Rachel Reeves Announces Increase to UK Mileage Allowance

If you drive your own car or van for work, you don’t need anyone to tell you how tough the rising cost of fuel, insurance, and maintenance has been. For fifteen years, the government’s approved mileage rate remained frozen at 45p, a figure set back in 2011 that hasn’t kept pace with what it really costs to keep a vehicle on the road.

But in a recent statement to Parliament, the Chancellor announced a long‑awaited update to the Approved Mileage Allowance Payments (AMAP) scheme, raising the standard tax‑free mileage rate by 10p to 55p per mile for the first 10,000 business miles and backdating it to 6 April 2026.

While a 10p bump might sound modest on paper, it marks a meaningful shift for employees, self‑employed workers and businesses across the UK.

Summary of the Changes

What the New Mileage Rate Means for You

Whether you’re a self‑employed sole trader claiming simplified expenses, an employee clocking up miles for work, or an employer reimbursing staff for using their own vehicles, the change will affect how much you can claim and how your tax is calculated.

Self-Employed and Sole Traders

If you use the simplified expenses method to claim vehicle costs on your Self Assessment return, this rise gives you an immediate advantage. Rather than keeping every receipt for repairs, fuel, and insurance, you simply multiply your business miles by the approved rate.

With the rate rising to 55p, you can claim a larger deduction against your income, which reduces your taxable profit and, in turn, lowers your Income Tax and National Insurance bills. Because the increase is backdated to April, make sure all your mileage records for this tax year are worked out using the new 55p rate.

Employees Claiming Mileage

Your employer can now reimburse you up to 55p per mile completely tax-free using Approved Mileage Allowance Payments.

Employers and Mileage Payments

If your business reimburses employees for using their own vehicles, your team will soon be asking how this change affects them. To stay compliant and maximise the benefit of the new mileage rates:

• Update mileage rates in payroll and expense systems
• Review expense policies to remain competitive
• Consider backdated payments from April 2026
• Improve mileage tracking for accurate record‑keeping

What Counts as Business Mileage?

Understanding what qualifies for mileage claims is essential for HMRC compliance.

✔ Qualifying journeys

• Travel to client sites
• Temporary workplaces
• Business meetings

✘ Non‑qualifying journeys

• Travel to your normal place of work (commuting)

Making the Most of the Mileage Rate Increase

The increase to 55p per mile is a welcome and long‑overdue update. As well as boosting how much drivers can be reimbursed, it also creates an opportunity for businesses to review their approach to expenses, systems and employee communication.

At DSA Prospect, we help businesses stay compliant while making the most of available tax reliefs. If you’d like support reviewing your mileage policy or understanding how this change affects you, please get in touch with our team.

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