Mileage Allowance Rates: What Changed and Why
From 6 April 2026, the approved mileage allowance rate for cars and vans has increased from 45p to 55p per business mile for the first 10,000 miles in the tax year, dropping to 25p per mile thereafter. This represents the first increase in 15 years and was implemented in recognition of rising fuel costs and inflationary pressures on drivers.
For National Insurance purposes, employers can now deduct 55p per mile for all Relevant Motoring Expenditure, regardless of mileage level. Self-employed individuals using the simplified expenses regime can also claim 55p per mile.
Who This Affects
This change impacts contractors, self-employed professionals, company car scheme operators, and any business reimbursing employees for business travel. If your business operates a fleet or reimburses mileage, you must update your rates to remain tax efficient and compliant.
Action to Take
Review your payroll procedures and expense reimbursement policies to reflect the new rates. Update employee handbooks and mileage claim forms immediately. Employers who continue paying at the old 45p rate may face tax compliance issues and incorrect National Insurance calculations.
For support with tax-efficient tax planning around business travel allowances, particularly if you operate a complex fleet or contractor arrangement, speak to your accountant about optimising your reimbursement policy.