TAX GUIDE

How the mileage allowance works in 2026/27.

If you drive your own vehicle for work, HMRC sets a rate per business mile that can be paid or claimed without tax. The car and van rate went up from 45p to 55p on 6 April 2026. This guide covers the rates, how employers and employees use them, and how sole traders claim them.

Figures for the 2026/27 tax year · Last reviewed 21/10/2026

The approved mileage rates for 2026/27

HMRC calls these the approved mileage rates. They apply per business mile, in your own vehicle, for the tax year running from 6 April 2026 to 5 April 2027.

Cars and vans, first 10,000 business miles: 55p. This was 45p before 6 April 2026.
Cars and vans, each business mile over 10,000: 25p. Unchanged.
Motorcycles: 24p for every business mile. Unchanged.
Bicycles: 20p for every business mile. Unchanged.

An electrically assisted pedal bike uses the bicycle rate. Other electric bikes use the motorcycle rate.

The 10,000 mile split counts business miles across the whole tax year. If an employee uses more than one vehicle in the year, HMRC says the miles are all calculated together.

What counts as a business mile

A business mile is a journey you make for your work. Your normal commute does not count. Travelling between home and your usual workplace is private, unless the place you are going to is a temporary place of work.

Typical business journeys include visiting a client or supplier, driving between two sites during the working day, or going to a temporary site for a job. The test is the purpose of the trip, not how far it is.

What the rate covers

The rate is meant to cover the full cost of owning and running the vehicle. That includes fuel or electricity, vehicle tax, MOTs, insurance and repairs. If you use the mileage rate, you cannot claim those costs on top of it.

This is the main thing to remember. Mileage is an all-in figure. Claiming 55p a mile and also claiming a fuel receipt for the same car is double counting.

If you are an employer

You can pay employees a mileage allowance when they use their own vehicle for business journeys. The approved amount for the year is their business miles multiplied by the rate for their vehicle.

Paying at or below the approved amount

If what you pay over the year is no more than the approved amount, there is nothing to report to HMRC and no tax to pay on it. You do not need to pay at the full rate. Paying less is allowed.

Paying above the approved amount

If you pay more than the approved amount, the extra is taxable. You report it on form P11D, add it to the employee's pay and deduct tax as normal.

National Insurance works differently

For National Insurance, HMRC works out a qualifying amount for each earnings period. It is the business miles in that period multiplied by the rate. For cars and vans the rate is 55p from 6 April 2026, and GOV.UK does not apply a 10,000 mile split for National Insurance. Anything you pay above the qualifying amount is added to the employee's earnings for Class 1 National Insurance through payroll.

There is no carry forward. If you pay below the qualifying amount in one period, the unused part cannot be set against a later period.

Carrying passengers

You can pay up to 5p per passenger per business mile when an employee carries a colleague on a business journey in their own car or van. You do not need to report it or pay National Insurance on it. There is no tax relief for the employee if you pay less than 5p or nothing at all.

If you are an employee

If your employer pays you less than the approved amount, or nothing at all, you can claim Mileage Allowance Relief on the difference. This reduces the tax you pay. You cannot claim it if your employer has already paid you the full approved amount.

To work out your claim, add up your business miles for the year for each type of vehicle, apply the rates, and take away anything your employer paid you towards the costs.

When you claim, HMRC asks for copies of your mileage logs. For each journey the log should show the reason for the trip and the postcodes of the start and end points. If you have more than one job, you send a log for each.

You can claim for the current tax year and the 4 previous tax years. If you already send a Self Assessment return, you make the claim on your return. Otherwise you can use HMRC's online service.

If you drive a company car

The mileage rates are for your own vehicle. In a company car you cannot use them. You can, though, claim relief on what you have spent on fuel or electricity for business trips, less anything your employer has paid back.

If you are a sole trader or partner

Sole traders, and partnerships with no companies as partners, can use simplified expenses for vehicles. The flat rates are the same as the approved mileage rates: 55p for the first 10,000 business miles in a car or goods vehicle from 2026/27, 25p after that, and 24p for motorcycles.

Two rules decide whether this is right for you.

No capital allowances first. You cannot use the flat rate for a vehicle you have already claimed capital allowances for, or already included as an expense when working out your profits.
Once chosen, it sticks. After you use the flat rate for a vehicle, you must keep using it for as long as that vehicle is used in the business. You can use different methods for different vehicles.

The alternative is to claim a business share of the actual running costs, plus capital allowances on the vehicle. Which works out better depends on the vehicle, its cost and how far you drive. A cheap, efficient car doing a lot of miles often suits the flat rate. A vehicle bought mainly for the business may not. Our guide to which expenses the self-employed can claim covers the wider picture.

Limited companies cannot use simplified expenses. If you run a company, the employer rules above are the ones that apply when it pays mileage. If the company owns the vehicle instead, see our guide to buying a car through a limited company.

Worked examples

These examples are made up to show how the sums work. They use the 2026/27 rates.

Example 1: an employee paid in full

Alex drives 12,000 business miles in their own car in 2026/27. The approved amount is 10,000 × 55p plus 2,000 × 25p, which is £5,500 plus £500, so £6,000.

If the employer pays exactly £6,000 over the year, there is nothing to report and no tax on it.

If the employer pays a flat 55p for every mile, Alex receives £6,600. The £600 above the approved amount is taxable and goes on the P11D. For National Insurance there is no 10,000 mile split, so 55p a mile is within the qualifying amount and no National Insurance is due on it.

Example 2: an employee paid less than the rate

Jordan drives 8,000 business miles and the employer pays 35p a mile, which is £2,800. The approved amount is 8,000 × 55p, which is £4,400.

Jordan can claim Mileage Allowance Relief on the £1,600 difference. That amount is deducted from taxable income, so the saving depends on Jordan's tax rate.

Example 3: a sole trader on the flat rate

Sam is a sole trader who drives 9,000 business miles in 2026/27 in a car with no capital allowances claimed. The flat rate claim is 9,000 × 55p, which is £4,950. Sam cannot also claim fuel, insurance or repairs for that car.

Keep a proper mileage log

Every claim rests on the record of miles. A log should be kept as you go, not rebuilt from memory at the end of the year. For each journey, note:

The date. When the trip took place.
The reason. Who you saw or what the job was.
Start and end points. Including postcodes, which HMRC asks for on employee claims.
Business miles. Leaving out any private detour.

Keep the log with the rest of your records. Our guide on how long to keep business records sets out how long that should be.

Where bookkeeping comes in

Mileage often goes wrong in the books rather than in the rules. Fuel receipts get coded as motor expenses for a car that is also on the mileage rate. Mileage payments to staff get posted with no log behind them. Or the 10,000 mile point passes and nobody changes the rate.

When the books are kept up to date, these show up while they are still easy to fix. When they are done once a year, they tend to surface at the deadline.