Increased tax free mileage rates

The government has announced a significant increase to the approved mileage allowance rates for cars and vans, effective from 6 April 2026. This is the first increase to the main mileage rate for more than 15 years and will be welcomed by employees and business owners who use their own vehicles for business travel.

What has changed?

The approved mileage rate for cars and vans has increased from 45p to 55p per mile for the first 10,000 business miles travelled in a tax year. The rate for business mileage above 10,000 miles remains unchanged at 25p per mile. Rates for motorcycles and bicycles also remain unchanged at 24p and 20p per mile respectively.

Who can use these rates?

These approved mileage rates are primarily intended for employees who use their own vehicle for business journeys. Employers can reimburse employees at these rates without creating a taxable benefit or additional tax liability.

The rates can also be used by self-employed individuals who choose to use HMRC's simplified expenses method for vehicle costs. Rather than claiming actual running costs such as fuel, repairs, insurance and depreciation, eligible sole traders can claim a mileage deduction based on the approved rates.

Company-owned vehicles do not qualify for these mileage rates because the business is already meeting the vehicle's running costs. Different rules apply where a company car is provided.

It is important to note that ordinary commuting between home and a permanent workplace does not qualify as business mileage. The rates apply only to qualifying business journeys.

Why does this matter?

The previous 45p rate had remained unchanged since 2011, despite substantial increases in fuel, insurance, maintenance and other motoring costs over that period. The increase provides additional tax-free reimbursement for employees and increases the allowable deduction available to many self-employed business owners.

For example, someone travelling 8,000 business miles during the year could now receive or claim up to £4,400, compared with £3,600 under the previous rate, an increase of £800.

Action points for employers

Employers should review their mileage reimbursement policies and payroll procedures to ensure that the new rates are applied where appropriate. Businesses that reimburse mileage below the approved rates may wish to consider whether an increase would help support employees facing higher travel costs.

Employees and business owners should continue to maintain accurate mileage records to support any claims.

If you would like advice on mileage claims, employee expenses or the tax treatment of business travel, please contact us.

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