The UK Government has announced a new higher rate for business miles driven in a privately owned vehicle as part of the Autumn Budget announced on 28 October 2026. From 6 April 2027, any employees who have driven more than 10,000 miles can be reimbursed up to 35p per mile free from tax, increasing from the previous rate of 25p per mile.
This follows the announcement made in May this year, when the Government increased the Approved Mileage Allowance Payment (AMAP) rate for the first 10,000 business miles travelled in privately owned cars and vans to 55p per mile, up from 45p per mile previously. The change applies to business mileage incurred during the 2026-27 tax year. As the announcement was made after the start of the tax year, employers may choose to retrospectively adjust mileage payments back to the beginning of the tax year to reflect the increased rate.
Employers are not required to reimburse mileage at these approved rates. However, the increase allows organisations to reimburse a greater proportion of employees’ business travel costs free from tax. Any mileage payments made above the approved rates must be reported through payroll and treated as taxable earnings. Where employers reimburse mileage at a rate below the approved amount, employees may be able to claim Mileage Allowance Relief from HMRC on the difference.
Where an employee drives a company car, the Advisory Fuel Rates (AFRs) continue to apply. Unlike the Approved Mileage Allowance rates, which are designed to cover the overall running costs of an employee’s own vehicle, including fuel, wear and tear, and maintenance, Advisory Fuel Rates are intended solely to reimburse fuel costs for business travel. These rates vary according to the vehicle’s fuel type and engine size and can be found on the GOV.UK website.
Employers should review their business travel and expense policies to ensure they remain aligned with the updated mileage rates. While reimbursement at the Approved Mileage Allowance rates is not mandatory, the changes provide greater flexibility for employers wishing to compensate employees for the increasing cost of using their own vehicles for business travel.
| Vehicle | First 10,000 Business Miles | Over 10,000 Business Miles |
| Cars and Vans | 55p | 35p |
| Motorcycles | 24p | 24p |
| Additional Per Passenger(s) | 5p | 5p |
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