The Chancellor has declared a 10p per mile rise in the tax-free mileage rates that can be reimbursed to employees who use their personal vehicles for business activities, effective retroactively from 6 April 2026.
Mileage rates
The 10p per mile increase is applicable solely to the initial 10,000 business miles driven within each tax year. Consequently, the reimbursement rates for employers compensating employees for business mileage in their own cars are now:
- Cars and vans: You can claim 55p per mile for the first 10,000 business miles you travel in a tax year. Any additional business miles over 10,000 can be claimed at 25p per mile.
- Motorcycles: You can claim 24p per mile for all business miles, regardless of how many miles you travel.
- Bicycles: You can claim 20p per mile for all business miles, with no reduced rate after a certain mileage threshold.
For trips involving cars and vans, employees can receive an extra reimbursement of 5p per mile for each passenger, totaling 70p per mile if three passengers are present.
E-bike users should receive the bicycle reimbursement rate for electrically assisted pedal cycles, while the motorcycle rate applies to other types of electric bikes.
If an employee utilizes multiple cars for business mileage within the tax year, the 10,000-mile limit is applicable across all vehicles, not individually. For instance, if 4,000 business miles are recorded in one car during the first quarter of 2026/27 and 9,000 miles in another car over the remaining nine months, the maximum tax-free reimbursement would be 10,000 miles at 55p, plus 3,000 miles at 25p, totaling £6,250.
Any reimbursement that exceeds the approved rates for the tax year is classified as earnings and is subject to taxation.
Regarding National Insurance contributions (NIC), the NIC-free rates are comparable, with 55p per mile available for every business mile driven in a car or van, without a 10,000-mile limit.
Additional Information
Employees who do not receive the maximum mileage reimbursement can claim tax relief on the difference between the reimbursement rate and what they actually received. Thus, if an employer provides no reimbursement, an employee can claim the full 55p/25p per mile car rates.
Sole traders and partnerships may apply the mileage rates for cars, vans, and motorcycles when calculating vehicle expenses to be deducted from trading profits. This also applies to unincorporated landlords when determining property income. However, in both scenarios, there is no extra allowance for passengers carried.
HMRC guidance on business travel mileage for employees’ own vehicles can be found here.