Business Mileage Rate Increase

4 months ago by Oliver Atkinson

Following 15 years of no changes, the approved mileage rate for business miles travelled has finally been increased, applying from the 6th of April 2026 onwards. For a long time, businesses and the self-employed have combatted rising fuel prices with no increase in the allowable rate from the government, which has been frozen at 45p per mile for the first 10,000 miles since 2011.

The change applies to the first 10,000 miles per year only and is restricted to mileage travelled in cars and vans (the rates for motorbikes and bicycles remain unchanged). With an increase of 10p per mile the allowance is now up to 55p per mile for the first 10,000 miles, and remains at 25p per mile thereafter.

Whilst an increase of 10p per mile doesn’t sound like a lot, with this change it means that those using their own car or van for work purposes could be better off by up to £1,000 per year if they use the entire 10,000-mile allowance.

How does this change apply to me?

If you are self-employed, you can get back the cost per mile through your tax return each year by claiming a deduction when calculating your taxable profit. The amount you can claim depends on how many miles you’ve travelled - you now get 55p per mile for the first 10,000 miles – up to £5,500 of deductible costs, and then 25p per mile travelled thereafter. But be careful, you can’t claim for both fuel costs and mileage allowances at the same time, so be sure to work out which way works better for you before committing.

For the employed, this means that your employer may well increase the rate by which they pay you for each mile you travel for them in your car (excluding commuting). However, some employers already pay either above or below the approved mileage allowance so this needs to be taken into consideration. If you’re already paid above the allowance, then the excess is liable to tax and NIC contributions. If you’re paid below the allowance, you should claim a deduction from earnings for the difference.

For employers paying mileage rates to their employees, given that this legislation was introduced in May 2026 but backdated to April, you might need to consider rerunning your monthly RTI schedules to cover the periods back to 6th of April to reflect any adjustments you need to make to the mileage rates paid or claimed by your employees for that period.

If there’s anything in this article that you want to know more about or you’d like to explore what we can do to help your business, please feel free to contact us using the details on our website.