Mileage allowance: HMRC rates and how to claim business travel

Published Friday 21 August 2026

Table of contents

• What is mileage allowance?
• HMRC mileage rates for 2026/27
• What counts as business mileage?
• How to claim mileage if you're self-employed
• How to claim mileage as an employee
• How employers should handle mileage payments
• Mileage rates for company cars
• How to keep mileage records
• Common mistakes when claiming mileage
• Track your mileage claims with Xero
• FAQs on mileage allowance

Key takeaways

• From 6 April 2026, the approved mileage rate for cars and vans increased from 45p to 55p per mile for the first 10,000 business miles, with 25p per mile applying after that.
• If you're self-employed, you can claim mileage using simplified expenses on your Self Assessment tax return, covering qualifying journeys like client visits and travelling to temporary workplaces.
• Employees whose employer pays less than the approved rate can claim the difference as Mileage Allowance Relief from HM Revenue and Customs (HMRC).
• Keeping accurate mileage records from the start, including dates, destinations, and business purpose, is essential for supporting any claim.

What is mileage allowance?

Mileage allowance is a tax-free amount you can claim for using your own vehicle for business travel. Rather than tracking every fuel receipt and maintenance cost, HMRC sets flat rates per mile that cover your running expenses. These are known as Approved Mileage Allowance Payments (AMAPs).

The system is designed to keep things straightforward. Whether you're a sole trader driving to a client's premises or an employee visiting a temporary work site, the rates let you claim a set amount for each business mile without having to prove your actual costs.

Mileage allowance applies to employees, self-employed individuals, and company directors. However, the way you claim differs depending on your employment status. Self-employed people claim through their Self Assessment tax return, while employees may receive payments directly from their employer or claim tax relief from HMRC.

HMRC mileage rates for 2026/27

The approved mileage rates set by HMRC for the 2026/27 tax year are as follows:

• Cars and vans (first 10,000 business miles): 55p per mile.
• Cars and vans (over 10,000 business miles): 25p per mile.
• Motorcycles: 24p per mile (flat rate, no threshold).
• Bicycles: 20p per mile (flat rate, no threshold).
• Passenger payments: 5p per mile for each fellow employee you carry on a business journey.

These rates apply to all qualifying business travel from 6 April 2026 onwards. The passenger payment rate has remained unchanged and only applies when carrying colleagues on a business trip, not family members or friends.

What changed in April 2026?

The biggest change is the car and van rate for the first 10,000 miles. It rose from 45p to 55p per mile on 6 April 2026, marking the first increase since the 2011/12 tax year. The previous 45p rate had been in place for over 13 years, during which fuel and vehicle running costs rose significantly.

The rate for miles over 10,000 stayed at 25p per mile. Motorcycle and bicycle rates also remained unchanged at 24p and 20p per mile respectively.

For anyone who drives regularly for business, the increase means a noticeably higher tax-free claim. If you travel 8,000 business miles in a tax year, you can now claim £4,400 instead of £3,600; a difference of £800. That extra amount could make a real difference to your bottom line, especially if you're a freelancer or tradesperson covering a lot of ground each week.

HMRC publishes the full breakdown of approved rates on their mileage rates and allowances page.

What counts as business mileage?

Not every journey in your car counts as business mileage. HMRC uses what's known as the "wholly and exclusively" rule. In plain terms, you can only claim for journeys made entirely for business purposes.

Here are some common journeys that qualify:

• Travelling to a client's home or office: Any trip to deliver a service or attend a business meeting counts.
• Visiting a temporary workplace: If you're working at a site for less than 24 months, travel to and from that site qualifies.
• Travelling between business locations: If you run your business from home and drive to a separate business premises, that journey counts.
• Attending trade shows, conferences, or training: Journeys to one-off business events are qualifying trips.
• Collecting supplies or materials: Picking up stock or equipment for your business is a valid claim.

Journeys that do not qualify include:

• Your daily commute: Travelling from home to your regular, permanent workplace is not business mileage.
• Personal trips: Any journeys for non-business reasons, even if made in a vehicle you also use for work.
• Mixed journeys without a clear split: If a trip combines business and personal purposes, you can only claim the business portion if you can clearly separate the miles.

Understanding the difference between a temporary workplace and a permanent one matters. If you regularly work from the same location, HMRC considers it your permanent workplace, and travel to it by commuting. But if you're a consultant working on a six-month project at a client's premises, that counts as temporary, and you can claim the mileage.

How to claim mileage if you're self-employed

If you're self-employed, you have two options for claiming vehicle expenses: simplified expenses or actual costs. The method you pick affects how you report your expenses on your Self Assessment tax return.

• Simplified expenses (flat rate): You use the HMRC approved mileage rates listed above to calculate your claim. Multiply your business miles by the appropriate rate and include the total on your tax return. This is the most common choice because it's straightforward and doesn't require you to keep fuel receipts or service records.
• Actual costs: You track every vehicle-related expense, including fuel, insurance, repairs, servicing, and depreciation. You then work out the business proportion based on your total mileage versus your business mileage. This method involves more record-keeping, but could result in a higher claim if your running costs are substantial.

Here's how to claim using simplified expenses on your Self Assessment:

1. Record every business journey throughout the tax year, noting the date, destination, purpose, and miles driven.
2. Total up your business miles at the end of the tax year.
3. Multiply the first 10,000 miles by 55p and any miles above 10,000 by 25p.
4. Enter the total amount on your Self Assessment tax return under business expenses.
5. Keep your mileage log and records for at least five years in case HMRC asks to see them.

For example, if you drive 12,000 business miles in the 2026/27 tax year, your claim would look like this: 10,000 miles at 55p (£5,500) plus 2,000 miles at 25p (£500), giving you a total claim of £6,000.

Simplified expenses vs actual costs

Simplified expenses suit most self-employed people. You don't need to save every receipt, and the calculation is simple. It works especially well if your vehicle costs are average and your business mileage is moderate.

Actual costs might give you a larger claim if you drive a vehicle with high running expenses, or if your business mileage makes up a large share of your total driving. However, you'll need detailed records of every expense, and you'll need to calculate the business-use percentage accurately.

One critical rule to keep in mind: once you start using one method for a particular vehicle, you must stick with it for as long as you use that vehicle for business. You can't switch between simplified expenses and actual costs for the same car or van. If you buy a new vehicle, you can choose again for that one.

How to claim mileage as an employee

If you're an employee who uses your own car, motorcycle, or bicycle for business journeys, your employer can reimburse you tax-free up to the approved mileage rates. These payments are called Mileage Allowance Payments (MAPs).

Many employers pay the full approved rate, in which case there's nothing more for you to do. The payment is tax-free and doesn't need to be reported on your tax return. But if your employer pays you less than the approved rate, or nothing at all, you can claim the shortfall from HMRC.

For example, if your employer pays you 30p per mile and you drive 5,000 business miles, you receive £1,500. The approved amount for those miles is £2,750 (5,000 miles at 55p). The difference of £1,250 is what you can claim tax relief on.

What is Mileage Allowance Relief?

Mileage Allowance Relief (MAR) lets you claim tax relief on the gap between what your employer pays and the approved HMRC rate. If your employer pays less than the approved rate, or pays nothing for business mileage, you could be owed money back.

To claim, you need to calculate the difference between the approved amount and what your employer actually paid. You can do this using form P87 if your claim is under £2,500, or through your Self Assessment tax return if the amount is higher – however, since October 2024, P87 claims can only be submitted by post.

The relief is applied to your tax bill, not paid out as a lump sum. If you're a basic-rate taxpayer and your shortfall is £1,250, the tax relief would be worth £250 (20% of £1,250). Higher-rate taxpayers would receive 40%, so £500 on the same claim.

How employers should handle mileage payments

If your employees use their own vehicles for business travel, you can reimburse them up to the approved mileage rate without any tax or National Insurance to pay. These payments don't need to be reported as earnings and don't affect your payroll calculations.

Paying at or below the approved rate keeps things simple. The payments are tax-free for the employee and fully deductible as a business expense for you. You just need to keep records of the business journeys and amounts paid.

If you pay more than the approved rate, the excess counts as earnings. You'll need to add the extra amount to the employee's pay for tax and National Insurance purposes and report it through your payroll. For instance, if you pay 65p per mile and the approved rate is 55p, the 10p difference per mile is taxable.

If you choose not to reimburse mileage at all, or you pay below the approved rate, your employees can claim Mileage Allowance Relief directly from HMRC for the difference.

Mileage rates for company cars

If you drive a company car rather than your own vehicle, a different set of rates applies. The approved mileage rates (55p, 25p, and so on) are specifically for employees and self-employed individuals using their own vehicles. Company cars use what HMRC calls advisory fuel rates.

Advisory fuel rates are based on your car's engine size and fuel type. HMRC reviews these rates quarterly, and they cover the fuel cost of business journeys only. Your employer uses these rates to reimburse you for fuel when you drive a company car on business trips.

Here are the key differences to keep in mind:

• Own vehicle: Use the approved mileage rates (55p/25p for cars and vans).
• Company car: Use HMRC's advisory fuel rates, which vary by engine size and fuel type.
• Electric company cars: HMRC sets separate advisory electricity rates, reviewed quarterly. From 1 June 2026, these are 7p per mile for home charging and 15p per mile for public charging.

If you're unsure which rates apply to you, the deciding factor is vehicle ownership. If it's your car that you also happen to use for work, you use the approved mileage rates. If the vehicle belongs to or is leased by your employer, the advisory fuel rates apply.

How to keep mileage records

Good record-keeping protects your claim if HMRC ever asks questions. It also makes completing your Self Assessment far less stressful when the tax year ends.

For every business journey, you should record:

• Date of the journey: The exact date you made the trip.
• Start and end points: Where you travelled from and to.
• Purpose of the trip: A brief description, such as "client meeting with ABC Ltd" or "collected materials from supplier".
• Miles driven: The total business miles for that journey.

You can keep your mileage log on paper, in a spreadsheet, or using a dedicated app. The format doesn't matter to HMRC, as long as the information is accurate and you can produce it if asked. Digital records tend to be easier to maintain and harder to lose.

HMRC requires you to keep your mileage records for a minimum of five years after the 31 January submission deadline for the relevant tax year if you’re self-employed. For example, records for the 2026/27 tax year (which you'd file by 31 January 2028) should be kept until at least 31 January 2033. For employees, the minimum is four years from the end of the relevant tax year.

A good habit is to log your journeys as you make them, rather than trying to reconstruct them at the end of the month or year. Even a quick note on your phone straight after a trip can save you hours later on.

Common mistakes when claiming mileage

Even if you're careful, there are a few pitfalls that catch people out. Being aware of these can help you avoid delays or problems with your claim.

• Including your daily commute: Travel between your home and your regular workplace doesn't qualify. This is one of the most common errors HMRC sees.
• Not keeping proper records: Without a mileage log, you'll struggle to support your claim if HMRC investigates. Estimates aren't enough.
• Using the wrong rate: If you drive a company car, you should use advisory fuel rates, not the approved mileage rates. Mixing these up can lead to an incorrect claim.
• Switching between methods: If you're self-employed and started with simplified expenses, you can't switch to actual costs for the same vehicle partway through. Choose once and stick with it.
• Claiming for mixed trips without splitting miles: If a journey has both business and personal purposes, you need to separate the miles and only claim the business portion.
• Forgetting passenger payments: If you carry a colleague on a business trip, you can claim an extra 5p per mile for each passenger. It's a small amount, but it adds up over a year.

Track your mileage claims with Xero

Keeping on top of mileage claims, expense receipts, and Self Assessment deadlines can feel like a lot to manage alongside running your business. Xero brings your income, expenses, and bank transactions together in one place, so you can stay organised and confident that your records are accurate come tax time.

Whether you're a sole trader or freelancer, Xero helps you spend less time on admin and more time on the work that matters. You can snap receipts and reconcile transactions straight from your phone or laptop.

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FAQs on mileage allowance

Here are answers to some of the most frequently asked questions about mileage allowance in the UK.

Can I claim 55p per mile?

Yes, if you use your own car or van for business travel and you're either self-employed or an employee whose employer doesn't reimburse at the full rate. The 55p rate applies to the first 10,000 business miles in a tax year, with 25p per mile after that.

Do I need receipts to claim mileage?

You don't need fuel receipts when using the approved mileage rates, since the flat rate per mile replaces the need for individual cost records. However, you do need a mileage log showing the date, destination, purpose, and distance of each business journey.

Can I claim mileage for my daily commute?

No. If your home is your only workplace, journeys from there to clients or temporary sites do qualify, but regular commutes to a fixed office or premises don't count as business mileage.

What happens if my employer pays less than 55p per mile?

You can claim the difference from HMRC through Mileage Allowance Relief. If your employer pays you 35p per mile and you drive 6,000 business miles, the shortfall is 20p per mile, giving you £1,200 of relief to claim on your tax return.

Can I claim mileage on an electric car?

Yes, the same approved rates apply to your own electric car: 55p per mile for the first 10,000 business miles and 25p after that. If you drive an electric company car, HMRC sets a separate advisory electricity rate instead.