Tax-free mileage allowance increased: What you need to know

The Chancellor has announced an increase to the tax free mileage rate for employees using their own vehicle for business travel.

What’s changing?

From 6 April 2026:

• 55p per mile (up from 45p) for the first 10,000 miles
• 25p per mile thereafter (unchanged)

This is the first increase since 2011/12 and reflects rising fuel costs.

Do employers have to apply this?

No – the 55p rate is the maximum tax free rate, not a requirement.

• Employers can choose their own rate
• There is no obligation to backdate to April 2026

What about employees?

If paid below the approved rate, employees can claim tax relief from HMRC on the difference.

What should employers do?

• Review and update your mileage policy if needed
• Decide whether to apply or backdate the new rate
• Check any payments made above 45p since April for tax treatment issues

Need help?

Get in touch with your usual Larking Gowen contact, or send get in contact via enquiry@larking-gowen.co.uk.

Neil Bottomley