HMRC Raises Mileage Rate to 55p: What Employers and Sole Traders Should Know

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This is an important tax update for anyone who drives a personal car for business trips or repays workers for business travel costs. HM Revenue and Customs (HMRC) has increased the Approved Mileage Allowance Payment (AMAP) rate for the first time in 15 years.

On 21 May 2026, the government confirmed that the approved mileage rate for cars and vans is moving up from 45p to 55p per mile. This new rate applies to the first 10,000 business miles driven in each tax year. It is also backdated, meaning it counts for any business travel done from 6 April 2026 onwards.

This change happened because vehicle running costs have gone up significantly. This includes higher prices for fuel, car insurance, repairs, and regular vehicle maintenance.

New HMRC Approved Mileage Rates from 6 April 2026

Here is the simple breakdown of the updated rates you can claim for business travel using your own vehicle.

• The extra passenger rate stays the same at 5p per passenger per mile.
• The 10,000 mile limit resets every tax year and applies to each employee individually.

What is the Approved Mileage Allowance Payment (AMAP)?

The approved mileage rate is the official amount set by HMRC. It is what employers can pay to staff members who use their personal cars for work travel.

This rate is designed to cover all the costs of running a car for work. It includes fuel, regular servicing, insurance, road tax, and normal wear and tear.

• Paying at or below the rate: If an employer repays staff at 55p per mile or less, the money is completely tax free. There is no income tax or National Insurance to pay.
• Paying above the rate: If a business pays more than 55p per mile, the extra money counts as taxable income. The business must report it and run it through the payroll system.

What UK Employers Need to Do Now

Businesses need to review and update their staff expense policies immediately to match the new HMRC rules.

1. Review recent travel logs. Check all employee mileage claims that have been submitted since 6 April 2026.
2. Update your expense software. Change the settings in your payroll and accounting apps to use the new 55p rate automatically.
3. Calculate backdated top-up payments. Identify any claims that were already paid out at the old 45p rate since April. Work out the difference and pay the extra money owed to your staff.
4. Update your team. Send a clear message to your employees explaining the new rates and how backdated claims will be sorted out.

What if your employer pays less than 55p?

If your business cannot or chooses not to increase its internal mileage rate to 55p, you do not lose out. Employees can claim Mileage Allowance Relief directly from HMRC to make up for the shortfall.

Does this apply to electric vehicles?

Yes. The exact same 55p rate applies to petrol, diesel, hybrid, and fully electric cars, as long as the vehicle is owned privately by the worker or the sole trader.

What the 55p Mileage Rate Means for Sole Traders

If you are self-employed and use the simplified expenses method to claim vehicle costs, you can use these exact same updated rates directly in your business accounts.

• You can claim 55p per mile for your first 10,000 business miles.
• You can claim 25p per mile for any business miles driven after that.

You do not need to fill out any special applications. You simply use the new higher rate when calculating your business expense deductions on your 2026/27 Self Assessment tax return.

Summary Checklist for Business Owners

The jump to 55p is a massive change that helps ease the pressure of rising transport costs. To make sure your business stays safe and compliant:

• Employers: Update your internal accounting platforms and employee handbooks today.
• Employees: Keep detailed logs of your travel dates and locations to make sure your backdated miles are accurate.
• Self-Employed: Add up your business mileage carefully so you can use the 55p allowance to lower your upcoming tax bill.