Business Mileage Allowance Update (Effective 6 April 2026)

Government & HMRC announcement – 21 May 2026 (Iran crisis support package)

HMRC has confirmed a significant increase to business mileage rates for employees and the self‑employed.  These changes apply to cars and vans and are fully backdated to 6 April 2026 for the 2026/27 tax year.

1.  New Mileage Rates (Cars & Vans)

These apply to:

• Approved Mileage Allowance Payments (AMAPs) – what employers can pay tax‑free
• Mileage Allowance Relief (MAR) – what employees can claim if paid less than HMRC rates
• Self‑employed mileage claims – simplified mileage method

2.  What Employers Need to Do

• Employers may increase their reimbursement rates to match the new AMAPs.
• If an employer paid above the old rates in April or May 2026 and deducted tax/NI, they may need to re‑run payroll to correct this.

3.  What Employees Need to Know (The Big Tax Tip)

If your employer pays less than the HMRC rate, you can claim Mileage Allowance Relief on the difference.

Example

Employer pays: 30p per mile
HMRC rate: 55p per mile
Difference you can claim: 25p per mile

This is a tax deduction, not a refund of the full 25p — but it still reduces your tax bill.

Key rule

This applies only to business travel, not commuting to your normal workplace.

4.  Fuel Prices vs Mileage Allowance – Why the Increase Matters

Pump Price Comparison

Insight:
Fuel prices in 2026 have surged back to near‑2022 levels due to the Iran/US situation.
A 22% mileage‑rate increase is helpful — but with fuel up as much as 43%, many argue it could have been higher.

5.  Additional Business Passenger Rate (Often Forgotten!)

If you carry work colleagues on business journeys, you can claim an extra 5p per mile per passenger.

Example

Employer reimburses: 30p per mile
You have 1 business passenger → HMRC rate = 60p per mile
You can claim the 30p per mile difference on your tax return.

This too is backdated to 6 April 2026.

6.  Summary

• New rate: 55p per mile (first 10,000), 25p thereafter
• Passenger rate: +5p per mile per colleague
• Backdated: to 6 April 2026
• Employees: claim the difference if employer pays less
• Self‑employed: use new rates immediately
• Employers: may need to re‑run April/May payroll if they taxed mileage incorrectly

2026 Mileage Allowance – FAQ

1.  What are the new HMRC mileage rates for 2026/27?

From 6 April 2026, the mileage rates for cars and vans are:

• 55p per mile for the first 10,000 business miles
• 25p per mile for miles over 10,000

These apply to employees, employers, and the self‑employed.

2.  Are the new mileage rates backdated?

Yes.  All changes are fully backdated to 6 April 2026 for the entire 2026/27 tax year.

3.  What is Mileage Allowance Relief (MAR)?

MAR is the tax relief employees can claim when their employer pays less than the HMRC mileage rate.
You can claim the difference between what you received and the HMRC rate.

4.  How do I claim the difference if my employer pays less?

You can claim via:

• Your Self Assessment tax return, or
• A P87 form if you don’t file a return

You claim only the difference, not the full mileage amount.

5.  Does this apply to commuting?

No.  Mileage can only be claimed for business travel, not normal commuting to your permanent workplace.

6.  What if my employer pays more than the old rate?

If employers paid above the old 45p rate in April or May 2026 and deducted tax/NI, they may need to re‑run payroll to correct this, because the new 55p rate is now tax‑free.

7.  Do the new rates apply to the self‑employed?

Yes.  The self‑employed using the simplified mileage method must use the new 55p/25p rates from 6 April 2026.

8.  What is the additional 5p passenger rate?

If you carry work colleagues on business journeys, you can claim an extra:

• +5p per mile per passenger

This is in addition to the 55p/25p mileage rate.

9.  How much can I claim with passengers?

• 1 passenger → 60p per mile
• 2 passengers → 65p per mile
• 3 passengers → 70p per mile

This applies only to business passengers, not family or friends.

10.  Can the passenger allowance also be backdated?

Yes.  The additional 5p per mile per passenger is also backdated to 6 April 2026.

11.  Do employers have to increase their mileage reimbursement?

No.  Employers can increase their rate to 55p, but they are not required to.
Employees can claim the difference through tax relief if paid less.

12.  Why did HMRC increase the mileage rate now?

Fuel prices in 2026 have risen sharply due to the Iran/US situation, returning to near‑2022 peak levels.
The government introduced the increase as part of a wider support package for individuals and businesses.

13.  Does this apply to vans as well as cars?

Yes.  The 55p/25p rates apply to cars and vans used for business mileage.

14.  Does this affect company‑car drivers?

No.  Company‑car drivers use Advisory Fuel Rates (AFRs), not AMAPs.
This update applies only to privately owned vehicles used for business.

15.  What records do I need to keep?

You should keep:

• Date of each journey
• Start and end location
• Purpose of the trip
• Miles travelled
• Amount reimbursed by your employer

HMRC can request evidence for up to 4 years.

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