After years of remaining unchanged, the government has announced a welcome increase to the UK mileage allowance rate for employees using their own vehicles for business travel.
From 6 April 2026, the approved mileage allowance for the first 10,000 business miles has increased from 45p to 55p per mile. While modest, this long-awaited change offers additional tax relief support at a time when motoring costs remain high.
Below, we explain what the mileage allowance is, who it affects, and what employees and employers should consider moving forward.
What Is the Mileage Allowance?
The mileage allowance is the amount employers can reimburse employees tax-free when they use their own car for qualifying business journeys.
This covers costs associated with business driving, including:
• Fuel
• Vehicle wear and tear
• Insurance
• Servicing and maintenance
The allowance applies only to genuine business travel and does not include ordinary commuting between home and a permanent workplace.
What Has Changed?
The mileage allowance rate had remained frozen at 45p per mile for the first 10,000 miles since 6 April 2011.
Following continued pressure from trade unions and rising motoring costs, the government has now confirmed an increase of 10p per mile, bringing the rate to:
• 55p per mile for the first 10,000 business miles
All other mileage rates remain unchanged.
Importantly, the increase is also being backdated to 6 April 2026.
What Does This Mean for Employees?
If your employer reimburses you for business mileage using your own car, the approved mileage allowance determines how much can be paid tax-free.
This means:
• Employers can now reimburse up to 55p per mile for the first 10,000 qualifying business miles without creating a tax charge.
• If your employer pays less than the approved rate, you may be able to claim tax relief on the difference through HMRC.
For employees who regularly travel for work, this increase may help offset some of the rising costs associated with running a vehicle.
What If Your Employer Pays Less Than the Approved Rate?
Some employers choose to reimburse mileage at a lower rate than the HMRC approved allowance.
Where this happens, employees may be entitled to claim Mileage Allowance Relief on the shortfall.
For example:
• HMRC approved rate: 55p per mile
• Employer reimbursement: 40p per mile
• Tax relief may be claimed on the 15p difference
Claims can usually be made through Self Assessment or directly with HMRC, depending on your circumstances.
What Employers Should Consider
For employers, this change provides an opportunity to review internal mileage policies and reimbursement rates.
Businesses may wish to:
• Update mileage claim systems and payroll processes
• Review staff travel policies
• Communicate the changes clearly to employees
• Ensure records of business journeys remain accurate and compliant
Good record-keeping remains essential. Employees should continue maintaining clear mileage logs showing:
• Dates of journeys
• Business purpose
• Start and end locations
• Number of miles travelled
A Positive Step After Years of Frozen Rates
While some may feel the increase does not fully reflect the true cost of motoring, it is nevertheless a positive step after more than a decade without change.
For both employers and employees, understanding how the updated mileage allowance works can help ensure claims are handled correctly and tax relief is not missed.
We’re Here to Help
If you would like guidance on mileage claims, employee reimbursements, or tax relief available through business travel, we are here to help.
Whether you are an employer reviewing your policies or an employee unsure what you can claim, we can provide friendly, professional advice tailored to your situation.
Share this post: