Articles

Approved mileage rate hike

The Chancellor has announced a 10p per mile increase for the tax-free mileage rates, which can be paid to employees using their own cars for business purposes, with the increase backdated to 6 April 2026.

16 Jun 2026

By Gautami Mukkasa

Mileage rates

The 10p per mile increase only applies to the first 10,000 business miles driven each tax year. This means that the rates to be reimbursed by employers to employees using their own vehicles for business mileage are now:

Vehicle	First 10,000 business miles each tax year	Subsequent business miles each tax year
Cars and vans	55p	25p
Motorcycles	24p	24p
Bicycles	20p	20p

For car and van trips, an employee can also be reimbursed an additional 5p per mile per passenger, so 70p per mile in total if three passengers are carried.

E-bike riders should be paid the bicycle rate for an electrically assisted pedal cycle, and the motorcycle rate for any other electric bike:

Where an employee uses more than one car for business mileage during the tax year, the 10,000 limit applies across all cars used; it is not per car. So, if 4,000 business miles are driven in one car for the first three months of 2026/27, with 9,000 driven in another car for the other nine months, the maximum tax-free reimbursement is 10,000 miles at 55p, plus 3,000 miles at 25p, which is £6,250.
Any reimbursement in excess of the approved rates for the tax year overall is treated as earnings and subject to tax.

When it comes to National Insurance contributions (NIC), the NIC-free rates are similar, except that 55p per mile can be paid for every business mile driven in a car or van; there is no 10,000-mile cut-off.

Other uses

Employees who are not reimbursed with the maximum mileage rate can claim tax relief on the difference between the rate and what they were reimbursed. An employee can therefore claim the full 55p/25p per mile car rates if the employer makes no reimbursement at all.

Sole traders and partnerships can use the mileage rates for cars, vans and motorcycles when working out their vehicle expenses to be deducted in calculating trading profits. The same applies to unincorporated landlords when calculating property income. However, in both cases, there is no additional allowance for passengers carried.

HMRC guidance on business travel mileage for employees’ own vehicles can be found: Gov.uk: Expenses and Benefits: Business Travel Mileage for employees’ own vehicles.