A 10p rise, now on the statute book — from 6 April 2026 the approved mileage rate for cars and vans increases from 45p to 55p per mile for the first 10,000 business miles, the first change since 2011, and it is backdated to the start of the tax year. As chartered certified accountants in Surrey advising sole traders, company directors and employers across the UK, TaxDigit explains what section 2 of the Taxation (Energy and Vehicles) Act 2026 actually changed, what it deliberately left alone, and what needs correcting before the year end.
What Approved Mileage Rates Are — and Why They Matter
Two separate regimes run off the same figure. For employees and directors, sections 229 to 232 of the Income Tax (Earnings and Pensions) Act 2003 set an approved amount for Approved Mileage Allowance Payments. Reimburse a business journey at or below that amount and the payment is free of income tax and National Insurance and needs no P11D entry. Pay above it and the excess is earnings.
For the self-employed, section 94F of the Income Tax (Trading and Other Income) Act 2005 provides simplified mileage expenses: a flat deduction per business mile instead of apportioning fuel, insurance, servicing, repairs and capital allowances between business and private use.
Because both regimes are pegged to the same pence-per-mile number, a single amendment moves the tax position of around three million drivers at once. That number had stood at 45p since 2011/12, while the running costs it approximates had not.
What Changes From 6 April 2026
- Cars and vans, first 10,000 business miles in the tax year: 45p rises to 55p per mile.
- Cars and vans, every business mile above 10,000: unchanged at 25p.
- The same 55p and 25p figures apply to self-employed simplified mileage expenses.
- The change is made by section 2 of the Taxation (Energy and Vehicles) Act 2026 (c. 26), which received Royal Assent on 15 July 2026. It substitutes “55p” for “45p” in ITEPA 2003 s.230(2) and in ITTOIA 2005 s.94F(2) and (3).
- Section 2(3) gives the amendment effect for the tax year 2026-27 and subsequent tax years — so it bites on journeys made from 6 April 2026, three months before the Act was passed.
The measure was announced in May 2026 as part of the Government’s Great British Summer Savings package. On HMRC’s own figures, an employee driving 6,000 business miles a year is roughly £120 better off. A driver reaching the full 10,000 miles gains £1,000 of additional tax-free reimbursement or deductible expense.
The Catch — What Did Not Change
The Act does one thing to mileage: it swaps a number. Everything around that number stands, and this is where the planning points sit.
The 25p rate above 10,000 miles is untouched, so the drop after the 10,000th mile is now 30p rather than 20p. High-mileage drivers take the full uplift on the first tranche and nothing beyond it, which makes accurate mileage logs and a correct split between business and commuting journeys more valuable than before, not less. Motorcycles remain at 24p, bicycles at 20p and the passenger supplement at 5p per passenger per business mile; none were amended.
Most importantly, 55p is a ceiling, not an entitlement. Nothing obliges an employer to pay it. Where an employer reimburses below the approved amount — including any employer still paying 45p — the employee can claim Mileage Allowance Relief on the shortfall, worth £200 to a basic-rate taxpayer covering 10,000 miles at 45p, or £400 at the higher rate.
Who Benefits — and Who Should Still Pay Attention
The clearest winners are self-employed traders using simplified expenses and owner-managers who reimburse themselves from their own company: the extra 10p is a straight increase in a tax-free extraction route carrying no National Insurance and no benefit-in-kind charge.
Employers who have already processed claims since 6 April need to look backwards. HMRC confirmed in Agent Update 143 that employers who reimbursed above the old rates, and deducted income tax and National Insurance on the excess, may need to re-run April and May payroll. Anyone still paying 45p is under-reimbursing against the new approved amount and should decide whether to top up or leave staff to claim the relief themselves.
What Drivers and Employers Should Do Now
- Update expense policies, mileage claim forms and any expense software to 55p and 25p, effective for journeys from 6 April 2026.
- Review every mileage payment made since 6 April, identify shortfalls against the new approved amount, and settle them — re-running April and May payroll where tax or NIC was deducted in error.
- Check the 10,000-mile counter for each employee: the rate falls to 25p on the 10,001st mile, and the counter resets on 6 April, not on 1 January.
- Self-employed clients should apply 55p and 25p in the 2026/27 return, due 31 October 2027 on paper or 31 January 2028 online, remembering that simplified mileage cannot be used for a vehicle on which capital allowances have been claimed.
- Keep a contemporaneous mileage log recording date, journey, purpose and miles. The rate change makes the record worth more, and HMRC still disallows undocumented claims.
Frequently Asked Questions
Is my employer obliged to pay 55p per mile?
No. The approved amount is the maximum that can be paid free of tax and National Insurance, not a statutory minimum. If your employer pays less, you can claim Mileage Allowance Relief on the difference through your tax return or a P87 claim.
Does the increase apply to journeys before the Act received Royal Assent?
Yes. Section 2(3) applies the amendment to the whole of 2026-27, so every qualifying business journey from 6 April 2026 onwards is covered, even though the Act was not passed until 15 July 2026.
Did the rate above 10,000 miles go up as well?
No. It stays at 25p per mile. Only the first-10,000-mile rate for cars and vans was amended, and the motorcycle, bicycle and passenger rates are unchanged.
Can I use 55p if I have claimed capital allowances on the car?
Not as a self-employed trader. Simplified mileage expenses and capital allowances on the same vehicle are mutually exclusive, and the choice made for a vehicle must be kept for as long as that vehicle is used in the business.
How TaxDigit Can Help
TaxDigit advises on personal tax and self assessment, alongside tax advisory and planning and day-to-day bookkeeping for owner-managed businesses. We can recalculate mileage claims from 6 April 2026, quantify the underpayment on claims already processed at 45p, decide whether a payroll re-run or a Mileage Allowance Relief claim is the cleaner route, and check that simplified expenses still beat actual costs and capital allowances. The amending provision is at section 2 of the Taxation (Energy and Vehicles) Act 2026 on legislation.gov.uk.
Plan Ahead With TaxDigit
If you or your staff drive for business, the backdated increase is worth reviewing before the next payroll run rather than at the year end. Call 01483 230 777, email info@taxdigit.co.uk or book a consultation with our team in Guildford, Surrey.