Mileage Allowance 2026: The 55p Rate for Employers

From 6 April 2026, HMRC’s approved mileage rate for cars and vans is 55p a mile for the first 10,000 business miles in the tax year, up from 45p. Over 10,000 miles it stays at 25p. A driver doing 12,000 business miles now has an approved amount of £6,000, not £5,000.

What changed on 6 April 2026?

The rate for the first 10,000 miles went up by 10p. HMRC’s business travel mileage rules give cars and vans “55p from 6 April 2026 (45p before 6 April 2026)” for the first 10,000 business miles, and 25p after that. The 28 October 2026 Budget raises the rate above 10,000 miles to 35p from 6 April 2027 (Budget 2026 overview, measure 2.7).

Vehicle	Rate from 6 April 2026
Car or van, first 10,000 business miles	55p a mile (was 45p)
Car or van, over 10,000 business miles	25p a mile
Motorcycle	24p a mile
Bicycle	20p a mile

HMRC adds that pedal-assisted e-bikes get the bicycle rate and other e-bikes get the motorcycle rate. The 10,000 mile step is counted per employee per tax year, which runs from 6 April.

What does the increase cost at 8,000, 12,000 and 20,000 miles?

It adds up to £1,000 per driver a year if you pay the full approved rate, and less below 10,000 miles. The table works out the approved amount at the old and new rates.

Business miles a year	At 45p then 25p	At 55p then 25p	Increase
8,000	£3,600	£4,400	£800
12,000	£5,000	£6,000	£1,000
20,000	£7,000	£8,000	£1,000

The 12,000 mile row is HMRC’s own example, reworked at the new rate. HMRC’s page works it as 10,000 x 45p plus 2,000 x 25p, which is £5,000. At 55p it is 10,000 x 55p plus 2,000 x 25p, which is £6,000.

The increase stops growing at 10,000 miles because only the first 10,000 miles went up. Beyond that, the extra cost per driver is flat at £1,000. The mileage rates tool works out your approved amount for any mileage.

Do you have to pay 55p?

No. HMRC’s approved rate is the amount you can pay without tax or reporting consequences. It is not a minimum. If you pay less, your employee can claim Mileage Allowance Relief on the unused balance, as explained in how to claim mileage allowance relief. If you pay more, HMRC says you must report on form P11D and add anything above the approved amount to the employee’s pay, deducting tax as normal.

Whether to move your own rate is a contract and policy question. Check what your employment contracts and expenses policy say before you change it.

How does National Insurance treat the 55p rate?

For National Insurance the rate is 55p for every business mile in a car or van, with no 10,000 mile step. HMRC’s National Insurance rules for mileage payments say the excess over the qualifying amount is added to earnings when calculating Class 1 National Insurance, “but not Pay As You Earn (PAYE) tax”, through payroll. There is no Mileage Allowance Relief for National Insurance.

The NI and tax schemes diverge above 10,000 miles. A driver paid 55p on every mile has a payment that is clear for NI but over the approved amount for tax once they pass the first 10,000 miles.

	Tax approved amount	NI qualifying amount
12,000 miles	£6,000	£6,600
20,000 miles	£8,000	£11,000

Take an employer paying a flat 55p on 20,000 miles, which is £11,000. For NI, that is exactly the qualifying amount, so there is no excess. For tax, the approved amount is £8,000, so £3,000 is above it. HMRC’s guidance is to report that on form P11D and add it to pay for tax.

A flat 55p on every mile therefore creates a reporting task for every driver over 10,000 miles. A rate of 55p to 10,000 miles and 25p after avoids it.

What should employers do now?

Check three things.

1. Your rate. Confirm what your policy pays for the first 10,000 miles and after, and whether it was ever tied to the 45p rate.
2. Your reporting. Anyone paid above the approved amount needs a P11D entry, and the NI position is separate from the tax one.
3. Your high-mileage drivers. A driver on the 55p rate for 10,000 miles costs £5,500 before they reach the 25p band. That is where grey fleet costs and risks and the comparison with company vehicles matter most. Company cars are different: they use advisory fuel rates, explained in advisory fuel rates vs mileage allowance.

Frequently Asked Questions

What is the HMRC mileage rate in 2026?

It is 55p a mile for the first 10,000 business miles in a car or van from 6 April 2026, and 25p a mile after that. Motorcycles are 24p and bicycles are 20p. From 6 April 2027 the rate above 10,000 miles rises to 35p, as announced in the 28 October 2026 Budget.

When did the mileage allowance go from 45p to 55p?

On 6 April 2026. HMRC’s wording is “55p from 6 April 2026 (45p before 6 April 2026)”.

How much more does the 55p rate cost employers?

If you pay the full approved rate, it costs 10p a mile more for the first 10,000 miles. That is £800 more for a driver doing 8,000 miles and £1,000 more for anyone doing 10,000 miles or more.

Is National Insurance treated differently from tax?

Yes. HMRC runs separate schemes for tax and National Insurance. The NI rate for cars and vans is 55p for every business mile with no step at 10,000 miles, and any excess is added to earnings for Class 1 National Insurance.

What happens if I pay less than 55p?

The employee can claim Mileage Allowance Relief on the unused balance. They do this through HMRC’s online service, or through Self Assessment if they file a return.

Cut your fleet’s fuel bill

Use the mileage rates tool to see what 55p and 25p cost across your drivers’ real mileage, and the fleet cost index to put it beside the cost of running your own vehicles.

For the vehicles you own, a speed cap changes the fuel side. The Department for Transport’s fuel consumption curves (TAG data book v2.03, May 2026, published on GOV.UK) show a diesel van using 20.0% less fuel per mile at 56 mph than at 68 mph. How much a fleet saves depends on the share of its miles driven above the cap.

AutoKontrol has made speed limiters in Britain since 1985, for vans, cars, HGVs and buses, and we come to you to install them. Book a free consultation or get a quote.