HMRC Mileage Rate Changes for 2026/27 – What Workers and Employers Need to Know

Thousands of workers across the UK use their own vehicles for work every day — from care workers and housing officers to trainers, advisers and outreach staff. For years, many have argued that mileage payments simply haven’t kept pace with rising fuel, insurance and maintenance costs.

The government has now confirmed that the Approved Mileage Allowance Payment (AMAP) rate for cars and vans will increase from 45p to 55p per mile for the first 10,000 business miles travelled each tax year. The rate above 10,000 miles remains at 25p per mile.

Importantly, the change has been confirmed as being backdated to 6 April 2026, the start of the 2026/27 tax year. (gov.uk)

Why was the mileage rate increased? 

The change follows growing pressure from unions, charities, care organisations and financial campaigners who argued that the previous 45p rate no longer reflected the real cost of using a vehicle for work.

Over recent years, drivers have faced significant increases in:

• Fuel prices
• Insurance premiums
• Servicing and repairs
• Tyres and maintenance
• General cost of living pressures

Many organisations warned that workers — particularly those in social care, housing, welfare support and outreach roles — were effectively subsidising work travel themselves.

There were also concerns that low mileage rates were contributing to recruitment and retention challenges in sectors where staff are expected to travel regularly between appointments and communities.

The government said the increase is intended to better reflect the real cost of business travel and provide additional financial support for workers using their own vehicles for work purposes.

What are HMRC mileage rates? 

HMRC mileage rates are the tax-free amounts employers can pay staff who use their own vehicle for qualifying business journeys.

The payment is intended to help cover:

• Fuel
• Wear and tear
• Insurance
• Servicing and repairs
• Vehicle running costs

If employers pay at or below the approved HMRC rate, there is normally no tax or National Insurance to pay on the reimbursement.

Current HMRC mileage rates for 2026/27 

Vehicle Type     First 10,000 Business Miles      Over 10,000 Miles 
Cars and vans       55p per mile                                          25p per mile
Motorcycles          24p per mile                                          24p per mile
Bicycles                  20p per mile                                         20p per mile

Employers can also pay an additional 5p per mile for each colleague carried as a passenger during a work journey.

Who is eligible? 

The mileage allowance is generally available to employees and some self-employed workers who use their own vehicle for qualifying business travel.

Eligible journeys may include: 

• Visiting clients or customers
• Travelling between work locations
• Outreach and support visits
• Attending meetings or training away from a normal workplace
• Travel to temporary workplaces

Journeys that are usually not eligible include: 

• Normal commuting between home and a permanent workplace
• Personal journeys
• Travel using a company vehicle under a separate fuel or mileage arrangement

HMRC makes a distinction between ordinary commuting and genuine business travel. In most situations, travelling from home to a normal office or workplace will not qualify.

Case Study – How the New Mileage Rate Works 

Sarah works for a community support organisation and regularly visits clients across the region using her own vehicle.

She travels approximately 8,000 business miles each year.

Before the change (45p rate) 
8,000 × 45p = £3,600

After the change (55p rate) 
8,000 × 55p = £4,400

Difference 

Sarah receives an additional:
£800 per year tax-free 

For many workers, this extra support could help with rising fuel costs, vehicle repairs and household expenses.

Can the increase be backdated? 

Yes. The increase has been confirmed as being backdated to 6 April 2026.

This means workers who completed eligible business mileage from that date may now be entitled to the higher 55p rate.

If an employer has already reimbursed mileage at the previous 45p rate since April 2026, they may choose to make a top-up payment for the difference.

Example 

Emma completed 2,000 business miles between April and May 2026 and was originally reimbursed at 45p per mile.

• Amount paid: £900
• Amount due at new rate: £1,100

Difference owed: 
£200 
Employers may now reimburse the additional amount tax-free.

What if an employer pays less than the HMRC rate? 

Some employers may still choose to reimburse below the approved HMRC mileage rate.

If this happens, employees may be able to claim Mileage Allowance Relief from HMRC on the difference.

Example 

James drove 5,000 business miles.

• HMRC approved rate: 55p
• Employer paid: 35p

Difference:
20p × 5,000 miles = £1,000 shortfall

James may be able to claim tax relief on the £1,000 difference through HMRC.

It is important to remember this is tax relief — not repayment of the full shortfall amount.

Keeping accurate records 

Workers should keep accurate mileage records including:

• Dates of journeys
• Start and destination locations
• Purpose of the trip
• Total business miles travelled

HMRC may request evidence if a claim is reviewed.

Many organisations now encourage the use of digital mileage logs or mileage tracking apps to help staff maintain accurate records.

Overall, the increase in the mileage allowance is likely to be welcomed by many workers who rely on their own vehicles to deliver essential services — particularly after years of rising motoring costs and financial pressure.