HMRC increases mileage rate to 55p – what it means for business owner
HMRC has increased its Approved Mileage Allowance Payment (AMAP) rate from 45p to 55p per mile for the first 10,000 business miles travelled each tax year. It is the first increase in more than 15 years and reflects the rising costs of running a vehicle, including fuel, insurance, servicing and maintenance.
For many owner-managed businesses, this is a welcome change that could result in higher tax-efficient reimbursements for both company directors and employees.
Good news for company directors
Many directors of limited companies use their personal vehicle for business journeys and then reclaim mileage from the company.
Rather than putting fuel, repairs, insurance and vehicle running costs through the business, directors can claim HMRC’s approved mileage rate for qualifying business journeys.
From April 2026, this means a director can now claim:
- 55p per mile for the first 10,000 business miles each tax year
- 25p per mile thereafter
The reimbursement is paid by the company and is generally tax-free to the director, while also being an allowable business expense for Corporation Tax purposes.
For example, a director who travels 8,000 business miles during the year could now claim £4,400 from their company rather than £3,600 under the previous rate – an additional £800 received tax-free.
For many small business owners, this represents a straightforward and legitimate way of recovering more of the costs associated with business travel.
What counts as business mileage?
Business mileage includes journeys made wholly and exclusively for business purposes, such as:
- Visiting clients or customers
- Attending meetings
- Travelling to temporary work locations
- Visiting suppliers
- Attending training courses or networking events
However, normal commuting between home and a permanent workplace is not classed as business mileage and cannot be claimed.
Keeping accurate mileage records remains essential. A simple mileage log showing dates, destinations, purpose of travel and miles travelled is usually sufficient.
Benefits for employees too
The increase is also positive news for employees who use their own vehicles for work.
Employers can now reimburse staff up to 55p per mile tax-free for qualifying business journeys.
Many businesses, particularly those in professional services, construction, healthcare, social care and sales, rely heavily on employees travelling between locations. The higher rate helps employees recover more of the real costs of using their own vehicle for work.
Where an employer chooses to pay less than the approved HMRC rate, employees may be able to claim tax relief on the difference through their tax return or directly from HMRC.
A timely reminder for business owners
The increase provides a useful opportunity to review mileage policies and expense procedures.
Business owners should ensure:
- Mileage reimbursement rates are updated
- Staff understand what qualifies as business travel
- Adequate mileage records are maintained
- Claims are submitted regularly and accurately
As HMRC continues to scrutinise business expenses, maintaining proper records remains just as important as claiming the correct amount.
The bottom line
For owner-managed businesses, the increase to 55p per mile is a practical tax-efficient benefit. Directors can recover more of the cost of using their personal vehicles for business, while employees receive fairer reimbursement for work-related travel.
After more than a decade without change, the new rate better reflects the true cost of motoring and offers a welcome boost for businesses and staff alike.
If you would like advice on mileage claims, directors’ expenses or the most tax-efficient way to reimburse business travel, speak to our team.
