Date posted: 1st Jun 2026
The Government has confirmed an increase to HMRC’s approved mileage rates, set to be backdated to 6 April 2026.
For many businesses and employees, this is a welcome change that better reflects the rising cost of motoring.
For cars and vans, the approved mileage rate will be 55p per mile for the first 10,000 business miles, with the rate remaining at 25p per mile above that threshold.
What the new rates mean
HMRC’s mileage rates are the amounts employers can pay tax-free to the individual when an employee uses their own vehicle for business travel. They are intended to cover the full cost of running a vehicle for work purposes, including fuel, servicing, insurance and wear and tear.
The updated rates are:
- 55p per mile for the first 10,000 business miles in the tax year.
- 25p per mile for business miles above 10,000.
- 5p per mile for carrying a passenger on a business journey in the employee’s own car or van.
What if the employer pays less?
This is an important point for employees and employers alike.
If an employer pays less than the approved HMRC rate, the employee may be able to claim Mileage Allowance Relief on the difference. In other words, if the business mileage rate paid by the employer is below 55p per mile, the employee can usually claim tax relief on the shortfall.
For example, if an employer pays 30p per mile for business travel, the employee may be able to claim tax relief on the remaining 25p per mile, subject to the normal rules.
This can be particularly useful where employers have a set expense policy that does not fully match HMRC’s approved rates, such as when the employer is already paying a car allowance.
What employers should do now
Employers should review their mileage policies to make sure they are using the updated rates and could even backpay employee’s for business mileage travelled since 6 April 2026.
It is also worth checking whether staff are being reimbursed at or below HMRC’s approved amounts. If mileage payments are lower than the approved rate, employees may be missing out on tax relief, and employers may face avoidable queries from staff later on.
If employers are paying in excess of HMRC rates, then there are tax and national insurance considerations.
How we can help
We advise employers and individuals on a variety of employment tax matters. If you have any queries regarding the above or any other employment tax issue, please get in touch.
