55p mileage rate

Further actions to take by employers and employees

The approved mileage rate for employees using their own cars or vans for business journeys has increased from 45p to 55p per mile for the first 10,000 business miles in a tax year.

Importantly, the increase has been backdated to 6 April 2026, so employers and employees should review mileage payments already made during the current tax year.

The rate for business mileage above 10,000 miles remains at 25p per mile. The rates for motorcycles and bicycles are unchanged at 24p and 20p, respectively.

What should employers do?

The 55p rate is an approved tax-free amount, rather than a compulsory reimbursement rate. Employers can therefore choose to pay employees more or less.

However, employers currently paying 45p per mile may wish to review their expenses policy and decide whether to increase reimbursement to 55p.

For example, an employee travelling 5,000 business miles in their own car could now receive up to £2,750 tax-free, compared with £2,250 under the previous rate.

Employers should also review mileage payments already made since 6 April 2026. If payments above 45p were previously treated as taxable because they exceeded the old, approved rate, payroll or benefit reporting may need correcting because the higher 55p rate applies retrospectively.

Employers should continue keeping appropriate business-mileage records showing the journeys undertaken and the amounts reimbursed.

What should employees do?

Employees should first establish the rate their employer actually pays.

Where an employer pays the full 55p for the first 10,000 business miles, there is normally no additional tax relief to claim.

However, if an employer continues paying less than 55p, the employee may be entitled to Mileage Allowance Relief on the difference between the approved rate and the amount actually reimbursed.

For example, if an employer continues paying 45p per mile and an employee travels 6,000 qualifying business miles, the shortfall is 10p per mile, or £600. The employee does not receive £600 from HMRC but can claim tax relief on that £600. A basic-rate taxpayer could therefore save £120 in Income Tax, while a higher-rate taxpayer could potentially save £240.

Employees should retain mileage records showing the business purpose and details of each journey. Those completing a Self-Assessment return should normally claim the relief through their return.

Check your mileage arrangements

The increase provides employers with an opportunity to review their mileage policy and employees with an opportunity to check whether additional tax relief is available.

If you use your own vehicle for business travel, or reimburse employees for doing so, now is a good time to review payments made since 6 April 2026 and make any necessary adjustments.