Where an employer reimburses an employee for the cost of using their personal car for business journeys, the official Mileage Allowance rates issued by HMRC determines the amounts that can be reimbursed by an employer to the employee tax-free.

The government has announced a 10p per business mile increase in the amount of tax-free Mileage Allowance that can be paid to employees that use their own cars for business journeys.

The increased rate has been backdated to 6th of April 2026.

The Mileage Allowance has been set at 45p per business mile for the first 10,000 miles per tax year since 6th of April 2011.

The Mileage Allowance has been increased from 45p per business mile to 55p per business mile, for the first 10,000 business miles in any one tax year. Any business miles claimed above 10,000 miles per annum remain at the same rate as before, i.e., 25p per mile.

One point often overlooked is that an employee can claim an additional 5p per business mile for every passenger in the car with the driver.

Where an employer reimburses an employee at less than the official rates, the difference can be claimed by the employees in a claim to HMRC.

If you need any more information about the use of the Mileage Allowance or making claims, please contact one of our tax team.

Take care until the next time

Russell + Russell