On 21 May 2026, HMRC announced that they were increasing the approved business mileage reimbursement rate for employees using their own vehicles for work. This marks the first uplift in 15 years, in recognition of the rising cost of fuel.
What’s changed?
The new ‘Approved Mileage Allowance Payments (AMAPs)’ for the 2026/27 tax year are:
| Vehicle type | First 10,000 miles | Over 10,000 miles |
| Cars and vans | 55p per mile | 25p per mile |
| Motorcycles | 24p per mile | 24p per mile |
| Bicycles | 20 per mile | 20p per mile |
This represents a 10p increase (from 45p to 55p) for the first 10,000 business miles for cars and vans, whilst all other rates remain unchanged.
Employers can also continue to pay an additional 5p per passenger per mile when employees carry colleagues on business journeys.
Note that different rates apply for business mileage reimbursement for company cars. These rates are reviewed and updated quarterly and the latest rates can be found here.
Why this matters
The above rates represent the maximum amounts that can be reimbursed tax-free for employees using their own vehicles for business travel. Payments within these limits are not subject to income tax or national insurance contributions (NIC).
If the employer decides to reimburse business mileage at rates lower than the above, it is possible for employees to claim tax relief on the difference using the Claim Tax Relief for your Job Expenses online service or by filling out a P87 Form. If the employer reimburses at rates higher than the above, the excess becomes subject to tax and NIC.
Impact on payroll
The change was announced after the start of the tax year, but it was confirmed that the new 55p per mile rate would apply with effect from 6 April 2026. As a result, April and likely most May payrolls will have been processed using the old 45p rate.
It should be noted that the new rate represents the maximum amount per mile that can be paid tax-free, rather than a required level of reimbursement. As a result, employers now have the opportunity to review their existing reimbursement policy and decide whether to:
- Carry out a retrospective reimbursement for April and May for the 10p difference as well as applying the 55p rate going forward; or
- Look to apply the new 55p rate only for reimbursement claims going forward; or
- Retain existing reimbursement rates for business mileage.
Note that for any retrospective claims the increased rate will apply to business journeys carried out on or after 6 April 2026, rather than reference to when the expense claim was made. Some care will, therefore, need to be taken to ensure that any backdated reimbursements do not include business mileage incurred prior to that date.
Recommended next steps
In light of the above, employers may wish to consider taking the following steps:
- Confirm organisational policy decide whether to adopt the new HMRC rate or retain an existing rate
- Review April and May activity – determine whether to apply a retrospective uplift in the rates for April and May payrolls which have already been processed . In addition, if rates above the 45p per mile were paid in those months and subjected to tax and NIC, corrections will need to made to the payroll.
- Update systems/advise payroll provider – ensure systems are updated for the new rates and/or advise your external payroll provider of any changes to your reimbursement rates.
- Communicate with employees – confirm any changes in rates that the firm will be adopting and when these will be effective from. Also highlight the ability for employees to claim tax relief directly if company reimbursement is below HMRC rates.
Conclusion
The business mileage rate increase is a positive and long-overdue announcement. Although there is no obligation for employers to change their reimbursement policy, in light of the increase, now is a good time for a review and communications to employees is recommended, regardless of the policy decision taken.
