Chancellor Rachel Reeves has raised the tax-free mileage rate from 45p to 55p per mile for the first 10,000 business miles — backdated to 6 April 2026.
It’s the first approved mileage allowance payment increase in 15 years, and it means millions of employees, self-employed workers and volunteers can now claim more tax relief per mile.
The numbers that matter:
- AMAP rate for cars and vans: up from 45p to 55p per mile for the first 10,000 business miles in a tax year
- Backdated: applies to every business mile driven since 6 April 2026
- Rate above 10,000 miles: stays at 25p per mile — no change
- Previous freeze: the 45p rate hadn’t moved since April 2011
- Motoring costs: risen by an estimated 40% over the last 15 years
Why the AMAP rate is rising now
That rate was set in April 2011, when it rose from 40p — a level that had itself been fixed since 2002. Petrol cost roughly £1.30 a litre at the time. It hasn’t budged since.
Fuel, insurance, servicing and depreciation costs have all climbed sharply, and the flat rate left workers — particularly care workers, salespeople and tradespeople — increasingly out of pocket.
Pressure from the trade union Unison, former minister Jim McMahon MP and analysis from the RAC Foundation helped push the issue up the political agenda. That’s what made this announcement different from the many previous calls for change — the timing coincided with a broader government response to rising living costs.
The mileage allowance rise May 2026 was announced alongside several other measures. These included a temporary VAT cut to 5% on children’s restaurant meals and family attraction tickets from 25 June to 1 September 2026.
Free bus travel for children aged 5 to 15 in England during August 2026, targeted agri-food tariff cuts and an extended fuel duty freeze until at least December 2026 also featured.
What the new mileage allowance rate means
Under the approved mileage allowance payment 2026 rules, the 55p per mile rate applies to the first 10,000 business miles driven in the 2026 to 2027 tax year.
Everything above 10,000 miles stays at 25p. Motorcycle and bicycle rates are unchanged at 24p and 20p respectively, and the passenger supplement remains at 5p per mile per qualifying business passenger.
Cars and vans of all fuel types are covered. It doesn’t matter whether the vehicle runs on petrol, diesel, electricity or a hybrid system — HMRC doesn’t differentiate.
Company car users, though, can’t use the AMAP rate. They’re on Advisory Fuel Rates instead — just 7p per mile for fully electric vehicles in the 2026 to 2027 tax year. That’s a big gap.
Martin Lewis, founder of MoneySavingExpert.com, reacted to the announcement on BBC Radio 5 Live on 21 May 2026, calling it a significant change.
He said: “The big one that I think is going to be under-covered, but is actually really important, is the increase in the mileage allowance for people who drive as part of their work. This has been frozen at 45p since, I think 2011, so the increase from 45p to 55p for the first 10,000 miles that you drive is really important.”
Lewis also explained how Mileage Allowance Relief works in practice.
He added: “If your employer doesn’t give you the full amount of the mileage allowance — let’s imagine they give you 30p, and the allowance is 55p — you can claim tax back on that 25p per mile that you drive as part of your work, not commuting.”
Who can claim mileage tax relief
Five groups of people are affected by this change.
Employees whose employer pays less than 55p per mile can claim Mileage Allowance Relief (MAR) on the shortfall. Take someone who drives 8,000 business miles and gets reimbursed at 30p per mile. The relief is 8,000 × (55p − 30p) = £2,000 off taxable income.
At the basic rate of 20%, that’s a tax saving of £400. At the higher rate of 40%, it’s £800.
Employees who receive nothing from their employer can claim the full 55p per mile. Someone driving 6,000 business miles with no reimbursement could claim relief on 6,000 × 55p = £3,300 of taxable income — saving £660 at basic rate or £1,320 at higher rate.
Employees whose mileage allowance is paid through salary are in a different position again. Some employers roll the mileage payment into the payslip alongside regular wages. Because it’s processed through PAYE, tax and National Insurance are deducted from it — just like normal earnings.
That means the employee can claim the full AMAP rate back from HMRC, since none of the allowance was paid tax-free. If someone in this situation drives 7,000 business miles, they could claim relief on 7,000 × 55p = £3,850 of taxable income — even though their employer technically paid them a mileage allowance.
The key is that it was taxed, so HMRC treats it as though no tax-free mileage payment was made.
Employees whose employer pays more than 55p per mile don’t get to keep the extra tax-free. Any amount above the AMAP rate is treated as earnings, taxed as part of salary and subject to National Insurance. The employer reports the excess on the P11D.
Say an employer pays 65p per mile and an employee drives 5,000 business miles. The taxable excess is 5,000 × (65p − 55p) = £500 added to taxable income. At the basic rate, that’s £100 in extra tax — worth knowing before assuming a generous mileage rate is entirely good news.
Self-employed workers can use the AMAP rate as a flat-rate deduction instead of tracking actual vehicle costs. Here’s the catch: once chosen, the method can’t be switched for that vehicle.
A self-employed person driving 6,000 business miles visiting clients could previously deduct 6,000 × 45p = £2,700. Under the new rate, that’s 6,000 × 55p = £3,300 — an extra £600 deduction, saving £120 at basic rate.
Business miles include travel to clients, between work locations, to temporary workplaces and to work-related training. Ordinary commuting — the trip from home to a permanent workplace — doesn’t count.
How to claim mileage at 55p per mile
If you’re an employee and your employer pays less than 55p per mile — or nothing at all — you can claim mileage tax relief on the difference. The process depends on the size of the claim.
Steps to take now
- Check what your employer currently pays you per business mile — if it’s below 55p, you’re likely eligible to claim mileage 55p per mile relief on the gap.
- Start keeping a mileage log if you don’t already. Record the date, destination, purpose and distance for every business journey.
- For claims of £2,500 or below in a single tax year, you can either post a P87 form to HMRC or claim online through your personal tax account. Claims above £2,500 need a Self Assessment tax return.
- If you’re self-employed, include the mileage deduction in your Self Assessment return for the 2026 to 2027 tax year. From April 2026, those with income above £50,000 may need to report through Making Tax Digital for Income Tax instead — it’s worth checking whether that applies to you.
- Don’t forget previous years. You can backdate claims up to four years — covering 2022 to 2023, 2023 to 2024, 2024 to 2025 and 2025 to 2026 at the old 45p rate, plus 2026 to 2027 at 55p.
For a detailed breakdown of qualifying journeys and how approved mileage rates apply, see the Tax Rebate Services guide to approved mileage allowance rates.
Could you be owed a mileage tax rebate?
The 45p to 55p mileage rate change is the headline, but the backdating to 6 April 2026 is what makes it immediately valuable. Every business mile you’ve driven since the start of the current tax year now qualifies at the higher rate.
If you’ve been using your own car for work and haven’t claimed mileage tax relief before, it’s worth checking whether you’re owed for previous years too.
The four-year backdating window means there could be unclaimed relief sitting in the 2022 to 2023 tax year onwards — all at the old 45p rate, but still potentially worth hundreds of pounds. That window closes on a rolling basis, so earlier years drop off first.
Key Takeaways
- The approved mileage allowance payment for cars and vans has risen from 45p to 55p per mile for the first 10,000 business miles — the first increase since 2011.
- The new rate is backdated to 6 April 2026, so it applies to miles you’ve already driven this tax year.
- If your employer pays less than 55p per mile (or nothing), you can claim mileage tax relief on the difference through form P87 or Self Assessment.
- Self-employed workers can use the 55p rate as a flat-rate deduction — but can’t switch back to actual costs for that vehicle once they’ve chosen this method.
- You can backdate mileage claims up to four years, covering the 2022 to 2023 tax year through to the current year.
- Company car users aren’t covered — they use Advisory Fuel Rates, not the AMAP rate.
