HMRC Mileage Rate Increase
Some good news from HMRC. The government has increased the amount you can claim for business mileage — for the first time since 2011.
If you use your own car or van for work (excluding your normal commute), HMRC sets a mileage rate that determines how much you can receive or claim tax-free for each business mile.
This rate was 45p per mile, however from 6 April 2026 it has increased to 55p per mile for the first 10,000 business miles in the tax year. Any mileage above 10,000 miles remains at 25p per mile.
This change is backdated to the start of the 2026/27 tax year, so it applies to qualifying mileage from 6 April 2026 onwards.
Example:
If you drive 8,000 business miles a year, you can now receive or claim £4,400 (8,000 x 55p) tax-free instead of £3,600 (8,000 x 45p) — an extra £800.
If you are an employee
If your employer reimburses you for business mileage, they can now pay up to 55p per mile tax-free.
If you have been paid at 45p since April, your employer can pay a 10p per mile top-up without any additional income tax or National Insurance implications. It is worth checking with your payroll or expenses team if this has not yet been updated, and whether it has been agreed.
If your employer pays less than 55p per mile (or nothing), you can claim tax relief on the difference through your Self-Assessment tax return or by submitting a P87 form.
If you are self-employed
You can claim vehicle costs in one of two ways:
Mileage method: claim 55p per mile for business journeys (simple and widely used)
Actual costs: claim a proportion of your running costs (fuel, insurance, servicing, etc.)
Once you choose a method for a vehicle, you must continue using it for that vehicle.
If you employ staff
You can now reimburse employees up to 55p per mile for business travel in their own vehicles without creating a tax liability.
If you have already reimbursed mileage at 45p since 6 April 2026, you can pay a 10p top-up without additional tax or National Insurance implications. You should also update your expense policy and systems going forward.
If you pay above 55p per mile, the excess will be taxable.
Not sure what this means for you?
This change could be worth a meaningful amount depending on your mileage.
If you would like us to review your position or ensure you are claiming everything you are entitled to, please get in touch.
FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment and professional services. Our clients vary in size from self employed sole traders, small enterprises and medium size businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.
