HMRC Mileage Allowance Increase to 55p Per Mile: What It Means for UK Employees, Self-Employed Workers and Universal Credit Claimants

Published: June 2026

Category: UK Tax Advice | Self Assessment | Business Expenses

The UK government has introduced one of the most significant mileage allowance changes in over a decade. HM Revenue & Customs (HMRC) has increased the Approved Mileage Allowance Payments (AMAP) rate from 45p to 55p per mile for the first 10,000 business miles travelled in a personal car or van.

For employees, sole traders, taxi drivers, couriers, delivery drivers and self-employed professionals, this update could lead to meaningful tax savings and improved financial outcomes.

In this guide, we explain what the new mileage rate means, who can benefit, and how to ensure you remain compliant with HMRC requirements.

What Is the HMRC Mileage Allowance?

HMRC's Approved Mileage Allowance Payments (AMAP) scheme allows individuals to claim tax-free mileage expenses when using a personal vehicle for qualifying business journeys.

The allowance is designed to cover the cost of:

• Fuel

• Vehicle maintenance

• Insurance

• Depreciation

• Repairs and servicing

Instead of tracking every vehicle-related expense separately, many taxpayers choose HMRC's simplified mileage method.

Under the updated rules, eligible business journeys can now be claimed at:

• 55p per mile for the first 10,000 business miles

• Lower rates may apply beyond the initial threshold depending on HMRC guidance.

How Employees Benefit from the New 55p Mileage Rate

Employees who use their own vehicle for work-related travel can benefit immediately from the increased allowance.

Examples of qualifying journeys include:

• Visiting clients

• Travelling between business locations

• Attending meetings away from the normal workplace

Regular commuting between home and your usual workplace generally does not qualify.

Tax-Free Reimbursements

Employers can now reimburse employees up to 55p per mile without triggering Income Tax or National Insurance liabilities.

Claiming Mileage Tax Relief

If your employer pays less than 55p per mile, you may be entitled to claim Mileage Allowance Relief from HMRC on the difference. This can reduce your tax bill and ensure you receive the full benefit available under current rules.

Why Self-Employed Individuals Could Save More Tax

The mileage increase is particularly valuable for self-employed workers who rely heavily on their vehicle.

This includes:

• Taxi drivers

• Private hire drivers

• Delivery drivers

• Tradespeople

• Consultants

• Freelancers

• Sole traders

Under HMRC's Simplified Expenses system, you can calculate vehicle expenses by multiplying business miles by the approved mileage rate instead of tracking individual fuel and maintenance costs.

Example

A self-employed driver completing 10,000 qualifying business miles can now claim:

10,000 × 55p = £5,500 allowable expense

Previously:

10,000 × 45p = £4,500 allowable expense

This creates an additional £1,000 deductible expense, reducing taxable profit and potentially lowering both Income Tax and Class 4 National Insurance contributions.

For many drivers and sole traders, this could result in hundreds of pounds of annual tax savings.

Universal Credit Claimants May Also Benefit

An often-overlooked advantage of the mileage increase affects self-employed individuals who receive Universal Credit.

When reporting self-employed income to the Department for Work and Pensions (DWP), allowable business expenses are deducted before calculating earnings.

Because the mileage deduction is now higher:

• Reported net income may be lower

• Allowable business expenses may increase

• Universal Credit calculations may be more favourable

While individual circumstances vary, accurate mileage records could help eligible claimants maximise both tax efficiency and benefit entitlement.

Record Keeping Remains Essential

HMRC expects taxpayers to maintain accurate records supporting any mileage claims.

You should keep:

• Journey dates

• Start and destination locations

• Business purpose of travel

• Mileage travelled

• Digital mileage logs where possible

Good record keeping helps demonstrate compliance if HMRC requests evidence and ensures you claim the correct amount.

Common Mistakes to Avoid

Many taxpayers miss valuable tax relief due to simple errors.

Avoid:

• Claiming ordinary commuting journeys

• Estimating mileage without records

• Mixing personal and business mileage

• Using both actual vehicle expenses and simplified mileage for the same vehicle when not permitted

• Leaving mileage claims until Self Assessment deadlines approach

How TaxNex Can Help

Understanding HMRC mileage rules can be challenging, particularly for self-employed workers, taxi drivers, couriers and growing businesses.

At TaxNex, we help UK taxpayers:

• Prepare Self Assessment tax returns

• Maximise allowable business expenses

• Maintain compliant bookkeeping records

• Review mileage claims

• Reduce tax liabilities legally and efficiently

Whether you're a sole trader, private hire driver, contractor or small business owner, our experienced team can help ensure you're claiming everything you're entitled to.

Speak to TaxNex Today

If you're unsure how the new 55p mileage allowance affects your tax position, our team is here to help.

Visit TaxNex Online today for professional UK tax and bookkeeping support.

Get Started

• Review your mileage claims

• Prepare your Self Assessment return

• Improve your bookkeeping records

• Maximise legitimate tax reliefs

Book your consultation now at TaxNex.online and ensure you're making the most of HMRC's latest mileage allowance changes.

Frequently Asked Questions

Can I claim 55p per mile on my tax return?

If you are eligible under HMRC's mileage allowance rules and use the simplified expenses method, you may be able to claim qualifying business mileage at the approved rate.

Does the mileage allowance apply to commuting?

No. Ordinary travel between your home and normal workplace is generally not allowable.

Do I need receipts for fuel?

If using HMRC's simplified mileage method, you typically do not need to claim individual fuel costs separately.

What records should I keep?

Maintain detailed mileage logs showing dates, destinations, purpose of travel and total business miles.

Should taxi drivers track mileage?

Yes. Accurate mileage records are one of the most effective ways for taxi drivers and private hire drivers to maximise legitimate tax deductions.