Tax-free mileage rates rise
Chancellor Rachel Reeves has announced a 10p per mile rise in tax-free mileage rates claimed by people who have to use their own cars for business travel.
The move, backdated to April 2026, will see the Approved Mileage Allowance Payment (AMAP) rate increase for the first time in 15 years.
The rate applied to the first 10,000 business miles travelled by employees per year is going up from 45p to 55p and will be backdated to April 2026.
The increased rate will also apply to the simplified expenses regime for the self-employed in 2026-27.
It is part of a raft of policies unveiled by the chancellor in the Commons all aimed at tackling the impact of Donald Trump’s war in the Middle East.
The chancellor told MPs: “For hauliers, the government is granting a 12-month road tax holiday for HGVs, saving the typical heavy lorry up to £912.
“To support farmers and the rail freight industry, I have decided to cut duty on red diesel by over a third until the end of this year.”
She said the tax-free mileage rise would benefit everyone who needs to drive for work, “from care workers to plumbers”.
Business mileage after 10,000 miles will remain at 25p per mile – except for National Insurance purposes, which will be at 55p per mile, rather than the previous 45p per mile, regardless of mileage.
There is no change to the rates for motorcycles or bicycles. These will remain at 24p and 20p, respectively. And passenger payments for employees’ car sharing will remain at 5p per passenger per business mile.
The government has stated that it will do a review of all rates, which will be set out in a future Budget.
HMRC has updated its guidance to apply the same increase to the Simplified expenses rules, which allow the self-employed to claim a fixed-rate deduction for motoring expenses, per business mile.
- To discuss any issues raised by this article please contact me on 01772 430000
