What UK Employers and Individuals Need to Know

The UK Government has announced long‑awaited changes to Approved Mileage Allowance Payments (AMAPs), following confirmation by Chancellor Rachel Reeves. From 6 April 2026, mileage rates will increase for the first time in over 15 years a move widely welcomed across the payroll and HR industry.

This change reflects rising fuel and vehicle costs and follows consistent calls for reform from industry bodies such as the Chartered Institute of Payroll Professionals (CIPP).

For employers, employees, and self‑employed individuals, understanding these updates is essential for compliance, cost planning, and tax efficiency.

New Mileage Rates from 6 April 2026

The updated mileage rates for the 2026–27 tax year are:

• 55p per mile for the first 10,000 business miles
• 25p per mile for mileage above 10,000 miles

This represents an increase from the long‑standing 45p rate, which had remained unchanged since 2011.

📌 The change is backdated to 6 April 2026, meaning all business mileage incurred from the start of the tax year should be recalculated based on the new rate where applicable.

Why This Change Matters

For many UK workers and businesses, mileage reimbursement is a key component of compensation and cost management.

The increase has several important implications:

For employees

• Fairer compensation for rising fuel and travel costs
• Reduced need to claim additional tax relief
• More accurate reimbursement for business travel

For employers

• Potential increase in payroll expenses
• Need to update payroll systems and policies
• Requirement to review previous mileage payments

For self‑employed individuals

• Higher allowable mileage deductions
• Reduced taxable profits where mileage claims apply

After 15 years with no change, this update brings mileage rates closer in line with actual costs.

What Employers Need to Do Now

1. Review Mileage Policies

Employers should update internal mileage reimbursement policies to reflect the new 55p rate.

2. Assess Previous Payments

Since the change is backdated to April 2026, employers may need to:

• Review mileage reimbursed earlier in the tax year
• Identify underpayments
• Adjust future payroll runs accordingly

3. Consider Backdated Payments

Where employees were reimbursed at the old rate:

• Employers may choose to top up payments
• This ensures consistency with HMRC‑approved rates

4. Update Payroll Systems

Payroll and expense systems should be updated to:

• Apply correct HMRC rates
• Avoid compliance issues
• Ensure accurate reporting

What Happens If Employees Are Paid Less Than the AMAP Rate?

If an employee is reimbursed below the HMRC approved rate (55p), they may be entitled to tax relief on the difference.

For example:

• Employer pays 45p per mile
• HMRC rate is 55p
• Employee can claim tax relief on the 10p difference

📌 Employees can claim this through job expenses tax relief.

Updated Tax Relief Forms

HMRC has confirmed that job expenses claim forms are being updated to reflect the new mileage rates.

Employees and agents should:

• Monitor HMRC Agent Updates
• Use the revised forms once available
• Submit claims for mileage relief where applicable

Self‑Employed Mileage Rules for 2026–27

The new mileage rates also apply to self‑employed individuals using simplified expenses.

What this means:

• Business mileage is calculated using the 55p rate
• Can be applied in the 2026–27 Self Assessment return

📅 Key deadlines:

• 31 October 2027 – paper returns
• 31 January 2028 – online submissions

This provides an opportunity for self‑employed workers to reduce taxable profits through higher allowable expenses.

HMRC Guidance Updates

HMRC has confirmed that:

The Business Income Manual (motor vehicle expenses) will be updated from
21 May 2026

This ensures guidance aligns with:

• New mileage rates
• Updated tax treatment
• Reporting expectations

Employers and payroll professionals should review updated guidance once published.

Compliance Considerations

While the increase is positive, it also creates new compliance requirements:

Risks include:

• Using outdated mileage rates
• Failing to update payroll systems
• Inconsistent reimbursement across employees
• Incorrect tax reporting

📌 HMRC expects businesses to apply the correct approved mileage rates once implemented.

Benefits of the Mileage Rate Increase

The update delivers several key benefits:

✔ Supports employees facing higher travel costs
✔ Aligns mileage rates with economic realities
✔ Reduces reliance on tax relief claims
✔ Improves employer transparency
✔ Encourages business travel reimbursement consistency

For employers, it also presents an opportunity to review travel and expense policies strategically.

How PayCheck Can Help

At PayCheck, we help businesses:

• Update payroll systems efficiently
• Manage backdated payments accurately
• Ensure RTI and payroll compliance

With 30+ years of payroll expertise, we support employers in navigating changes like this without disruption.

Key Takeaway

The 2026–27 mileage rate increase is a significant change after more than a decade. While it provides welcome financial relief, it also requires action from employers, payroll teams, and self‑employed individuals.

✅ Update your systems
✅ Review previous payments
✅ Communicate changes to employees
✅ Stay aligned with HMRC guidance