The Autumn Budget 2026 has confirmed two changes to the approved mileage rates for employees who use their own cars or vans for business journeys. The 55p rate for the first 10,000 business miles is now permanent, and the rate above 10,000 miles will rise from 25p to 35p per mile from 6 April 2027.
The approved mileage rates
- First 10,000 business miles: 55p per mile, now permanent
- Business miles above 10,000: 25p per mile for 2026/27, rising to 35p per mile from 6 April 2027
The Government announced the rise from 45p to 55p on 21 May 2026 and backdated it to 6 April 2026. It was the first increase in the rate since 2011. The higher rate had originally been due to end in April 2027, but the Government has now made it permanent. The 10,000-mile threshold is counted over each tax year.
These approved rates set the maximum amount an employer can pay tax-free for business journeys in an employee's own car or van. The same increase applies to the simplified mileage rates used by the self-employed.
What it means for employees
Employees who drive a lot for work gain most from the new higher mileage rate. For example, an employee who drives 12,000 business miles in 2027/28 can receive up to £6,200 tax-free: £5,500 for the first 10,000 miles at 55p, plus £700 for the next 2,000 miles at 35p. At the 2026/27 rate of 25p, the second part would have been £500, so the employee is £200 better off.
If an employer pays less than the approved rate, the employee can claim tax relief on the difference. Payments above the approved rates are taxable.
What it means for employers
- Update policies and systems: From 6 April 2027, mileage above 10,000 should be reimbursed at up to 35p. Check that expense systems can track each employee's cumulative mileage over the tax year.
- Check for top-ups: Because the 55p rate is backdated to 6 April 2026, employers who paid 45p earlier in the tax year may want to top up those payments.
- Review budgets: Higher reimbursement rates will increase costs for businesses with high-mileage staff.
Frequently Asked Questions
For cars and vans, it is 55p per mile for the first 10,000 business miles and 25p per mile after that.
The 35p rate for business miles above 10,000 starts on 6 April 2027.
Yes. The Budget confirmed that the higher rate will stay in place.
Yes. The approved mileage rates for cars and vans apply whatever the fuel type.
No. The rates for motorcycles (24p) and bicycles (20p) are unchanged.
