For 2026/27, the approved mileage rate for cars and vans is 55p a mile for the first 10,000 business miles, then 25p. It was announced on 21 May 2026 and is backdated to 6 April 2026.
If you use your own car for work and your employer pays you less than 55p a mile, or nothing, you can usually claim tax relief on the shortfall. And if you claim on form P87, the version you use matters from 1 November 2026.
Key points
- For 2026/27 the approved rate for cars and vans is 55p a mile for the first 10,000 business miles, then 25p. It’s backdated to 6 April 2026.
- Employees paid less than 55p (or nothing) can usually claim tax relief on the shortfall.
- P87: HMRC accepts both the 10/23 and 06/26 versions until 1 November 2026. From 1 November, use 06/26 only.
- Employers who paid above the old 45p and deducted tax or NIC may need to correct earlier 2026/27 payrolls.
- Self-employed people using simplified mileage use 55p / 25p for 2026/27 profits.
On this page
The new rate
For 2026/27, the approved rate for cars and vans is 55p a mile for the first 10,000 business miles, then 25p. The National Insurance disregard is also 55p. The old rate was 45p.
The change was announced on 21 May 2026 and is backdated to 6 April 2026, so it covers the whole 2026/27 tax year (GOV.UK).
Motorcycle, bicycle and passenger rates are unchanged.
The government has said it will set out a review of these rates beyond 2026/27 at the Budget.
Employees: claiming the shortfall
If you use your own car or van for work and your employer pays you less than 55p a mile, or nothing at all, you can usually claim tax relief on the shortfall.
An illustration only: say you drove 2,000 business miles in your own car in 2026/27 and your employer paid you 45p a mile (£900). At 55p a mile the approved amount would be £1,100. The shortfall is £200, and that is the amount you can usually claim tax relief on.
This isn’t a £200 refund. Tax relief is given at the rate you pay tax, so at 20% the relief on £200 would be £40, and at 40% it would be £80. Relief can’t be more than the tax you’ve paid.
Keep a record of your business journeys and what you were paid. HMRC asks for mileage logs showing the reason for each journey and the start and end postcodes. You can usually claim for the current tax year and the 4 years before.
The P87 change on 1 November
If you claim using form P87, HMRC accepts both the 10/23 and 06/26 versions until 1 November 2026. From 1 November, use the 06/26 version only (Agent Update 147).
So if you have an older copy of the form saved, check which version it is. Either send it before 1 November, or switch to the 06/26 version.
If you fill in a Self Assessment tax return, you must claim through your return instead of using a P87.
Employers: check your 2026/27 payroll
Because the new rate is backdated to 6 April 2026, employers who paid above the old 45p and deducted tax or National Insurance may need to correct earlier 2026/27 payrolls (Employer Bulletin, August 2026).
If that sounds like you, talk to us or your payroll provider about what needs correcting.
Self-employed: simplified mileage
If you’re self-employed and use simplified mileage, use 55p / 25p for your 2026/27 profits.
Sources
Our main sources are HMRC and GOV.UK:
- Increasing mileage rates (approved mileage allowance payments and simplified mileage)
- Claim tax relief for your job expenses
- Vehicles you use for work (Claim tax relief for your job expenses)
- Agent Update: issue 147
- Employer Bulletin: August 2026
Talk to us about mileage
Whether you want help with a P87 claim before 1 November, or you’re an employer checking your 2026/27 payroll, we can help. Call us on 020 7164 0225, send us a WhatsApp message or email your tax enquiry to hello@ibandco.co.uk.
See also our payroll management and Personal Tax Planning services.
Checked on 9 October 2026. The Budget on 28 October 2026 may change some of these rules and rates. We plan to review this post after the Budget. Please check with us before acting.
Please note: this article is general information based on our understanding of UK tax rules at the date shown above. It is not advice for your circumstances, and tax rules and rates can change. Please speak to us before acting on it.
Ishmael Bangura FFA
Ishmael Bangura FFA is a qualified tax adviser and Fellow Financial Accountant with a finance degree and about 15 years’ experience, including earlier corporate roles. He has helped more than 950 clients. IB&Co Accountants is regulated by the IFA and IPA. IB&Co is based at Level 37, 1 Canada Square, Canary Wharf.
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