Yesterday, for the first time since April 2011, the government announced an increase in the approved mileage rate, raising it from 45p to 55p per mile. This long-awaited change will be welcomed by thousands of people who regularly use their own vehicles for work and claim back costs through expenses or tax relief.
For context, the previous 45p rate had remained frozen for 15 years, despite significant increases in the cost of motoring. When that rate was introduced in 2011, petrol prices averaged around 133p per litre. Today, drivers are paying closer to 155–159p per litre, underlining just how outdated the old allowance had become. The costs of maintenance and insurance have increased significantly too, which, in fairness, is probably a stronger argument for the 45p rate needing an increase in 2026.
The new 55p rate applies to the first 10,000 business miles travelled in a tax year and is designed to better reflect the true cost of running a vehicle. This includes not just fuel, but also maintenance, insurance, servicing, and depreciation. For individuals who claim mileage directly, such as the self-employed, contractors, or employees whose employers reimburse below HMRC’s approved rate, this uplift could make a meaningful financial difference.
To put it into perspective, someone travelling 10,000 business miles a year could now claim £5,500 in allowable expenses, compared to £4,500 under the old rate. That’s an additional £1,000, money that goes some way towards offsetting rising day-to-day costs.
Although this change primarily affects individuals making their own claims, there is also a potential knock-on impact for employers. Many organisations base their mileage reimbursement policies on HMRC’s approved rates. While not compulsory, some may choose to increase their own mileage payments in line with the new 55p figure, offering additional support to employees who rely on their cars for work.
That said, not all businesses will adjust their rates immediately, or at all. Employees who receive less than the approved amount can still claim tax relief on the difference, making it important to understand what you are entitled to and how to claim it.
As always, accurate record-keeping is essential. Keeping a clear log of business journeys, including dates, distances, and purposes, ensures claims are compliant and maximised.
After more than a decade without change, the move to 55p per mile represents a significant and overdue update. For many, it will provide practical relief at a time when motoring costs remain high and every penny counts.
Leave a Reply