
Worked example for a company car driver
A company car driver covers 1,000 business miles in a month in a 1,600cc petrol car. Reimbursed at the advisory rate of 17p, the employer pays £170 with no tax, no Class 1A National Insurance and no reporting [6].
If the employer paid the AMAP rate of 55p instead, the payment would be £550 and the £380 excess over the advisory rate would be taxable, because AMAPs do not apply to company cars [6] [2]. Paying above the advisory rate is only acceptable without a charge where the employer can show the actual fuel cost per mile is higher [6].
Handling the backdated increase in payroll
Because the 55p rate was announced on 21 May 2026 but applies from 6 April 2026, many employers processed April and May mileage at 45p. HMRC has set out a simple position for correcting this [7].
Topping up mileage already paid at 45p
According to HMRC's Agent Update, employers can pay the 10p shortfall between 45p and 55p for business mileage driven since 6 April 2026 without any income tax or National Insurance being due [7]. An employee who drove 2,000 business miles in April and May and was paid £900 at 45p can receive a £200 top-up tax-free.
Where an employer paid more than 45p in April or May and deducted tax and National Insurance on the excess, HMRC suggests updating the payroll for those months to reflect the higher approved rate [7] [8]. In practice, this means refunding tax and National Insurance deducted in error and correcting the Full Payment Submission for the affected periods.
Practical steps for payroll teams
The sequence below brings an existing mileage policy into line with the 2026-27 rates, based on the rules published by HMRC [2] [3].
- Update the expenses policy and the payroll configuration to 55p for the first 10,000 miles.
- Confirm that the cumulative 10,000-mile count runs per tax year and per vehicle type.
- Apply the 55p rate to all miles for the National Insurance qualifying amount.
- Identify April and May payments made above 45p and correct the tax and National Insurance treatment.
- Decide whether to pay a top-up to employees reimbursed at 45p in the backdated period.
- Check that company car drivers are reimbursed at advisory fuel rates, not AMAPs.
Accountants handling this across several clients can run the correction in one pass with a multi-client payroll dashboard, while platforms that handle expenses inside their own product can push approved mileage straight into payroll through a REST API for UK payroll.
HMRC-recognised payroll and mileage
Mileage interacts with RTI in a way that manual processes often miss. Taxable excesses must flow into the correct earnings period for Class 1 National Insurance and into the Full Payment Submission, while tax-free AMAPs must stay out of both [3] [2]. HMRC-recognised payroll software for SMEs applies the per-period National Insurance test and the annual income tax test separately, which removes the most common source of mileage error.
Mileage rates for the self-employed and minimum wage workers
The same 55p rate reaches beyond employees, and mileage policy has one consequence that payroll teams frequently overlook.
Simplified expenses for sole traders
Self-employed individuals using simplified expenses claim a flat rate per business mile instead of actual vehicle costs. For the 2026-27 tax year, cars and goods vehicles attract 55p for the first 10,000 miles and 25p thereafter, while motorcycles remain at 24p [11] [7]. Businesses with an accounting period that does not match the tax year must split mileage between the old and new rates [7].
Self-employed taxpayers cannot claim the 5p passenger rate [7]. The wider rules on allowable costs are covered in the guide to claiming expenses when self-employed, and owner-managers moving onto the payroll can use dedicated sole-trader payroll.
Mileage and the minimum wage
Employers are not generally required to reimburse mileage, but those paying at or close to the minimum wage probably must [8]. A worker who bears the cost of business travel in a personal vehicle is bearing a cost connected with the job, which can reduce pay below the legal minimum [14] [8]. Care workers and other staff who drive between clients are the most exposed group, and the related obligations are set out in the guide to minimum wage rates and rules.
Conclusion
HMRC mileage rates now rest on three distinct sets of figures: approved mileage allowance payments for private vehicles, a single per-mile National Insurance rate applied period by period, and quarterly advisory fuel rates for company cars. The increase to 55p widened the tax-free envelope for the first time in 15 years, but it also widened the gap between the income tax and National Insurance calculations for high-mileage staff, and the backdating left a correction task for April and May.
The 55p rate runs to 5 April 2027 and will be written into legislation in due course, while advisory fuel rates will continue to move every quarter. Employers that hold mileage rates as configuration rather than as fixed numbers in a spreadsheet, and that apply the two schemes separately on every payrun, will absorb each future change without reprocessing past periods.
Frequently asked questions
What is the HMRC mileage rate per mile?
For cars and vans, the HMRC approved mileage rate is 55p a mile for the first 10,000 business miles in a tax year and 25p a mile after that, from 6 April 2026 [1]. Motorcycles are 24p and bicycles 20p for every business mile [1]. Before 6 April 2026, the car and van rate for the first 10,000 miles was 45p.
Is the 55p mileage rate backdated?
Yes. The increase was announced on 21 May 2026 and applies from 6 April 2026, covering the whole 2026-27 tax year [7]. Employers can pay a top-up of 10p a mile for business mileage reimbursed at 45p since 6 April 2026 without tax or National Insurance being due [7]. Employees who are not topped up can claim Mileage Allowance Relief on the difference.
Can an employer pay more than 55p a mile?
An employer can pay any rate it chooses, but anything above the approved amount is taxable earnings [2]. The excess must be reported on form P11D or put through payroll, and any amount above 55p a mile for the earnings period also attracts Class 1 National Insurance [2] [3].
Do electric cars use the 55p mileage rate?
An electric car owned by the employee uses the standard AMAP rate of 55p for the first 10,000 business miles, because approved mileage rates do not vary by fuel type [1]. A fully electric company car uses the advisory electricity rate instead, which is 7p a mile for home charging and 15p a mile for public charging from 1 September 2026 [6].
Image prompt for Imagen (also in frontmatter)
Documentary-style wide shot of a mid-size hatchback parked on a wet gravel lay-by beside a quiet B-road in the Yorkshire Dales, an adult driver seen from behind leaning on the open driver's door and writing in a paper mileage logbook, dry-stone walls and rolling green fields, soft overcast late-morning light, muted palette of slate grey, moss green and pale stone, off-centre composition with the car in the left third and the road curving away to the right, shot on a Fujifilm X-T5 at 23mm f/2, photojournalism, 35mm film grain, no AI artefacts, no warped hands, no warped text, landscape orientation 16:9.
