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are reviewed quarterly), it is worth checking gov.uk directly before relying on a rate that might be a quarter or two out of date, rather than assuming last year's figure still applies.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
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