That does not mean every employer must raise its reimbursement rate. It does mean that employers should understand the tax treatment of what they pay, while staff should know whether a lower payment leaves them eligible for tax relief.

What changed and which rate applies now

From 6 April 2026, the approved mileage rate for cars and vans rose from 45p to 55p per business mile for the first 10,000 miles in a tax year. The rate for miles above 10,000 remains 25p. The rise is the first change to the initial car and van rate since 2011. HMRC’s guidance on the mileage rate increase sets out the change for the 2026 to 2027 tax year.

The tax year matters when checking a journey or an earlier claim. The 55p rate applies from 6 April 2026, not to business miles driven in previous tax years. For those earlier years, the car and van rate was 45p for the first 10,000 business miles and 25p thereafter. A payroll team reviewing historical reimbursements therefore needs to keep each year’s mileage and payments separate rather than applying the newest rate to every journey.

How staff can claim the difference

Employees paid less than the approved amount can check whether they qualify for Mileage Allowance Relief. Taxpro, an HMRC-registered tax agent, is one option for staff who want help checking their position and making a claim. Employees can also claim directly through HMRC. In either case, the starting point is the same: compare the approved amount for qualifying business miles with the mileage payments received from the employer during the relevant tax year.

The relief applies to eligible travel in an employee’s own vehicle, not ordinary travel between home and a permanent workplace. A journey to visit a client or travel between work sites may qualify, but its purpose and circumstances matter. Staff using a company vehicle are not eligible for Mileage Allowance Relief on that vehicle, and being a passenger does not create an employee mileage claim. Employers can help prevent confusion by distinguishing business journeys from commuting in their expenses guidance.

Relief is given on the shortfall, but it is not a cash payment equal to every unpaid penny of mileage allowance. Suppose an employee drives 2,000 qualifying business miles in their own car during 2026 to 2027 and receives 40p per mile from their employer. At 55p per mile, the approved amount for those miles is £1,100; the employer has paid £800. The potential relief is on the £300 difference. The employee’s actual tax saving depends on their tax circumstances and applicable rate of income tax, so £300 should not be presented as the refund.

Staff may also be able to claim for up to four previous tax years, subject to the relevant claim deadlines and eligibility rules. Each year must be calculated using the rate that applied in that year, not the 2026 to 2027 rate. Someone checking several years should separate the business miles and employer payments for each one before calculating any shortfall. Claims can be made through the relevant HMRC employment-expenses process or through Self Assessment where applicable. HMRC’s Agent Update on the new mileage rates also addresses the changes to its job-expenses claim forms.

What the approved rate means for employers

The approved rate is a tax-free reimbursement benchmark, not a statutory minimum that employers must pay. A business can choose a lower mileage allowance, provided it honours its employment terms and expenses policy. When an employee uses their own car or van for qualifying business travel, payments within the approved amount can generally be made without income tax or National Insurance on that mileage payment. If an employer pays more than the approved amount, the excess has tax consequences and needs the appropriate payroll or reporting treatment.

For a small business, this distinction makes a policy review more useful than an automatic rate change. Payroll should know which rate the business actually pays, whether it changes after 10,000 business miles and how mileage is totalled across the tax year. HR can then give staff an accurate answer to a straightforward question: “Does our rate match HMRC’s approved rate?” If the answer is no, that does not by itself mean payroll has made an error. It does mean some employees may have a separate tax-relief claim.

Records that support a mileage claim

A reliable mileage record helps the business administer its policy and gives employees the information needed to check a claim. For each journey, it is sensible to record the date, destination, business purpose, miles driven and vehicle used, along with the mileage payment the employer made. These details make it easier to distinguish a client visit from a normal commute and to reconcile an employee’s records with payroll. They are practical record-keeping measures, rather than a claim that every HMRC form requires the same set of fields.

The annual 10,000-mile threshold is another reason to keep a running total. It applies to business mileage over the tax year, so the approved car and van rate changes to 25p once that threshold is passed. An isolated monthly spreadsheet may not show when that happened. Where employees drive for work regularly, a consistent expenses system can also reduce disputes about missed trips, duplicate entries or whether a journey was approved. The aim is a record that both payroll and the employee can follow later, especially if an earlier tax year is being reviewed.

Why telling staff about the change is a low-cost step

Employers do not have to pay 55p per mile simply because the approved rate has risen. They can still make the change useful to staff by explaining their own reimbursement policy clearly. A short update can state the rate the business pays, which journeys are covered, how employees should submit mileage and where the approved rate differs. If the business pays less, it can explain that eligible employees may be able to claim tax relief on the shortfall, without suggesting that everyone will receive a refund.

That communication matters for employees who rarely look beyond the amount shown on an expenses payment. Without the distinction between reimbursement and tax relief, someone may assume a lower company rate ends the matter, while another employee may expect the employer to pay the full approved amount. Clear wording gives both groups a more accurate picture and can spare payroll repeated questions. It is a modest administrative step, not a substitute for checking whether the business’s chosen allowance still works for its workforce and budget.

The practical next move is to check three things together: the expenses policy, the way payroll applies it and the information staff receive. For 2026 to 2027, that means using 55p for the first 10,000 qualifying car or van business miles when assessing the approved amount, then 25p above that threshold. For earlier years, it means keeping the earlier rates in place. A policy that makes those distinctions visible helps employers manage mileage consistently and helps staff identify a genuine tax-relief opportunity rather than guessing from the pence-per-mile figure alone.

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