If you’ve ever used your own car for work, you’ll probably know the feeling.
You fill up the tank.
You wince at the cost.
You submit your mileage claim.
Then you wonder whether the reimbursement actually reflects what it costs to run a vehicle these days.
Well, after more than 15 years of sitting at the same level, HMRC has finally increased the Approved Mileage Allowance Payment (AMAP) rate for cars and vans from 45p to 55p per mile for the first 10,000 business miles.
And honestly?
It’s about time.
So What Has Actually Changed?
Previously, employers could pay employees up to:
- 45p per mile for the first 10,000 business miles
- 25p per mile thereafter
Now the rates are:
- 55p per mile for the first 10,000 business miles
- 25p per mile over 10,000 miles
The change took effect from 6 April 2026 and represents the first increase in the main mileage rate for well over a decade.
That extra 10p per mile may not sound like much at first glance.
But for employees who spend a lot of time travelling for work, it can make a significant difference.
What Difference Does It Actually Make?
Let’s look at a real-world example.
An employee travelling 8,000 business miles in a year could now receive:
8,000 × 55p = £4,400
Under the old rate they would have received:
8,000 × 45p = £3,600
That’s an increase of £800 over the year.
Suddenly that doesn’t seem quite so small.
An extra £800 a year isn’t life-changing, but it’s certainly a welcome contribution towards the real cost of running a vehicle for work.
Why Does This Matter?
For many businesses, mileage isn’t simply a reimbursement.
It’s part of everyday operations.
Think about:
- Care workers
- Community nurses
- Sales teams
- Engineers
- Consultants
- Surveyors
- Mobile workers
These employees are using their own vehicles to support the business.
And whilst mileage payments aren’t intended to generate profit, they should reasonably reflect the costs involved in running a vehicle.
Fuel costs.
Insurance.
Tyres.
Servicing.
Maintenance.
Vehicle depreciation.
None of those things have become cheaper over the last 15 years.
In fact, most have increased significantly.
That’s why many employers and employees have welcomed this change.
What Does This Mean For Employers?
The important word here is “can.”
HMRC has increased the tax-free approved mileage rate.
It doesn’t automatically mean every employer must immediately increase their mileage reimbursement policy.
However, many businesses will want to review their current arrangements.
Particularly if employees travel regularly as part of their role.
You may wish to consider:
- Updating mileage policies
- Reviewing expenses procedures
- Checking payroll settings
- Updating employee communications
- Reviewing any mileage claims already submitted since April 2026
The increase is backdated to 6 April 2026, so some employers may choose to revisit claims already processed this tax year.
And What About Employees?
Many employees don’t realise that if their employer pays less than HMRC’s approved mileage rate, they may be able to claim tax relief on the difference through HMRC.
It’s worth checking:
- What mileage rate your employer currently pays
- Whether it matches HMRC’s approved rate
- Whether you could be entitled to claim Mileage Allowance Relief
A quick check could potentially put money back in your pocket.
As always, individual circumstances vary, so it’s worth reviewing the latest HMRC guidance or seeking professional advice if you’re unsure.
Payroll’s Role in All of This
This is a perfect example of why payroll isn’t simply pressing a button once a month.
Rates change.
Legislation changes.
HMRC guidance changes.
Processes evolve.
And somebody has to stay on top of it all.
At Love Payroll Limited, we spend a lot of time monitoring changes like this so our clients don’t have to.
Whether it’s:
- Mileage rates
- SSP reforms
- Pension changes
- Holiday pay legislation
- Family leave updates
- Employment law developments
Our job is to help businesses remain compliant while keeping things as straightforward as possible.
Because let’s be honest…
Most business owners have more important things to be doing than checking HMRC mileage guidance over their morning coffee.
That’s our job.
And we genuinely love it.
Final Thoughts
This increase won’t solve every challenge facing employees who use their own vehicles for work.
But it is a long-overdue acknowledgement that the cost of running a vehicle has changed significantly over the last decade and a half.
For employers, it’s a good opportunity to review mileage policies and ensure they remain fit for purpose.
For employees, it’s worth understanding what you’re entitled to and whether your current mileage arrangements reflect the new rates.
And for payroll professionals?
Well, it’s just another example of why payroll is never quite as simple as people think.
Need help navigating payroll changes, expenses, pensions, SSP or holiday pay?
At Love Payroll Limited, we keep up with the legislation so you don’t have to.We’ve got this.
