Mileage Allowance 2026/27: The New 55p Rate and What It Means for Your Tax Bill
Published 21 October 2026 · 8 min read · AI-assisted analysis
From 6 April 2026 the HMRC approved mileage rate for cars and vans went up from 45p to 55p a mile for the first 10,000 business miles in a tax year. It is the first change to that rate since 2011. If you drive your own car for work, it changes what you can claim, what your company can pay you tax-free, and how much tax you save. Here is what it means in practice, with every rate checked against GOV.UK.
1. The Rates for 2026/27
| Vehicle | First 10,000 business miles | Each mile over 10,000 | Before 6 April 2026 |
|---|---|---|---|
| Cars and vans | 55p | 25p | 45p, then 25p |
| Motorcycles | 24p | 24p | 24p |
| Bicycles | 20p | 20p | 20p |
Miles are counted across the tax year (6 April to 5 April), so the 10,000 mile point resets each April. Journeys before 6 April 2026 still use the old 45p rate, which matters if you are still finishing your 2025/26 return. An employer can also pay up to 5p per passenger per business mile tax-free when you carry a colleague who is travelling for work too.
2. Self-Employed: Simplified Expenses
Sole traders and business partnerships with no companies as partners can use simplified expenses: instead of adding up fuel, insurance, repairs and servicing, you claim a flat rate per business mile. A few rules from GOV.UK:
- It works for cars, goods vehicles such as vans, and motorcycles, but not cars designed for commercial use such as black cabs or dual control driving instructor cars.
- You cannot use it for a vehicle you have already claimed capital allowances on, or included as an expense when working out your profits.
- Once you use the flat rate for a vehicle, you must keep using it for as long as you use that vehicle for your business.
- You can still claim train fares and parking on top.
- You need to keep records of your business miles.
Worked example (from GOV.UK): 11,000 business miles in 2026/27. 10,000 miles × 55p = £5,500, plus 1,000 miles × 25p = £250. Total claim: £5,750.
As a basic rate taxpayer you save 20% income tax plus 6% Class 4 NI on that claim: about £1,495. As a higher rate taxpayer (40% plus 2%), about £2,415.
The same 11,000 miles in 2025/26 at 45p gave a claim of £4,750. The new rate adds £1,000 to the claim, worth about £260 at the basic rate.
🔍 Try it yourself in our calculator
Our Self-Employed Calculator has a mileage box under the main result: enter your business miles to see the claim and the exact income tax and Class 4 NI it saves on your own figures. Open Self-Employed Calculator →
3. Employees Using Their Own Car
If you use your own car for work journeys, you can claim tax relief on the approved rate. You take away anything your employer pays you towards your costs, and claim relief on the rest (Mileage Allowance Relief). The approved rate covers the cost of owning and running the car, so you cannot claim separately for fuel, insurance, MOTs or repairs.
Travel to and from your usual workplace does not count, unless it is a temporary place of work. You can claim for the current tax year and the 4 previous tax years. If you complete a Self Assessment tax return, you claim through your return.
Worked example: 6,000 business miles in 2026/27, and your employer pays 30p a mile.
Approved amount: 6,000 × 55p = £3,300. Your employer paid 6,000 × 30p = £1,800. Mileage Allowance Relief you can claim: £1,500.
That saves about £300 in tax as a basic rate taxpayer, or £600 as a higher rate taxpayer.
Keep records of the dates and mileage of your work journeys. If your employer already pays the full 55p, there is nothing extra to claim.
🔍 Try it yourself in our calculator
Our PAYE Calculator has a mileage box where you enter your business miles and what your employer pays per mile. Open PAYE Calculator →
4. Company Directors: Tax-Free Mileage From Your Company
If you are a director using your own car for company business, your company can pay you mileage allowance payments. Up to the approved amount (business miles × the approved rate) there is no income tax and nothing to report to HMRC. Anything above the approved amount must be reported on form P11D and taxed as pay.
National Insurance works slightly differently: for cars and vans, payments up to 55p for every business mile are free of NI, even above 10,000 miles.
Worked example: 12,000 business miles in 2026/27.
Approved amount for income tax: 10,000 × 55p + 2,000 × 25p = £6,000 tax-free.
NI-free amount: 12,000 × 55p = £6,600. If the company paid 55p on all 12,000 miles (£6,600), the extra £600 above the approved amount goes on a P11D and is taxed as pay, but no NI is due on it.
🔍 Try it yourself in our calculator
Our Director Calculator shows how much your company can pay you tax-free for your business miles. Open Director Calculator →
5. Landlords
GOV.UK lists vehicle running costs for your rental business, “including mileage rate deductions for business motoring costs”, as an allowable expense, and mileage logs for journeys made solely for your property business as records to keep. Trips for viewings, inspections and repairs can count. Check with an accountant that the 55p and 25p car rates suit your property business before you use them.
6. Keep a Mileage Log
Every route above depends on records: GOV.UK asks sole traders to keep records of business miles, employees to keep the dates and mileage of work journeys, and landlords to keep mileage logs. At a minimum, note the date, where you went and why, and the miles for each business journey.
We built MileLog, our own £1.99 iPhone app, for exactly this: it logs each business trip, keeps a running total for the tax year, and exports a report for your Self Assessment or your accountant. MileLog on the App Store
Key Takeaways
- Cars and vans: 55p a mile for the first 10,000 business miles from 6 April 2026 (45p before), then 25p.
- Self-employed: simplified expenses turn 11,000 miles into a £5,750 claim, worth about £1,495 to a basic rate taxpayer.
- Employees: claim relief on the gap between 55p and what your employer pays, but not for your normal commute.
- Directors: your company can pay up to the approved amount tax-free, and up to 55p a mile free of NI.
- Whichever route applies, keep a mileage log.
See What Your Mileage Is Worth
Each calculator has a mileage box under the main result, worked out on your own figures with the 2026/27 rates.