Business mileage

Conditions

1. Employees and directors using their own vehicle: for 2026/27 the approved mileage rate for cars and vans is 55p per mile for the first 10,000 business miles in the tax year, up from 45p, and 25p for each business mile over 10,000. Motorcycles are 24p a mile and bicycles 20p a mile. Mileage allowance payments up to the approved amount are not taxed; an employer adds anything above it to the employee's pay. The approved rates do not apply to a company vehicle.
2. If the employer pays less than the approved amount, or nothing, the employee can claim tax relief (Mileage Allowance Relief) on the difference — through their Self Assessment return if they complete one.
3. An employer can also pay up to 5p per passenger per business mile, tax-free, for carrying fellow employees in a car or van on journeys that are also work journeys for them. There is no relief if you receive less than 5p or nothing at all. The legislation attaches further conditions to tax-free passenger payments, so check with an accountant if you rely on them.
4. National Insurance follows a separate scheme: for cars and vans the National Insurance-free amount is 55p for every business mile from 6 April 2026, with no lower rate after 10,000 miles. Anything above it is added to earnings for Class 1 National Insurance, and there is no Mileage Allowance Relief for National Insurance.
5. Sole traders and partnerships with no companies as partners can use simplified expenses instead of actual costs: for the 2026-27 tax year, 55p per mile for the first 10,000 business miles and 25p after that for cars and goods vehicles, and 24p for motorcycles. Bicycles are not covered, the number of people in the vehicle does not affect the rates, and cars designed for commercial use, such as black cabs or dual control driving instructor cars, are excluded. You cannot use the flat rate for a vehicle you've already claimed capital allowances for, or for a van or motorcycle whose cost you've already deducted as an expense under the cash basis.
6. Simplified expenses cannot be used by limited companies or business partnerships involving a limited company. Where a company pays a director or employee for business miles in their own vehicle, the employee rules above apply to them; how the company treats those payments for Corporation Tax is not covered by the sources this page uses, so ask an accountant.
7. Only business journeys qualify. If you're self-employed, you cannot claim for travel between home and work. For employees, GOV.UK says relief does not include travelling to and from work unless it's a temporary place of work; whether a workplace counts as temporary has its own rules, so check with an accountant if your claim depends on it.
8. Under either flat rate you cannot also claim fuel, servicing, insurance or other running costs of the same vehicle. A self-employed person can still claim tolls, congestion charges and parking fees for a business journey on top (BIM75005).
9. Announced, and not in effect yet: HMRC's Budget 2026 overview says 'As announced on 27 October, the government will increase the Approved Mileage Allowance Payments (AMAPs) and Simplified Mileage Rates for business mileage above 10,000 miles from 25 pence to 35 pence per mile', and that 'The changes will take effect from 6 April 2027' (HMRC, Budget 2026 Overview of tax legislation and rates, 28 October 2026). The rates stated above it on this page are the ones that apply now.

Common mistakes

• Claiming for travel between home and a regular place of work.
• Mixing the flat rate with actual vehicle running costs for the same vehicle.
• Claiming the 20p bicycle rate or the 5p passenger rate as a sole trader — simplified expenses covers cars, goods vehicles and motorcycles only, and the number of people in the vehicle does not affect the rates.
• Not keeping a contemporaneous record of business mileage, which HMRC says is important to support a flat-rate claim.

What to keep

• A mileage log with date, journey purpose, start and end points, and miles travelled. Employees claiming Mileage Allowance Relief must send HMRC copies of mileage logs giving the reason for every journey and the postcodes of its start and end points.
• Records of any mileage allowance received from an employer.

Real-world example

A self-employed consultant drives 8,000 business miles in 2026/27 in her own car and uses simplified expenses: 8,000 × 55p = £4,400, keeping a log of each trip. An employee drives 12,000 business miles in his own car in 2026/27 and his employer pays him 30p a mile, £3,600. His approved amount is 10,000 × 55p plus 2,000 × 25p = £6,000, so he can claim Mileage Allowance Relief on the £2,400 difference.

Frequently asked