HMRC’s 55p mileage rate: What employers need to know

What is HMRC's new mileage rate?

From 6 April 2026, HMRC’s Approved Mileage Allowance Payment (AMAP) rate for cars and vans increased from 45p to 55p per mile for the first 10,000 business miles in the tax year. The change was announced after the start of the tax year, but it applies retrospectively from 6 April 2026.

The 25p rate for business miles above 10,000 is unchanged, as are the 24p motorcycle rate, the 20p bicycle rate and the 5p passenger payment for carrying a colleague on the same business journey. 

This is a significant development for employers whose staff use their own vehicles for business travel. After many years without change, the approved rate now better reflects the real cost of motoring. In practice, it gives employers more room to reimburse employees tax efficiently, but it also creates some housekeeping work for payroll, expenses and policy documents.

When does the 55p rate apply?

The approved mileage rules apply where an employee uses their own car or van for qualifying business journeys. Broadly, that means business travel such as visiting clients, travelling between sites or attending a temporary workplace. Ordinary commuting between home and a permanent workplace does not qualify. 

If the employer reimburses qualifying mileage at or below the approved rate, the payment can normally be made free of income tax and national insurance contributions. If the employer pays more than the approved amount, the excess is taxable. If the employer pays less, the employee may claim Mileage Allowance Relief on the shortfall.

It is important not to confuse AMAP with the separate fuel rates used for company cars. The 55p rate is for employees using their own vehicle. It is also relevant for owner-managed businesses where directors and employees use personally owned cars for business journeys and want to recover costs from the company in a tax-efficient way.

What should employers do now?

Employers are not obliged to increase their reimbursement rate, but many will wish to do so for employee relations reasons and to keep pace with current HMRC guidance. 

However, if you wish to apply the new AMAP rate to your employee mileage claims, there are several practical actions worth taking now:

• First, update your expense policy and any employee guidance so the wording reflects the new 55p rate. 
• Secondly, check payroll and expense software settings. Some systems update automatically; others require the rate to be changed manually. 
• Thirdly, review existing claims from 6 April 2026 onwards to identify whether top-up payments are needed. 
• Fourthly, remind line managers and claim approvers what counts as qualifying business mileage and the records that should be kept.

Good records remain essential. Employers should expect mileage claims to show the date of travel, start and end points, business purpose and number of miles. This is not just good discipline; it supports the tax treatment if HMRC ever reviews the payments. Businesses that rely on estimates, rounded figures or repetitive ‘standard’ journeys without explanation create unnecessary risk.

The right answer is not always to move every employee to 55p automatically. Employers should consider budget, the volume of business travel, market practice in their sector and whether some roles are already supported through different arrangements, such as company cars. Because the approved rate is a tax ceiling rather than a mandatory minimum, businesses still have flexibility. But any decision to retain a lower rate should be conscious, documented and communicated clearly.

Key takeaways

The increase to 55p is good news for employers, who have greater scope to make tax free reimbursements to employees which better reflect their actual motor costs. 

Employers should consider treating this update as a prompt to review policies, update systems, revisit earlier 2026/27 claims and make sure their mileage process is both compliant and fair. Done well, the new rate can improve employee support, reduce friction around expenses and deliver extra value in a tax-efficient way.

Speak to Bishop Fleming

If you have questions about what these changes mean for your business and your employees, please contact our Employer Solutions team, or your usual Bishop Fleming contact, and we would be happy to help.