HMRC Increases Mileage Rates for the First Time in 15 Years
Posted on 13th June 2026 by David Rudd
For anyone who uses their own vehicle for work, HMRC’s recent announcement will come as welcome news. From the 2026/27 tax year, the Approved Mileage Allowance Payment (AMAP) rate for cars and vans has increased from 45p to 55p per mile for the first 10,000 business miles travelled each year.
It’s the first increase to the rate since 2011, bringing to an end a 15-year period during which employees and employers have had to work with the same allowance despite significant rises in motoring costs.
The mileage allowance is intended to cover much more than the cost of fuel. When employees use their own vehicles for business journeys, they also incur costs such as insurance, servicing, tyres, vehicle depreciation and general wear and tear. Over the past decade and a half, all of these expenses have increased substantially, yet the approved tax-free mileage rate remained unchanged.
Many tax professionals and industry bodies have argued for years that the allowance no longer reflected the true cost of driving for work. The Association of Taxation Technicians (ATT) has been particularly vocal on the issue, repeatedly highlighting that employees were effectively absorbing a growing proportion of business travel costs themselves. In their view, the increase is overdue, even if it is ultimately a step in the right direction.
Under the new rules, employees can receive up to 55p per mile tax-free for the first 10,000 business miles they drive in their own car or van during a tax year. Once that threshold has been reached, the rate remains at 25p per mile for any additional mileage. Motorcycle users will continue to receive 24p per mile, while cyclists remain at 20p per mile.
For some employees, the change could make a noticeable difference. Someone who drives 10,000 business miles in a year could now receive up to £5,500 tax-free from their employer, compared with £4,500 under the previous rules. At a time when household budgets remain under pressure, that extra £1,000 of tax-free reimbursement is likely to be welcomed by many workers.
The change will also prompt employers to review their travel and expense policies. While businesses are not obliged to pay the HMRC approved rates, the allowances provide a useful benchmark because payments made up to those limits can generally be made free from tax and National Insurance. If an employer pays less than the approved amount, employees may be able to claim tax relief on the shortfall. If they pay more, the excess may become taxable.
Despite welcoming the increase, the ATT has pointed out that not all concerns have been addressed. The organisation notes that the 25p rate paid after 10,000 miles has not changed and argues that some employees who spend large amounts of time on the road could still find themselves out of pocket. There is also disappointment that the rates for motorcycles and bicycles remain frozen.
Perhaps the most significant point raised by the announcement is not the increase itself, but the length of time it took to happen. Fifteen years is a long time for any allowance to remain unchanged, particularly during a period that has seen major fluctuations in fuel prices and substantial increases in the cost of vehicle ownership. Many commentators believe a more regular review process would help ensure rates remain aligned with real-world costs and avoid the need for such large catch-up increases in the future.
For now, however, the increase represents a positive move. It recognises the reality that business travel costs have changed significantly since 2011 and provides greater financial support for employees who use their own vehicles for work. While some may argue that further changes are still needed, few would disagree that the latest update is a long-overdue acknowledgement of the rising costs faced by drivers across the UK.
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