The mileage rate is 55p now. What employers need to do

By Bradley

Published 3 November 2026

Last updated 3 November 2026

From 6 April 2026 you can pay 55p a mile instead of 45p for the first 10,000 business miles in an employee’s own car or van.

That rate sat at 45p for fifteen years. Fuel went up, insurance went up, servicing went up, and the rate didn’t move. So this one was overdue.

Here’s where everything stands for 2026-27.

The rate moved for the first time since 2011

Vehicle	First 10,000 business miles	Each mile over 10,000
Cars and vans	55p (was 45p)	25p
Motorcycles	24p	24p
Bicycles	20p	20p
Each business passenger	5p	5p

These are Approved Mileage Allowance Payments, and what they give you is a ceiling. Pay up to the approved amount and there’s no tax, no National Insurance and nothing to report.

They aren’t a minimum. You’re under no obligation to pay mileage at all, let alone at 55p. What you pay is whatever your contracts and your expenses policy say.

The 10,000-mile threshold runs per employee, per employer, per tax year. Associated employers count as one.

Where a flat rate goes wrong

Most of the policies I see pay one rate for every mile. It’s easy to run and it ignores the drop to 25p after 10,000 miles.

For anyone doing serious miles, a flat rate quietly pushes the total over the approved amount, and the excess is taxable.

James, 20,000 miles at a flat 45p

James is a site manager. He drives 20,000 business miles a year in his own car and his employer pays 45p for every one of them, because that’s what the policy has said since 2019.

	2026-27 (new rates)	2025-26 (old rates)
Paid by employer, 20,000 at 45p	£9,000	£9,000
Approved, first 10,000 miles	£5,500 (55p)	£4,500 (45p)
Approved, next 10,000 at 25p	£2,500	£2,500
Total approved amount	£8,000	£7,000
Taxable excess	£1,000	£2,000

The new rate halves James’s taxable excess without his employer paying a penny more.

Which is the point I’d make to anyone still running a 45p flat rate. The rate change has already improved your position. It hasn’t fixed it.

The income tax

That £1,000 is taxable earnings for James. £200 at basic rate, £400 at higher rate. HMRC usually collects it through his tax code.

National Insurance is a different calculation

This catches people out, so stay with me.

For National Insurance there’s no drop after 10,000 miles. You take the higher rate and apply it to every business mile.

For James that’s 20,000 at 55p, so £11,000. He was paid £9,000. Nothing to do, no Class 1 due from James or from his employer.

NI only bites when the rate per mile itself goes above the approved rate. Pay 60p a mile over 20,000 miles and the extra 5p a mile, £1,000, has to run through payroll with Class 1 deducted in the period you pay it.

So you can have income tax to deal with and no NI, which is exactly what’s happening to James.

What to report

Three situations, three answers.

Within the approved amount, there’s nothing to report. Don’t put it on a P11D, don’t run it through payroll.

A taxable excess goes on the employee’s P11D at section E, due by 6 July after the tax year ends. For 2026-27 that’s 6 July 2027. No Class 1A is due on it.

A rate per mile above the approved rate also goes through payroll for Class 1 NI, in the pay period you paid it.

Still paying 45p? You can top it up

The 55p is backdated to 6 April 2026, so you can pay the extra 10p a mile on journeys already made this year with no tax and no NI, as long as the total stays inside the approved amount.

It costs you the cash and nothing else. For someone doing 8,000 miles a year that’s £800 in their pocket, and it’s a straightforward bit of goodwill at a point when everybody’s feeling the motoring costs.

One more change coming in April 2027

The Budget did two things here.

It made the 55p permanent. It had been announced as a temporary rate, and that uncertainty has gone.

And from 6 April 2027 the rate above 10,000 miles goes from 25p to 35p.

Run James through that and his approved amount becomes £5,500 plus £3,500, so £9,000. At a flat 45p his taxable excess disappears entirely.

If you employ high-mileage drivers, that’s worth knowing before you redraft the policy. The problem you’re fixing today gets smaller in April.

The mistakes I see most

Policies that say “the HMRC rate” and pay 45p. Check what your payroll or expenses software has actually been applying since 6 April 2026, because plenty of systems needed the rate changing by hand.

No running total per employee. If nobody is tracking cumulative miles, nobody notices when somebody crosses 10,000 and the 25p kicks in.

Paying for the commute. Home to the usual workplace is never business mileage, and reimbursing it is taxable pay however you label it.

No mileage logs. Date, start and end point, purpose, miles. Without that your tax-free payments are an assertion rather than a record, and an HMRC enquiry is the wrong moment to find that out.