HMRC’s 2026 Mileage Allowances Explained: What You Need to Know
09th Jun 2026
During a statement in the House of Commons on 21 May 2026, Chancellor Rachel Reeves announced the first increase in the approved business mileage rate for cars and vans in 15 years.
The UK Government has announced an increase to HM Revenue and Customs (HMRC) approved mileage rate for cars and vans from 45p to 55p per mile for the first 10,000 business miles. The rate then falls to 25p per additional business mile. This change applies to business travel in the UK, excluding commuting, and can be backdated to 6, April 2026, allowing tax relief at the new rate within the same annual mileage limit.
This means that CEOs who travel for work, employees who travel between sites, and the self-employed can claim more tax-free mileage relief when using their own car or van for business journeys.
What is a car mileage allowance?
The HMRC mileage rate is a set amount that is either paid or claimed for business travel using a personal vehicle, not a fleet vehicle or a company car provided by your employer.
If you own or personally lease the vehicle, you can claim the amount. For example, if you're a midwife driving from house to house, this is the amount your employer can pay you, or you can claim it back as tax relief.
It's to cover costs such as:
- Fuel costs
- Insurance
- Road tax
- Depreciation
- Vehicle maintenance
- General running costs
There are a few way it can work:
If your employer pays mileage
An employer can reimburse you at the approved mileage rate, currently 55p per mile up to 10,000 miles, and 25p thereafter. They pay the full rate, and there is no tax relief to claim.
If they don't pay the full rate or none at all, you may be able to claim tax relief on the difference. For example, if they give you 35p per mile (when the allowance is 55p), you can claim tax relief on the difference, in this case 20p per mile, on a vehicle that you drive as part of your work.
If your employer doesn't pay (or pays less)
For example, if you cover 4000 business miles per year, the approved allowance would be £2200 (55p x 4000 miles). If your employer pays nothing, you can claim a tax refund on the £2200. How much you get depends on your tax bracket. A basic-rate taxpayer in the 20 percent tax bracket would save about £440 in tax.
If you're self-employed
Benefits of the increased rate
It works for many industries and roles, including sales representatives, care workers, CEOs, and self-employed individuals who use their own or personally leased vehicles to drive from job to job or site to site.
How have the mileage allowances changed for 2026?
In 2026, the rate for car and van drivers changed from 45p (introduced in 2011) to 55p per mile up to 10,000 miles. The 25p rate after 10,000 miles has stayed the same for cars and vans.
For motorbikes and bicycles, the rate hasn't increased and remains at 24p for motorcycles and 20p for bicycles, regardless of mileage. You can claim this via HMRC or through your tax return when you complete your self-assessment.
You can also claim 5p per passenger per business mile for carrying fellow employees in a car or van on journeys which are also work journeys, travelling between jobs or worksites.
Current HMRC mileage rates for 2026/27
| Vehicle Type | Business Miles | Rate Per Mile (p) |
| Cars & Vans | First 10,000 miles | 55 |
| Cars & Vans | Over 10,000 miles | 25 |
| Motorcycles | All business miles | 24 |
| Bicycles | All business miles | 20 |
What does the mileage allowance cover?
To make things much simpler for keeping your car on the road, the mileage rate is designed to cover everything, including fuel costs, insurance, road tax, depreciation, vehicle maintenance, and general running costs, rather than targeting each expense individually.
This blanket approach makes it easier for employers and the self-employed to direct tax relief or a mileage allowance toward the expenses that need it most. For example, a construction project manager who uses their own vehicle to travel from site to site will likely allocate funds for servicing and maintenance due to the dust and dirt kicked up in these rugged environments.
Who is eligible to claim the mileage allowance?
People eligible to claim the HMRC mileage allowance are those who use their personal vehicle for business travel, excluding commuting to work.
Employees
If employees of a business use their own personal car, van, motorcycle, or bicycle for work travel and their employer does not fully reimburse their mileage or pays less than the improved rate, they can claim a mileage allowance. It can be beneficial for smaller businesses that don't have the budget to lease company cars or vans, as it helps keep their staff happy.
Examples are sales staff visiting clients, care workers doing house calls, and field technicians moving between sites.
Directors
Directors can also claim mileage for business travel, provided it's not for personal use or commuting. Many directors often travel between different workplaces and client locations, so having the opportunity to claim a mileage allowance can be beneficial, allowing them to use their own cars and avoid extra costs associated with leasing.
Self-employed workers
The self-employed, including sole traders and freelancers, can also claim mileage expenses for tax relief if they use their own vehicle for work travel. For example, a mobile hairdresser or someone who does house or site visits as part of their job can claim.
People who are not eligible
In some instances, mileage allowance can't be claimed from HMRC, and those are:
- employees or directors are using a leased company car or fleet vehicle
- your employer fully reimburses your business mileage already
- the journey is an ordinary commute or personal trip
How are the mileage rates calculated?
HMRC sets mileage rates as a fixed per-mile rate based on the average cost of running a vehicle. It is calculated by multiplying business miles travelled by the approved rate.
For example, an employee who uses their own van to travel between jobs, averaging around 6,000 miles per year, could claim back up to £3,300, which, at the basic rate of 20 percent, would be £660.
If an employer pays less than the HMRC-approved mileage rate of 55p per mile, the employee can also claim tax relief on the difference.
For example, if a care worker uses their own vehicle and travels 4,000 business miles a year, receiving 30p per mile from their employer, they can claim the remaining 25p per mile as tax relief. This means they would receive £1,200 from their employer and could claim £200 in tax relief if they are a basic-rate taxpayer at 20 percent.
Also, the mileage rates are not based on actual running costs per journey, but are more fixed HMRC-approved allowances designed to simplify expenses and make tax calculation easier.
Is mileage allowance still the most suitable choice?
Mileage allowance is the standard way employers reimburse employees who use their own vehicles, however there are other options available.
The limitations of using their own vehicles for long distances can put pressure on their employees by covering the costs of rising fuel prices, higher repair costs, and fluctuating insurance premiums. Costs can vary month to month.
Alternative options to the HMRC-approved mileage rate
Salary Sacrifice Scheme
An employee sacrifices part of their salary in exchange for leasing a vehicle through your employer, which is usually an EV. Instead of being deducted from your take-home pay, the monthly cost is deducted from your gross salary before tax. The benefit from this is that your taxable income and National Insurance (NI) contributions are reduced. The employer can also save on NI contributions, benefiting both the employee and the employer.
You'll still pay Benefit in Kind (BiK) tax on the vehicle as you'll be using it for personal use and commuting, so most employers opt for an all-electric car or van, which currently offers much lower BiK rates than hybrid, petrol or diesel cars, and can work out far more cost-effective for most employees. Plus, getting a car through a salary sacrifice scheme usually means that insurance, servicing, and maintenance are included.
Company Vehicles
Company vehicles are vehicles that the business leases or owns and provides to employees for use.
Although it is mainly used for business travel, most businesses allow personal use and commuting, which are taxable under Benefit-in-Kind (BIK). The company usually covers insurance, servicing, maintenance, and fuel/electric costs.
Fleet Vehicles
Fleet vehicles, such as cars or vans, are owned or leased by the employer and are used by employees when needed. They're usually shared across the business for many employees to use.
Frequently asked questions
Personal travel and normal commuting (travel between home and a permanent workplace) do not qualify for the HMRC-approved tax-free mileage allowance.
Yes, you can claim HMRC-approved mileage allowance if you are self-employed, including freelancers and sole traders. You'll need to track any business travel throughout the year, including client visits, business meetings, and work-related training. When completing your Self Assessment, enter the total business miles you did in the year in the self-employment section.
Yes, your employer can use a different rate than the one defined by HMRC. For example, if your employer pays you a 30p mileage rate, you can claim the other 25p (of the maximum HMRC-approved rate at 55p) as tax relief.
Managing business travel costs beyond mileage allowance
The increase in HMRC's mileage allowance to 55p per mile is welcomed by employees, directors, and the self-employed who use their personal cars and vans for business travel.
While mileage claims can be the simplest way to recover costs such as fuel/electricity, service and maintenance, and insurance for work journeys, frequent business driving can still place significant wear and tear on personal vehicles and leave drivers exposed to rising running costs.
For businesses seeking a solid, more predictable travel solution for their employees, salary sacrifice schemes can provide access to a vehicle with fixed monthly costs that often include servicing, maintenance, and insurance, removing the hassle of calculating mileage and the worry about wear and tear on their personal car or van.
At Driveway Vehicle Solutions, we help organisations and individuals explore salary sacrifice options that can cut administrative burden while providing a valuable employee benefit.
