Tax Planning
How the 2026-27 Mileage Allowance Changes Could Save Self-Employed and Employees Hundreds
Explore how HMRC’s 2026-27 mileage rate rise dramatically increases tax-free allowances, meaning real cash in pockets for workers and sole traders alike.
By NomadicTax Research Team • 5-8 min read • June 17, 2026
## What’s changed
From the **2026-27 UK tax year**, HMRC has increased the Approved Mileage Allowance Payment (AMAP) for cars and vans from **45p to 55p per mile** for the first **10,000 business miles** in a year. For miles beyond that threshold, the rate remains at **25p per mile**. Rates for motorcycles and bicycles remain unchanged at **24p** and **20p** respectively.([nalc.gov.uk](https://www.nalc.gov.uk/resource/nalc-publishes-new-advice-on-travel-mileage-fuel-rates-and-allowances.html?utm_source=openai))
This is the first change in 15 years for these specific rates.([gov.uk](https://www.gov.uk/government/news/millions-to-benefit-from-lower-travel-and-food-costs?utm_source=openai)) The rates are tax-free applicable under AMAP rules, meaning employers can reimburse these rates without triggering taxable benefits.([gov.uk](https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31240?utm_source=openai))
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## Who stands to benefit most
- **Self-employed persons** using their own car or van for business journeys—they can claim the higher AMAP when calculating business expenses.
- **Employees who drive their own vehicle** for work but receive mileage reimbursements from employers—employers are expected *or strongly encouraged* to reimburse at no higher than AMAP to avoid taxable benefits.
- **Volunteers and casual car users**—as long as their total business miles are below or at certain thresholds, they can receive up to AMAP without paying income tax.([gov.uk](https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim71155?utm_source=openai))
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## Practical savings example
| Scenario | Miles driven (annually) | Amount at 45p | Amount at 55p | Extra Annual Tax-Free Reimbursement |
|----------|--------------------------|----------------|----------------|--------------------------------------|
| Jane, self-employed consultant | 6,000 miles | £2,700 | £3,300 | **£600** |
| Bob, employee with 12,000 business miles | First 10,000 miles (10,000 x) and 2,000 extra |
| — Payment under old rates | (10,000 × £0.45) + (2,000 × £0.25) = **£5,500** |
| — New payment | (10,000 × £0.55) + (2,000 × £0.25) = **£6,100** |
| — Gain | | | **£600** |
This gain is **tax-free**, assuming the reimbursement doesn’t exceed AMAP and is properly documented. That’s potentially several hundred pounds extra each year.([gov.uk](https://www.gov.uk/government/news/millions-to-benefit-from-lower-travel-and-food-costs?utm_source=openai))
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## What you need to do to benefit
1. **Check your current reimbursement rate** with your employer—if it still uses the previous 45p, request update.
2. **Keep accurate mileage records**: date, purpose, miles travelled and any relevant employer/contract detail.
3. **If self-employed**, include the updated rate when calculating travel expenses on your accounts.
4. **Make sure reimbursements match AMAP** to stay tax-free—if an employer pays more, the excess could be taxable.
5. **Watch deadlines and rules**: the updated rate is backdated to April 6, 2026, so any mileage since then needs retroactive adjustment.([staffordshire.gov.uk](https://www.staffordshire.gov.uk/staffordshire-learning-net/school-bag/june/12-june-2026/hmrc-mileage-rate-change-april-2026?utm_source=openai))
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## Broader policy context
- This change came in alongside measures to **freeze fuel duty**, extended to **reduce duties and taxes** for drivers and businesses dealing with high fuel costs.([gov.uk](https://www.gov.uk/government/news/chancellor-protects-drivers-and-businesses-from-rising-fuel-costs?utm_source=openai))
- It aligns with the government’s intention to ease cost-of-living pressures, particularly for those whose work requires mileage.([gov.uk](https://www.gov.uk/government/news/millions-to-benefit-from-lower-travel-and-food-costs?utm_source=openai))
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## Summary
If you drive a lot for work—whether self-employed or reimbursed by employers—these new rate changes as of April 2026 are an important win. Update your documentation, understand your eligibility, and make sure you capture the benefit—because it’s not just about rate change; it’s about **tax-free cash savings pretty much in your pocket**.