Mileage allowance finally increases
The rate at which employees can be reimbursed for business mileage when using their own vehicles has increased for the first time in 15 years. How might this impact your business and what do you need to be aware of? Tax Partner, Christiaan Hansen, clarifies in this article.
Long-awaited increase
You probably don’t have much trouble remembering HMRC’s approved mileage rates because they haven’t changed since 2011. That is, until now. The rate for the first 10,000 miles has increased by 10p from 45p to 55p. Trade unions have been campaigning for an uplift, and the government responded with the 10p increase in recognition of the impact of the Iran war. The rates for motorcycles, bicycles, car journeys exceeding 10,000 miles and passengers have not changed. The government intends to review and update those in a future Budget.
Retrospective effect
The government announced the increase in late May, but the new rate applies from 6 April 2026.
Applying the new rate
Update your travel expenses policy to reflect the new rate applicable to employees using their own cars if you’d like to pay the increased rate. If you don’t, your employees can still claim tax relief on the difference between the amount received and the new rate.
If you’ve already reimbursed employees for business journeys in April and May, you can pay the extra 10p per mile now, but you don’t have to. The approved rate is simply the maximum amount you can pay to your employees without incurring tax charges.
Ensure you only pay 55p per mile for business journeys travelled from 6 April 2026. Expenses incurred before 6 April but claimed afterwards are still limited to the old 45p per mile rate.
If you’re self-employed, the increase applies to you from 6 April 2026 if you’re using simplified expenses for motoring costs.
IN SUMMARY
The 10p increase applies retrospectively from 6 April 2026. You can now reimburse employees up to 55p per mile tax and NI free if you wish. The increase also applies to the self-employed using simplified expenses.
Please do contact our team for any further questions you may have.
