Tax Tips

Mileage and Fuel Rates for UK Small Businesses in 2026/27

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Mileage Allowance Payments — the rates that changed

From June 2026, HMRC increased the Mileage Allowance Payment rate for cars for the first time in several years — from 45p to 55p per mile for the first 10,000 business miles in a tax year, dropping to 25p per mile after that. This is the rate that applies when an employee (or a sole trader claiming simplified mileage expenses) uses their own vehicle for business journeys.

Vehicle type Rate 2026/27
Car — first 10,000 business miles 55p per mile
Car — miles after 10,000 25p per mile
Motorcycle 24p per mile
Cycle 20p per mile

These are the maximum amounts you can pay tax-free without having to report them to HMRC. Pay more than this and the excess is taxable; pay less, and the employee can claim tax relief on the shortfall through their Self Assessment.

Advisory fuel rates for company cars

If your business provides company cars, advisory fuel rates (updated from 1 June 2026) set the amount you can reimburse for business fuel, or recover from an employee for private fuel, without a tax charge.

Petrol / LPG

Engine size Petrol LPG
1400cc or less 14p 11p
1401cc–2000cc 17p 13p
Over 2000cc 26p 21p

Diesel

Engine size Rate
1600cc or less 15p
1601cc–2000cc 17p
Over 2000cc 23p

Fully electric

Charging location Rate
Home charger 7p per mile
Public charger 15p per mile

Hybrid cars are treated as either petrol or diesel for these purposes — there is no separate hybrid rate.

Why this matters for your bookkeeping

Mileage claims are one of the most common areas where small business expense records are wrong — either the wrong rate is applied, the 10,000-mile threshold within the tax year isn't tracked, or claims aren't backed by a mileage log. Since these rates change periodically (the car rate had been frozen for years before this increase, and advisory fuel rates are reviewed quarterly), it is worth checking gov.uk directly before relying on a rate that might be a quarter or two out of date, rather than assuming last year's figure still applies.

Practical checklist

  • Update your expenses policy and any template mileage claim form to reflect 55p / 25p for cars
  • If you run payroll and pay mileage through it, confirm your payroll or expenses software has the updated rate applied
  • Keep a mileage log for every claim — date, purpose, start/end location, and miles — HMRC can ask to see this if a claim is queried
  • For company car fuel, check the current advisory fuel rate quarterly rather than assuming it's fixed for the year
QY
Qais Yasir — QaisYasir Accounting Services Xero Certified Advisor · QuickBooks ProAdvisor · 15+ years in accounting and tax consultancy · ACCA-trained · Serving UK businesses remotely · hello@qaisyasir.co.uk

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