For the first time since 2011, HMRC has moved the Approved Mileage Allowance Payment (AMAP) rate. From 6 April 2026, the approved tax-free mileage rate for cars and vans rises from 45p to 55p per mile for the first 10,000 business miles in a tax year. If your expense policy hasn’t been updated, you are already three months behind. Here is what you need to do — and why it matters more than a routine policy tweak.
Why HMRC Finally Moved After 15 Years
The 45p rate had stood since April 2011. Over that period, ONS inflation data shows cumulative CPI inflation of around 50%. Insurance premiums surged. Fuel costs oscillated wildly through two energy crises. Vehicle maintenance costs climbed steadily. Yet the AMAP rate did not move once.
The trigger for the 2026 increase was an economic package aimed at easing the financial pressures flowing from global instability — but the underlying review was already under way. The government had acknowledged that employees in travel-heavy, lower-paid roles were effectively subsidising business travel out of their own pockets. The 10p increase is the first signal of potential longer-term reform to the AMAP framework, and it may not be the last.
The official HMRC announcement confirms the following revised schedule for 2026/27 onward:
- Cars and vans — first 10,000 miles: 55p per mile (up from 45p)
- Cars and vans — above 10,000 miles: 25p per mile (unchanged)
- Motorcycles: 24p per mile (unchanged)
- Bicycles: 20p per mile (unchanged)
- Passenger supplement (fellow employee): 5p per mile (unchanged)
The Backdating Problem Every Payroll Team Has Already Missed
The new 55p rate applies retrospectively from 6 April 2026. That means any employee who drove on business between 6 April and today and was reimbursed at 45p was underpaid relative to the approved rate. The gap is 10p per mile — and for a field sales team covering 500 miles per week, that accumulates quickly.
Employers are not legally required to pay the AMAP rate — they can pay more or less. But the AMAP is the ceiling for tax and NIC-free reimbursement. Anything above it triggers income tax and employer/employee NICs. Anything below it creates a Mileage Allowance Relief (MAR) entitlement for the employee, claimable through their Self Assessment return or via HMRC’s P87 process.
If you have not made backdated payments to April, you have two choices: pay the back-dated top-up now, or accept that your employees will need to claim MAR individually — and tell them how to do it. Either way, doing nothing is not a compliant position. RSM notes that most employers it has spoken to are planning to pay the higher rate with backdated payments to April.
What This Means for Car Allowance Employees
A common point of confusion: employees receiving a car cash allowance rather than a company car are generally reimbursed at HMRC’s Advisory Fuel Rates (AFRs), not AMAPs. AMAPs are designed for employees using their own privately-owned vehicle — a distinction that matters because car allowance recipients typically still run a private vehicle and the allowance is treated as salary, not a fuel-only reimbursement.
Many employers incorrectly use AFRs for car allowance employees when they should be using AMAPs. If your car allowance scheme does not cover ownership and running costs — insurance, depreciation, tyres, maintenance — and your employees are using their own cars for business travel, the AMAP framework almost certainly applies. The 55p rate increase makes this distinction worth revisiting immediately.
ICAEW’s commentary on the increase flags this as an opportunity to audit expense frameworks that have not been reviewed in years. That audit is now overdue.
The Owner-Managed Business Opportunity
For directors of owner-managed businesses who use their personal vehicles for business travel, the 55p rate is a straightforward, HMRC-approved mechanism for extracting value from the company in a tax and NIC-efficient way. If you are driving 8,000 business miles per year, the increase from 45p to 55p translates to an additional £800 per year that you can draw from the company without income tax or NIC liability on either side.
At a corporation tax rate of 25%, the company also gets a deduction for the full 55p, reducing the net cost. This is one of the few remaining mechanisms where the efficiency works in both directions simultaneously. It is worth running the numbers, particularly for businesses where directors or senior employees have been drawing a salary/dividend mix and mileage reimbursement has been a secondary consideration.
Importantly, AMAPs are available to self-employed individuals too, via the simplified expenses mileage rate. The same 55p rate applies. If your business structure involves sole trader or partnership elements, the review applies equally.
Electric Vehicle Mileage: The Unresolved Gap
The AMAP framework does not differentiate between petrol, diesel, hybrid, and electric vehicles. A 55p rate applies regardless of fuel type. For electric vehicle drivers, this creates a structural anomaly: the AFR for an electric company car is currently 7p per mile (the Advisory Electric Rate, or AER), while the AMAP for a privately-owned EV is 55p. The difference represents the cost of ownership that the AMAP is intended to cover, and it illustrates precisely why AMAPs and AFRs are not interchangeable.
As more employees move to EVs as their private vehicle, the question of whether 55p adequately reflects charging costs rather than fuel costs will become increasingly relevant. The government’s review of mileage rates is likely to address this in future. For now, 55p applies across all fuel types for privately-owned vehicles.
Seven CFO Actions for June 2026
- Update your expense policy immediately. Any policy referencing 45p is out of date. Amend it, version it, and communicate the change to all employees. If you have a staff handbook, update that too.
- Calculate and process backdated payments. Identify every employee who submitted mileage expense claims between 6 April 2026 and today at 45p. Calculate the 10p-per-mile shortfall and pay it through the next payroll run as a supplementary expense reimbursement (tax and NIC-free up to the AMAP ceiling).
- Tell employees about Mileage Allowance Relief. If you are not going to backpay, employees who were underpaid can claim MAR themselves. They need to know this is available and how to claim it — either through Self Assessment or HMRC’s P87 form for non-SA taxpayers.
- Audit your car allowance population. Establish whether car allowance employees are being reimbursed at AFRs (fuel-only) or AMAPs. If the former, review whether this is appropriate given their vehicle type and business travel patterns. The 55p increase is a natural trigger for this conversation.
- Run the director mileage calculation. For owner-managed businesses, model the tax efficiency of increased mileage reimbursements at 55p. If directors are driving significant business mileage on personal vehicles, this is incremental, no-cost tax planning.
- Review your expense management system. If mileage rates are hard-coded in your expense platform — whether Concur, Certify, or a bespoke system — they need updating. A system still running at 45p will underpay employees automatically and potentially flag over-claims against the wrong ceiling.
- Check your travel budget assumptions. The 55p rate increases the gross cost of employee business mileage by 22%. If your 2026/27 budget was set using 45p assumptions, your travel line is understated. Reforecast, flag to the board, and consider whether journey planning or video-first policies should offset the increase.
The Broader Context: HMRC Reviews, Not Resets
The 55p rate is welcome, but it should be read as a beginning rather than a final answer. The government’s underlying review of the AMAP framework has not concluded. There is a credible argument — particularly for EV drivers, for high-mileage roles, and for regions with above-average vehicle running costs — that 55p still underestimates the true cost of using a private vehicle for business. The consumer reaction to the announcement made clear there is appetite for further movement.
For CFOs, the lesson is structural: expense frameworks tied to statutory rates need an annual review trigger, not a 15-year one. Build a calendar reminder now for April 2027 to revisit your mileage policy. If rates move again — and they may — you need to be ahead of payroll, not behind it.
Tanous Limited advises PE-backed and owner-managed businesses on employment tax, expense frameworks, and compliance. If your mileage policy, car allowance structure, or expense system needs reviewing in light of the April 2026 changes, contact Mark Hendy at Tanous for a direct conversation.