Mileage allowance 2027/28: 55p a mile, and 35p after 10,000 miles from April

The tax-free mileage rate for driving your own car or van for work will be 55p a mile for the first 10,000 business miles in 2027/28, and 35p for every mile after that. The 55p rate is already in force: it replaced 45p from 6 April 2026, the first change to the headline rate since 2011/12. The 35p rate is new. The government announced it the day before the Budget on 28 October 2026, and the Budget confirmed it, raising the rate above 10,000 miles from 25p, where it has been since at least 2002/03, from 6 April 2027.

The second change matters most to the people who drive most. Until April 2027 the rate falls from 55p to 25p after 10,000 miles, so a high-mileage driver averages well below the headline figure. In 2027/28 a driver covering 20,000 business miles averages 45p a mile, the old headline rate; in 2025/26 they averaged 35p.

What the mileage allowance is

When an employee uses their own car, van, motorcycle or bicycle for business journeys, the employer can pay them a mileage allowance. HMRC calls these mileage allowance payments, and the most it lets an employer pay without tax is the approved amount: the business miles multiplied by the approved rate. Up to that amount the payments are tax-free and do not have to be reported to HMRC.

The rate is meant to cover the whole cost of using the vehicle, not just fuel. HMRC's guidance for employees says it "covers the cost of owning and running your vehicle", and that fuel, electricity, vehicle tax, MOTs and repairs cannot be claimed separately on top. It is also a ceiling, not an entitlement. HMRC says the rate "is advisory, and employers can choose to reimburse more or less".

What changed, and when

May 2026: 45p to 55p. On 21 May 2026 the government announced that the rate for the first 10,000 business miles would rise from 45p to 55p, backdated to 6 April 2026. HMRC's policy paper, published on 17 June 2026, says it was part of a package to support motorists, "in response to elevated fuel prices rising from the Iran war", and aimed to make the rates "better reflect the average costs of motoring". Parliament wrote the 55p rate into the Taxation (Energy and Vehicles) Act 2026, for 2026/27 and later years. The rate above 10,000 miles stayed at 25p.

October 2026: 25p to 35p. The government had committed to a review of the rates and said it would set out the result at the Budget. It announced the outcome ahead of the Budget: the 55p rate stays, and the rate above 10,000 miles rises to 35p from 6 April 2027. In his Budget speech the Chancellor said he was "increasing the higher mileage rate from 25p to 35p per mile and making permanent the increase to the standard mileage rate introduced earlier this year". The Budget's overview of tax legislation says the change will be made by statutory instrument later in the year. HMRC's rate pages show 25p because that is the 2026/27 rate; the 35p rate starts in 2027/28 once the instrument is made.

The same rates apply to the self-employed who use simplified expenses for their vehicle. The Treasury puts the cost of both changes together at £200 million in 2027/28, rising to £245 million in 2031/32. THRIVE could not find any published evidence from the review.

How much an employer can pay tax-free

At 10,000 business miles or fewer, nothing changes between 2026/27 and 2027/28: every mile is at 55p. Above 10,000 the 35p rate lifts the approved amount by £100 for every 1,000 extra miles. HMRC's own example, 12,000 business miles, gives £6,000 at 2026/27 rates; at the 2027/28 rates the same mileage gives £6,200.

What the rate averages, 2027/28

Approved amount divided by business miles, pence a mile

Show the figures as a table

5,000 miles	55.0p
10,000 miles	55.0p
12,000 miles	51.7p
15,000 miles	48.3p
20,000 miles	45.0p
25,000 miles	43.0p
30,000 miles	41.7p

The averages show what the taper does. Before April 2026, a driver covering 15,000 business miles averaged 38.3p a mile; in 2026/27, 45.0p; in 2027/28, 48.3p. At 30,000 miles the average rises from 31.7p in 2025/26 to 41.7p in 2027/28. In 2026/27 the 55p rise was worth nothing extra for miles beyond 10,000. From 2027/28, every business mile is worth 10p more than it was in 2025/26.

If your employer pays less: Mileage Allowance Relief

Some employers do not pay the full rate. If you are paid less than the approved amount, you can claim tax relief from HMRC on the difference, called Mileage Allowance Relief. You claim it yourself, for the current tax year and the four before it, and you need records of each journey: its reason and the postcodes where it started and ended. HMRC does not allow a claim for actual costs instead.

Take a driver whose employer still pays a flat 45p a mile and who covers 15,000 business miles in 2027/28. They are paid £6,750. The approved amount is £7,250. They can claim relief on the £500 difference, worth £100 to a basic-rate taxpayer and £200 to a higher-rate taxpayer. The Budget's own example is similar: a basic-rate taxpayer driving 15,000 business miles gains "up to £300" a year compared with the old rates, and one driving 6,000 miles gains £120.

If your employer pays more

Anything paid above the approved amount is taxable. The employer either puts the excess through payroll and deducts tax, or reports it on form P11D if it cannot be taxed through payroll. Excess mileage payments can no longer be included in a PAYE settlement agreement.

National Insurance works differently. For Class 1 National Insurance, HMRC lets employers pay up to the first-band rate, now 55p, for every business mile, with no lower rate after 10,000 miles. A payment above the tax rate but no more than 55p for miles over 10,000 is therefore taxable but free of National Insurance. If HMRC's current rule is unchanged, from 2027/28 that band would be 20p a mile wide, down from 30p. The Budget overview says the 35p change will also apply to the National Insurance treatment of motoring expenses, without saying how; HMRC's current rule uses the first-band rate for every mile, and THRIVE will update this section when HMRC publishes guidance for 2027/28.

Which journeys count

Only business travel counts, and the rules are the same as for any travel expense. The test that catches most people is commuting.

• Ordinary commuting does not count. HMRC says that for most employees it is "the journey they make most days between their home and their permanent workplace".
• Travel to a temporary workplace does. A workplace is temporary if the employee goes there "only to perform a task of limited duration or for a temporary purpose". Travel direct from home to a temporary workplace counts in full, even if it is longer than the usual commute, unless the journey is substantially the same as the ordinary commute; HMRC treats an extra distance of 10 miles or more each way as not substantially the same.
• The 24-month rule. A workplace stops being temporary if the employee spends, or expects to spend, 40% or more of their working time there over a period that lasts, or "is likely to last", more than 24 months, in HMRC's words.
• Calling at the office first. If the employee stops and does substantive work at their permanent workplace on the way, the journey to the office is commuting and only the onward leg is business travel. If they do not stop, or the stop is incidental, the whole journey is business travel.
• No disguising commutes. HMRC says an employee "cannot turn an ordinary commuting journey into a business journey by arranging a business appointment somewhere on the way just to get tax relief".

Company cars are different: advisory fuel rates

The mileage allowance is for your own vehicle. If you drive a company car, your employer can reimburse business fuel at HMRC's advisory fuel rates, which cover fuel only and are reviewed every quarter. From 1 September 2026 they are 17p a mile for a 1.4 to 2.0 litre petrol car, 16p for a 1.6 to 2.0 litre diesel, and 7p for an electric car charged at home or 15p at a public charger. HMRC reviews them on 1 March, 1 June, 1 September and 1 December, and THRIVE publishes each quarter's rates on its advisory fuel rates page.

The comparison shows how much of the 55p is not fuel. HMRC's fuel rate for a mid-size petrol company car is 17p, about 31% of 55p. For an electric car charged at home it is 7p, about 13%. The rest of the mileage allowance covers the other costs of owning and running the vehicle, which the driver of their own car pays and the company car driver does not.

That gap is why the rate matters for fleet policy. For an employee driving their own electric car and charging at home, a 55p allowance covers far more than the energy. For an employer deciding between a company car, a car allowance and paying mileage on staff cars, the higher rates change the arithmetic, particularly for high-mileage drivers above 10,000 miles.

Employers that pegged their own rate to a flat 45p before April 2026 now sit below the approved amount for the first 10,000 miles, £1,000 short for a driver who covers exactly that. Above 10,000 miles the gap narrows, and from 2027/28 it closes at 20,000 miles; beyond that a flat 45p is above the approved amount and the excess is taxable. Updating the policy, or telling drivers how to claim Mileage Allowance Relief, is the practical job.

Employer-set rates

Some employers set their own reimbursement rates by agreement. These are contractual rates, not HMRC limits: an employee paid more than HMRC's approved rate pays tax on the excess, and one paid less can claim relief on the difference, in the same way as anyone else.

Questions fleets are asking

What is the HMRC mileage rate for 2027/28?

55p a mile for the first 10,000 business miles and 35p a mile after that, for cars and vans, from 6 April 2027. Motorcycles are 24p and bicycles 20p.

What is the mileage rate for 2026/27?

55p for the first 10,000 business miles and 25p after that, backdated to 6 April 2026.

Is there a different mileage rate for electric cars?

Not for your own car. Electric cars and vans use the same 55p and 35p rates. HMRC's separate advisory electric rates, 7p for home charging and 15p for public charging, are for company cars only.

Does my employer have to pay 55p a mile?

No. It is the most they can pay tax-free. If they pay less, you can claim Mileage Allowance Relief from HMRC on the difference.

Is the 35p rate law yet?

Not yet. The government says it will make the change by statutory instrument later in the year, to take effect from 6 April 2027.