The government has confirmed it will lock in the 55p per mile tax-free allowance rate for the first 10,000 business miles and increase the rate above that threshold from 25p to 35p per mile, a change expected to benefit around three million drivers.
The move means workers who use their own cars and vans for business travel will receive £120 a year in additional tax savings for a worker doing 6,000 business miles, while someone driving 15,000 business miles could receive up to £300 in additional savings.
What the HMRC mileage rate changes mean
HMRC's Approved Mileage Allowance Payments (AMAPs) are used by employers to reimburse employees for mileage incurred on business journeys. The rates are designed to cover the costs of running a vehicle, including fuel, repairs and servicing, with the amount per mile varying depending on the type of vehicle and the number of miles covered per year.
HMRC increased the rates from 45p to 55p per business mile for the first 10,000 business miles travelled earlier this year for personally owned cars and vans used for business travel, the first change in 15 years. The 25p rate for each business mile over 10,000 in the tax year had remained unchanged since 2001.
Who benefits from the mileage allowance increase
The changes are set to benefit around three million people, including nurses, care workers, self-employed builders and others who drive to work. The government is also increasing the rate above 10,000 miles from 25p to 35p to help support those who drive a lot of miles for work.
HM Treasury said: "The government will lock in the biggest increase in mileage rates for 15 years, ensuring employees and self-employed people can continue to receive up to 55p per mile tax-free for the first 10,000 business miles they drive each year. Following a review, the government is also going further with the rate for those who drive over 10,000 miles also rising from 25p to 35p, supporting those who drive significant mileage for work."
"Around 3 million people are expected to benefit. The change means workers who rely on their vehicle for their job can receive greater support with the costs of fuel, servicing and other motoring expenses. These changes will provide £120 a year in additional tax savings for a worker doing 6,000 business miles, with someone driving 15,000 business miles receiving up to £300 in additional tax savings."
Reaction and upcoming Budget
The change comes as part of Prime Minister Andy Burnham's series of 'everyday fixes' designed to save time and money, and give households "breathing room". It comes ahead of Wednesday's Budget announcement, which will set out the government's spending and borrowing plans for the year ahead.
Commenting on the mileage rates, Emma Rawson, director of public policy for the Association of Taxation Technicians, said: "Increasing the rate above 10,000 miles from 25p to 35p is a welcome move and directly addresses one of the concerns we raised ahead of the Budget. Those who have to use their own vehicles to drive substantial distances for work should not be disadvantaged simply because they cross an arbitrary mileage threshold. However, today's announcement still leaves us with a two-tier system. We think a simpler single rate of at least 60p per mile would be fairer and easier to administer. The Government should introduce regular reviews so mileage allowances keep pace with the costs workers actually face, and also look again at the rates for motorcycles and bicycles."
The current approved mileage rates for the 2026/27 tax year, as confirmed by HMRC, are as follows: for cars and vans, the first 10,000 business miles are paid at 55p per mile, backdated to apply from 6 April 2026, while miles over 10,000 remain at 25p per mile. Unchanged vehicle rates include motorcycles at 24p per mile and bicycles at 20p per mile. Passenger payments remain at 5p per mile per passenger for carrying fellow employees on business journeys.
