HMRC increases mileage rates: What it means for your business?

Jul 10
3 min read

Following HMRC’s recent announcement, the approved mileage allowance payment rates for business travel in an employee’s own car or van have now increased.

This change is designed to better reflect rising fuel costs, and the real expenses employees face when using their personal vehicles for work.

For many businesses across the UK, especially those with staff regularly travelling between sites, visiting clients, or attending events, this update is a practical opportunity to make sure your mileage processes are fair, compliant, and easy to manage.

Why the mileage rate increases matter.

Employee wellbeing

Higher rates help ensure employees are not left out of pocket when using their own vehicle for business travel.

Accurate reimbursement

Paying the correct HMRC rate means reimbursements remain tax free and straightforward.

Payroll compliance

Using the approved rates protects your business from unexpected tax or National Insurance implications.

Clear record keeping

Mileage claims must be supported by accurate logs, so this is a good moment to check your systems.

So, what are the new HMRC mileage rates?

The updated rates apply to business journeys in an employee’s own car or van.

HMRC reviews these rates periodically to ensure they reflect real‑world motoring costs.

If your business reimburses mileage, you should now be using the new approved figures.

If you pay above the HMRC rate, the excess is treated as taxable income.

New Rates:

For the 2026/27 tax year, the HMRC tax-free Approved Mileage Allowance Payment (AMAP) for cars and vans is 55p per mile for the first 10,000 business miles, and 25p per mile thereafter.

Plus:

Passenger Rate

If you carry fellow employees in your own car or van on business journeys, you can claim an additional 5p per mile for each passenger.

If you pay below it, employees may be able to claim tax relief on the difference.

Practical steps for employers:

Update internal policies: Make sure your staff handbook, onboarding documents, and internal guidance reflect the new rates.

Review payroll settings: Check that your payroll software or spreadsheets have been updated to avoid under or overpayments.

Communicate with your team: A short message to employees helps avoid confusion and ensures everyone understands the new rules.

Check your record keeping: Mileage logs should include dates, destinations, purpose of travel, and miles driven.

Consider digital tools: Apps and accounting software can make mileage tracking easier and reduce errors.

How LHP Accountants can help.

As a Welsh firm supporting businesses across Carmarthenshire, Pembrokeshire, and Ceredigion,

we can help you:

· Review your mileage reimbursement processes

· Update payroll and accounting systems

· Ensure your business remains fully aligned with HMRC guidance

If you are unsure whether your current approach meets the updated rules, we are here to guide you through the changes in a clear and friendly way.

Final Thoughts:

Mileage may seem like a small detail, but getting it right protects your business, supports your team, and keeps your payroll running smoothly.

With HMRC’s new rates now in place, this is the perfect time to check your systems and make sure everything is up to date.

If you would like help reviewing your mileage processes, simply get in touch with our team at LHP Accountants.

We are always happy to support local businesses with practical, down‑to‑earth advice.

Ready to review your mileage processes?

If the new HMRC mileage rates have prompted you to take a closer look at your travel policies, payroll settings, or record keeping, our team at LHP Accountants is here to help.

Whether you want to update your systems, check compliance, or simply make things easier for your staff, we can guide you through every step.

Contact your local LHP office today and let us support your business with clear, practical advice that keeps you moving forward.