Mileage tax relief increase for business drivers

What’s changed?

from 6 April 2026, HMRC’s approved mileage rate rose from 45p to 55p per mile for the first 10,000 business miles (the first increase in 15 years)
if you’re self-employed or run a small business, you can now claim more tax relief on every business mile you drive

If you drive for work, there’s good news. After being frozen since 2011-12, the approved mileage rate has finally gone up. And the change is backdated, so it covers the whole 2026-27 tax year.

For self-employed people and small business owners, this matters. More relief per mile means a lower tax bill. Here’s what’s changed, who it affects, and what you should do next.

What’s the new mileage rate for 2026-27?

The rate for cars and vans rose from 45p to 55p per mile for the first 10,000 business miles in a tax year. That’s a 10p uplift – or a 22% increase. For miles above 10,000, the rate stays at 25p per mile.

A few other rates have remained the same:

cars and vans (over 10,000 miles): 25p per mile (no change)
motorcycles: 24p per mile (no change)
bicycles: 20p per mile (no change)
passenger payments: 5p per passenger per mile (no change)

The new rate took effect from 6 April 2026. HMRC announced it in May 2026 and backdated it, so it applies to the full tax year – including journeys you’ve already made.

You can read more about it on HMRC’s website.

Why does this matter for self-employed people?

If you’re a sole trader or in a partnership, you can use HMRC’s simplified mileage rates to work out your motoring costs. Rather than tracking fuel, servicing, insurance, and wear and tear separately, you claim a flat rate per business mile instead.

With the rate now at 55p, you can deduct more from your taxable profits. This means your tax bill goes down. The more business miles you drive, the bigger the savings.

New mileage rate example

Say you drive 9,000 business miles in 2026-27. Under the old 45p rate, you could deduct £4,050. At the new 55p rate, that’s £4,950 – an extra £900 off your taxable profit.

But there’s one thing to remember: once you use simplified mileage rates for a vehicle, you have to stick with that method for as long as you use the vehicle in your business. You can’t switch to claiming actual costs later on.

What if you’re an employer and pay staff mileage?

Sometimes an employee might own their own car and an employer reimburses the mileage cost. The 55p rate is the most employers can pay tax free – but they can choose to pay less than this.

If you pay less than 55p towards your staff’s mileage, they can claim the difference through mileage allowance relief (MAR). For example, if you pay 40p per mile, your staff can claim relief on the remaining 15p for each business mile within their first 10,000.

If you run a business and pay staff mileage, you can:

Choose to adopt the 55p rate
Keep your current rate, or
Set something in between

It’s worth reviewing your expenses policy and updating any documents that quote a specific rate.

What counts as business mileage?

Not every journey qualifies. As a general rule, business travel includes:

visits to clients, customers, or suppliers
travel between different work sites
trips to off-site meetings, training, or networking events
travel to a temporary workplace

What doesn’t count is ordinary commuting between home and a permanent workplace, plus any private journeys. So your daily trip to a fixed office won’t qualify, but a visit to a client will.

How to make the most of the new rate

The simplest step is to keep good records. Log every business journey with the date, destination, reason, and miles driven. Without records, you can’t back up a claim.

If you’re self-employed, you’ll claim through your Self Assessment tax return. Employees paid below 55p a mile can apply to HMRC for mileage allowance relief.

And don’t forget the backdating. Because the rate applies from 6 April 2026, you may be able to top up or claim relief on journeys earlier in the year that were paid at the old rate.

A small change with a real saving

The mileage rate increase is one of the easier tax wins for business drivers in years. After 15 years frozen at 45p, the move to 55p puts more money back in your pocket for every business mile.

The action is simple. Keep accurate mileage records, use the new rate on your next return, and check whether you can claim for earlier journeys. If you pay staff mileage, review your policy and decide your position on the new rate.

Mileage rate FAQs

When did the new 55p mileage rate start?

The 55p rate applies from 6 April 2026, the start of the 2026-27 tax year. HMRC announced it in May 2026 but backdated it to cover the full year, including journeys already completed.

Can self-employed people use the 55p rate?

Yes, sole traders and partners can use HMRC’s simplified mileage rates as an alternative to claiming actual vehicle costs. You deduct the rate per business mile from your taxable profits when working out your tax.

Do employers have to pay 55p per mile?

No, there’s no legal duty to pay the approved rate, or any set rate. The 55p figure is the most an employer can pay tax-free. If they pay less, employees can claim mileage allowance relief on the shortfall.

Does my commute count as business mileage?

No, ordinary commuting between home and a registered workplace address is treated as private travel and doesn’t qualify for mileage relief.

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Mileage tax relief just jumped to 55p – what it means for the self-employed