HMRC mileage rate rises to 55p: the biggest change in 15 years

The Approved Mileage Allowance Payment rate has been 45p per mile since 2011. Fifteen years. In that time, average petrol prices have gone from around 130p a litre to over 150p. Insurance premiums have doubled for most drivers. Road tax, servicing costs, tyre prices: all up. And the flat rate you could claim for a business mile? Frozen solid at 45p.

That changed on 21 May.

Chancellor Rachel Reeves announced that the AMAP rate for cars and vans will rise from 45p to 55p per mile for the first 10,000 business miles in a tax year. The rate above 10,000 miles stays at 25p. Motorcycle and bicycle rates are unchanged.

Ten pence per mile doesn't sound like much on its own. But if you're a self-employed driver doing 8,000 or 10,000 business miles a year, it adds up to hundreds of pounds in extra tax relief. And because it's backdated, you might already be sitting on a bigger claim than you thought.

It's backdated to April

This is the bit that caught a lot of people off-guard. The 55p rate applies from 6 April 2026, the start of the current tax year, not from the announcement date. If you've been tracking your mileage at 45p since April, every business mile you've driven this tax year is now worth 10p more.

You don't need to go back and change anything in your records. The rate applies when you file your Self Assessment for 2026/27. Your mileage log stays exactly as it is. The only thing that changes is the pence-per-mile figure you multiply by.

For anyone who's already filed quarterly updates under Making Tax Digital with the old 45p rate, HMRC has confirmed you can adjust in a later quarterly update or in the final declaration.

What the numbers actually look like

Take a self-employed plumber driving 8,000 business miles a year. Under the old rate, the mileage claim was 8,000 × 45p = £3,600. Under the new rate, it's 8,000 × 55p = £4,400. That's an extra £800 of tax-deductible expenses. At the 20% basic rate, that's £160 less tax. At 40%, it's £320.

Now take a delivery driver doing 15,000 business miles. The first 10,000 miles are at the higher rate: 10,000 × 55p = £5,500. The remaining 5,000 stay at 25p: 5,000 × 25p = £1,250. Total: £6,750. Under the old rates, that same 15,000 miles came to £5,750. Difference: £1,000 in extra claimable expenses.

Nobody is getting rich from this. But £200 to £400 in actual tax savings is a tank of fuel every month for most people. It's real money.

What you need to do (probably nothing)

If you use the simplified mileage method (flat rate per mile, which the vast majority of self-employed drivers do), nothing changes in how you claim. You keep your mileage log the same way you always have. When you file your 2026/27 return, you use 55p for the first 10,000 business miles instead of 45p. That's it.

If you use the actual cost method instead (claiming real fuel, insurance, depreciation costs rather than the flat rate), the AMAP change doesn't affect you directly. You're already claiming what you actually spend. Though it might be worth checking whether the simplified method now works out better for you, especially if your car is relatively cheap to run. The comparison between the two methods has shifted.

Your mileage records are the same either way: date, destination, purpose, miles. Nothing about record-keeping requirements has changed.

If your employer was reimbursing at 45p

This one affects employees rather than the self-employed, but it's worth knowing about because it comes up constantly.

If your employer has been reimbursing your business mileage at 45p per mile for April and May, they now owe you the difference. HMRC has confirmed that employers can pay the additional 10p per mile for journeys already taken without any tax or National Insurance consequences. It's not a bonus or a benefit in kind. It's just the rate catching up.

Whether your employer will actually bother doing this retrospectively is a different question. Some will adjust automatically. Others will need a nudge. IPSE has a good write-up on the practical side of this if you need to make the case to your finance department.

If your employer reimburses at less than the AMAP rate (say 40p per mile), you can claim Mileage Allowance Relief on the gap. That gap is now 15p per mile instead of 5p, which makes the claim much more worthwhile for employees who weren't bothering before.

Why did it take fifteen years?

Good question. The 45p rate was set in April 2011 when petrol was about 130p a litre. At the time, it was considered reasonably generous. The rate is supposed to cover fuel plus the running costs of owning and maintaining a vehicle (insurance, road tax, depreciation, tyres, servicing). For a while, it did.

By 2022, with fuel prices spiking to 190p and beyond after the Russian invasion of Ukraine, it clearly didn't. The AA, IPSE, the Federation of Small Businesses, and dozens of other organisations called for a review. Nothing happened. The rate stayed at 45p through 2022, 2023, 2024 and 2025 while everything around it got more expensive.

The government's stated reason for the freeze was that the rate was designed to be an average across all vehicle types and fuel prices over time, and that short-term spikes shouldn't trigger changes. Which sounds reasonable in theory. In practice, a fifteen-year freeze while cumulative inflation ran past 50% left the rate badly out of step with reality.

MoneySavingExpert covered the announcement and noted that even at 55p, the rate may still not fully cover the costs for many drivers. That's probably fair. But it's a lot closer than 45p was.

Will it be reviewed again?

The government said the rate will be reviewed at the next Budget. No commitment to annual reviews, no formula linking it to fuel prices or inflation, and no mechanism to adjust it automatically. So it could freeze again.

Whether 55p is enough depends entirely on what you drive and how fuel prices move. For a small petrol car doing mostly motorway miles, 55p probably covers the real costs comfortably. For a diesel van in stop-start city traffic with high insurance, it might still fall short. The rate was always a rough average and it still is.

The fact that it moved at all, though, is a good sign. Fifteen years of inertia has been broken. The political cost of raising the rate turned out to be basically zero (everyone likes it), which makes future adjustments easier to justify.

What we're doing in KeptMiles

We're updating the app to use the new 55p rate for business journeys in the 2026/27 tax year. If you're already tracking, your existing journey records don't need to change. The rate is stored per tax year, so when the update lands, every business journey recorded since 6 April 2026 will automatically reflect the new rate in your totals, exports and tax summaries.

If you haven't started tracking yet this tax year, now is a particularly good time. Every business mile is worth 22% more in tax relief than it was last week. At 55p, a self-employed driver doing 8,000 business miles a year who doesn't keep records is leaving roughly £880 in claimable expenses on the table (that's £176 to £352 in actual tax, depending on your band). The records take seconds per journey. The tax saving is there every year.

All Premium features free until 5th April 2027 (end of 26/27 tax year). KeptMiles tracks every business journey automatically so you never lose a mile, and with the new 55p rate each one is worth more than ever.

The short version

HMRC's mileage rate has gone from 45p to 55p per mile for the first 10,000 business miles, backdated to 6 April 2026. The rate above 10,000 miles stays at 25p. If you're self-employed and use the simplified mileage method, you don't need to change how you keep records. Just use the new rate when you file. If you've been tracking since April, every mile you've logged is now worth more.

If you want the longer version with rate tables and a comparison of simplified vs actual cost methods, I wrote about that in detail in the HMRC mileage rates for 2026/27 post (which I'll be updating with the new 55p figures).