Approved Mileage Rate Increase: What UK Employers and the Self-Employed Need to Know

In a move widely anticipated for several years, the UK government announced on 21 May 2026 the first uprating of approved mileage rates in 15 years. The change, backdated to 6 April 2026, increases the tax-free mileage allowance for cars and vans from 45p to 55p per mile for the first 10,000 business miles in a tax year.

For the estimated two million employees and one million self-employed individuals who claim mileage against their tax, the change is significant. For employers, it triggers payroll and expense policy updates that need addressing without delay.

What Has Changed?

The approved mileage allowance payment (AMAP) rates for cars and vans from 6 April 2026 are now:

• First 10,000 business miles in the tax year: 55p per mile (previously 45p)

• Any additional miles above 10,000: 25p per mile (unchanged)

The rates for motorcycles and bicycles have not changed. The announcement cited the impact of rising fuel costs as justification. This is the largest single uplift to these rates since the AMAP framework was introduced.

What Does This Mean in Practice?

An employee doing 6,000 business miles a year will now receive £600 more per year tax-free than under the previous rate, saving over £120 in tax for a basic rate taxpayer. For heavier business drivers covering the full 10,000-mile threshold, the additional tax-free allowance is £1,000 per year.

For the self-employed, the higher rate means a larger deductible expense against business profits, reducing taxable income accordingly.

What Employers Need to Update

The rate change is backdated to 6 April 2026, which means employers who have been paying mileage at the old 45p rate for any part of the 2026/27 tax year may need to make retrospective adjustments. Key actions include:

• Update your mileage reimbursement policy and rate schedule with effect from 6 April 2026

• Reprocess any mileage claims submitted from 6 April at the old rate, if still within the payroll period

• Communicate the change to employees and managers responsible for approving expense claims

• Update any expense management software or HR systems that apply a fixed mileage rate

• Review any advisory fuel rates used for company car drivers alongside this change

Employers who pay above the AMAP rate must report the excess as a taxable benefit via PAYE or P11D. Employees whose employer pays below the AMAP rate may claim the shortfall directly through self-assessment or an HMRC claim.

Impact on the Self-Employed

Self-employed individuals using the simplified expenses method for business mileage can now deduct 55p per mile for the first 10,000 business miles from 6 April 2026. Those who have already recorded mileage for the start of 2026/27 at the old rate should update their records.

For sole traders using the actual costs method rather than simplified expenses, the mileage rate change does not directly apply — but it may be worth reviewing which method delivers a better outcome at the new rate.

Backdating: What to Watch For

The backdating to 6 April 2026 adds administrative complexity. If your payroll has already processed April and May mileage claims at 45p, you will need to decide whether to make a retrospective adjustment or handle the difference as a future payment. Either approach is workable, but it needs a conscious decision and clear documentation.

How Finsight Advisory Can Help

Whether you need support updating your expense policies, reviewing the payroll implications, or advising self-employed clients on the best approach to mileage expenses, Finsight Advisory can provide clear, practical guidance tailored to your situation.

Speak to Finsight Advisory — finsightadvisory.co.uk