Earlier today (21 May 2026), Chancellor Rachel Reeves announced an immediate increase to the HMRC Approved Mileage Allowance Payment (AMAP) rate. The rate for cars and vans rises from 45p per mile to 55p per mile for the first 10,000 business miles in a tax year.
The rate above 10,000 miles per tax year remains unchanged at 25p per mile, and rates for motorcycles and bicycles are also unchanged.
Whilst the 10p mileage rate increase took immediate effect today, the Chancellor confirmed that the increase would be backdated to business mileage claims submitted during the period 6 April – 20 May 2026.
The 45p rate had been frozen since 2011, making this the first mileage rate increase in 15 years and a significant change for any organisation whose employees or workers (e.g. zero hours workers) use their own vehicles for business mileage.
If you’re a small business or charity paying employees or workers a mileage allowance for using their own car or van for business journeys, this mileage rate increase update’s relevant to you. Please read on.
Top 9 Frequently Asked Questions
Q1. What exactly has changed?
The HMRC AMAP rate (the maximum amount employers can pay employees and workers tax-free for business mileage in their own vehicle) has increased from 45p to 55p per mile for the first 10,000 business miles in the tax year. As long as you pay at or below the approved rate, the payments are tax-free and there’s nothing to report to HMRC. The mileage rate increase applies to cars and vans. All other rates (motorcycles, bicycles, company cars) are unchanged.
Q2. Do we have to increase our mileage rate to 55p?
No. The AMAP rate’s the maximum you can pay tax-free… it’s not a minimum and there’s no legal obligation to match it. However, if you pay below the AMAP rate, your employees and workers may be able to claim Mileage Allowance Relief (MAR) directly from HMRC on the difference (e.g. if you choose to continue to pay 45p per mile, they may be able to claim relief on 10p per mile). From an employee relations perspective, now that the mileage rate increase is public knowledge, we’d recommend considering whether to adopt it in a timely manner.
Q3. Do we have to backdate the mileage rate increase to 6 April 2026?
No. The Government’s made the new 55p rate available from 6 April 2026 but there’s no legal requirement for employers to backdate any increase in the rate they pay. Backdating’s entirely at your discretion as an employer. If you do choose to backdate to 6 April 2026, you’ll need to calculate and pay the 10p difference for any business mileage already reimbursed to your employees and workers since that date. If you decide not to backdate, the new rate simply applies from whatever date you choose to adopt it going forward.
Q4. What factors might help us decide whether to backdate the mileage rate increase to 6 April 2026?
It’s entirely a business decision and there’s no obligation either way. We suggest the main considerations are: the cost (10p per mile on all business mileage driven since 6 April 2026… for some organisations this will be negligible, for others more significant); the admin involved in revisiting and recalculating already-processed claims; whether your contracts or expenses policy create any expectation either way; and the employee relations angle… if your team drive heavily for work, backdating the mileage rate increase may be a goodwill gesture worth making.
It’s also worth bearing in mind that choosing to backdate now may set a precedent for how future mileage rate increases are handled so you’ll want to bear that in mind as part of your decision-making too.
Q5. If we don’t backdate the mileage rate increase, are our employees and workers simply left out of pocket for mileage driven since 6 April?
Not necessarily. Employees and workers who’ve been reimbursed below the new AMAP rate (whether because your organisation hasn’t yet adopted 55p or because you’ve chosen not to backdate it) can claim Mileage Allowance Relief (MAR) directly from HMRC on the shortfall themselves. This means they can recover tax relief on the difference between what they were paid and the 55p rate, through their Self Assessment tax return or by contacting HMRC directly. It’s worth letting your team know this so that anyone who’d like to claim the relief knows it’s available to them – they just need to sort it out themselves.
Q6. What about people who’ve left us since 6 April 2026 – do we need to include them in any backdated payment?
No. There’s no legal obligation to make any backdated payment to former employees or workers and you wouldn’t be doing anything wrong by not doing so. They were paid the correct mileage rate at the time and that’s what matters.
If you aren’t backdating the mileage rate increase at all, this question doesn’t arise as no one receives a backdated payment and there’s nothing further to consider.
If you are choosing to backdate the mileage rate increase for your current team though, it’s worth briefly considering whether to extend that to any leavers for the period they were with you… not because you’re required to but simply as a matter of fairness and consistency. In most small businesses and charities with limited recent leaver activity, this is unlikely to be a significant issue.
Where a former employee or worker’s aware of the change and feels they missed out, they also have the option of claiming Mileage Allowance Relief (MAR) directly from HMRC for any shortfall, so they aren’t without any recourse – they just need to sort that out themselves.
If you do decide to include leavers in a backdated payment, bear in mind the practicalities e.g. bank details may need to be re-obtained and any payment will need to be handled correctly for tax purposes given they’ll have already received their P45. That in itself might be the reason you decide not to give backpay to leavers, as it may be a fiddly and disproportionate exercise for what may be a relatively small sum of money.
As with everything in this update, the decision is yours… there’s no wrong answer here.
Q7. What if we currently pay above 45p but below 55p – do we need to do anything?
Not necessarily, but it’s worth reviewing your position. Any amount you pay above the AMAP rate’s treated as a taxable benefit and must be reported to HMRC… so if you currently pay, say, 50p, that arrangement will now sit comfortably within the new 55p ceiling and the full amount becomes tax-free. If you pay above 55p, the excess over 55p remains taxable.
Q8. Does the mileage rate increase affect employees and workers who use company cars?
No. Employees and workers using a company vehicle don’t qualify for the mileage rate increase. Instead, company car mileage is reimbursed using HMRC’s Advisory Fuel Rates (AFRs) which operate separately and are unaffected by today’s announcement.
Q9. What actually counts as business mileage?
Business mileage is any journey made in the course of work e.g. travelling to a client or customer, visiting a temporary workplace, travelling between sites or attending a work-related meeting or event away from your usual place of work. The ordinary daily commute between home and a permanent workplace doesn’t qualify.
For employees or workers who travel directly from home to a client or other business location rather than going to their permanent workplace first, the claimable mileage isn’t the full home-to-destination distance – it should be reduced by the distance of their normal home-to-work commute. Only the additional mileage above their usual commute is treated as business mileage.
The position’s different for contractual homeworkers i.e. those whose home’s formally established as their place of work under their contract. Because they have no ordinary commute, any journey away from home for work purposes can generally be treated as business mileage in full, including travel to the employer’s HQ or to a client. This is a meaningful distinction and one worth reviewing if you have homeworkers whose contracts may not accurately reflect their working arrangements.
6 next steps we recommend
1. Decide your position on the mileage rate increase. Confirm internally whether you will adopt 55p per mile and, if so, from what date. Consider whether you’ll backdate to 6 April 2026 or apply the new rate from 21 May 2026 or another future date.
2. Communicate to your team. Once you’ve made your decision about the mileage rate increase, let your employees and workers know in writing… confirm any new rate, the effective date and whether any backdated payment will be made. Keep a record of this communication.
3. Update your expenses policy. If you have a written expenses or mileage policy (whether standalone or within your Employee Handbook), update it to reflect any mileage rate increase you apply and the effective date.
4. Update your payroll and expenses systems. If you process mileage claims through payroll software or an HR/expenses platform (such as Breathe, Xero, QuickBooks or similar), update your chosen mileage rate in your system settings before the next mileage claims are submitted or processed.
5. Check any outstanding or pending claims. If employees or workers have mileage claims already submitted but not yet processed, consider whether these should be recalculated at the new rate, particularly if you decide you’re backdating the mileage rate increase.
6. Brief your payroll provider or bookkeeper. If someone else processes your payroll, make sure they’re aware of any mileage rate increase you determine and the date from which it applies in your small business or charity.
If you have any questions about how the mileage rate increase applies to your small business or charity, or need help updating your HR documents, just get in touch with us – we’ll be happy to help you.
Important note
The information in this update’s intended as a general overview of the HMRC mileage rate increase announced on 21 May 2026 and isn’t tax, accounting or payroll advice. We aren’t tax advisers, accountants, bookkeepers or payroll specialists, and we’d always encourage you to raise any questions about how these changes apply to your specific circumstances (particularly around backdating, payroll processing and the tax treatment of any payments made) with those people before taking any action or making decisions.
This is especially relevant if your company’s financial year has ended since 6 April 2026 or is approaching its end, as there may be additional accounting and reporting considerations that affect how and when any changes to your mileage payments are best implemented. Your accountant or bookkeeper will likely be best placed to advise on the timing and treatment of any payments in that context.
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