Key takeaways

  • The tax-free mileage rate for cars and vans stays at 55p a mile for the first 10,000 business miles, made permanent.
  • From 6 April 2027 the rate above 10,000 miles rises from 25p to 35p.
  • The same rates apply to the self-employed simplified mileage deduction and to the National Insurance disregard for motoring expenses.
  • The 55p rate has applied since 6 April 2026, after a mid-year increase from 45p announced in May 2026.
  • The government says around 3 million employees and self-employed people use their own vehicle for work.

Budget 2026 locks in the higher mileage rate introduced this year and adds a second increase for high-mileage drivers. Employees and the self-employed who use their own car or van for work can receive, or deduct, 55p a mile for the first 10,000 business miles in a tax year. From 6 April 2027 the rate for miles above 10,000 rises from 25p to 35p. The change was trailed by the Treasury on 26 October and confirmed in the Budget.

The rates

Car or van2026-27From April 2027
First 10,000 miles55p55p
Over 10,000 miles25p35p

Before 6 April 2026 the rates were 45p and 25p.

Motorcycle and bicycle rates are not changed by the Budget. GOV.UK lists them at 24p and 20p a mile for 2026-27.

How we got here

The 45p rate for the first 10,000 miles had been frozen since 2011. In May 2026, as part of a package responding to high fuel prices after the conflict in the Middle East, the government raised it to 55p with retrospective effect from 6 April 2026. HMRC’s note on that change said a review of the rates beyond 2026-27 would be set out at the Budget.

On 26 October the Treasury announced it was “locking in the 55p per mile rate for the first 10,000 business miles and increasing the rate above 10,000 miles from 25p to 35p per mile”, calling it the biggest increase in mileage rates for 15 years. The Budget document confirms the rates will be 55p and 35p, and the overview of tax legislation says the 35p rate takes effect from 6 April 2027, with legislation by statutory instrument.

Who the rates apply to

  • Employees using their own vehicle. Approved Mileage Allowance Payments (AMAPs) are the amounts an employer can pay tax-free. If the employer pays less, the employee can claim Mileage Allowance Relief on the difference. If the employer pays more, the excess is taxable.
  • The self-employed. Sole traders and partnerships of individuals using simplified expenses can deduct the same per-mile rates instead of claiming actual costs and capital allowances. Once a method is used for a vehicle it must continue for as long as that vehicle is used in the business.
  • National Insurance. The overview of tax legislation says the change also applies to the National Insurance disregard for relevant motoring expenditure. For 2026-27, GOV.UK says the National Insurance rate is 55p for all business miles.

What it is worth

The Treasury’s examples: a worker doing 6,000 business miles gets £120 a year in additional tax savings, and someone driving 15,000 business miles gets up to £300. Those figures compare the new rates with the old 45p and 25p.

Here is how the approved amount works for a car driver with 15,000 business miles:

2026-272027-28
First 10,000 miles£5,500£5,500
Next 5,000 miles£1,250£1,750
Approved amount£6,750£7,250

At the old 45p and 25p rates the approved amount would have been £5,750.

What it means for accountants and their clients

Check payroll and expenses systems. Employers who pay mileage at the advisory rates should make sure their systems use 55p for 2026-27 and 55p and 35p from 6 April 2027. Employers still paying 45p are paying less than the approved amount, and their employees can claim Mileage Allowance Relief on the shortfall.

Revisit Mileage Allowance Relief claims. Employees whose employers pay below the rates can claim relief. With the 55p rate backdated to 6 April 2026, some 2026-27 claims will be larger than clients expect. From April 2028, the separate Budget change removing the £2,500 Self Assessment threshold for employment expenses will let more people claim through PAYE. See employee expenses after Budget 2026.

Rerun the simplified expenses comparison for the self-employed. For sole traders who claim actual motoring costs and capital allowances, the higher flat rates may now give a bigger deduction, especially for high-mileage drivers. Remember that the choice is locked in for the life of the vehicle.

Company car or own car? Higher AMAP rates and rising company car tax percentages, set out in our benefits in kind update, both tilt the comparison towards employees using their own car and claiming mileage.

Our mileage allowance calculator and guide to sole trader expenses can help with the numbers.

Frequently asked questions

What is the mileage rate for 2026-27?

55p a mile for the first 10,000 business miles in a car or van, and 25p a mile after that. The 55p rate applies from 6 April 2026.

What is the mileage rate from April 2027?

From 6 April 2027 the rate stays at 55p for the first 10,000 business miles and rises to 35p a mile above 10,000 miles.

Do the new mileage rates apply to the self-employed?

Yes. The simplified mileage rates used by sole traders and partnerships of individuals change in line with the employee rates.

Is the 55p rate temporary?

No. It was introduced in 2026 in response to high fuel prices, and Budget 2026 makes it permanent.

Sources

Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 28 October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.