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55p Mileage Rate Made Permanent and 35p Above 10,000 Miles: What Sole Traders and Employers Need to Know

The government will make the 55p tax-free mileage rate for the first 10,000 business miles permanent and raise the rate above 10,000 miles from 25p to 35p, a change it says benefits about 3 million employees and self-employed people.

By Entrepreneur Group · Published 28 October 2026

The government will make the 55p per mile tax-free rate for the first 10,000 business miles permanent and raise the rate for miles above 10,000 from 25p to 35p, HM Treasury announced on 26 October 2026. It says about 3 million employees and self-employed people who use their own car or van for work will benefit, saving around £120 a year at 6,000 business miles and up to £300 at 15,000 miles.

The change was one of five "everyday fixes" announced ahead of the Autumn Budget. Here is what it means for sole traders, small employers and staff who drive for work.

What has changed

The 55p rate is not new. HMRC raised the rate for the first 10,000 business miles from 45p to 55p in June 2026, backdated to 6 April 2026. That change covered both Approved Mileage Allowance Payments (AMAPs) for employees and the simplified mileage rates used by the self-employed for cars and vans. The rate above 10,000 miles stayed at 25p.

The Treasury announcement now:

• locks in the 55p rate for the first 10,000 business miles permanently; and
• raises the rate for business miles above 10,000 from 25p to 35p.

The Treasury estimates a saving of about £120 a year for someone driving 6,000 business miles and up to £300 for 15,000 miles. Brit Brief reports that these savings are compared with rates before April 2026, that the 35p rate applies from 6 April 2027, and that the motorcycle and bicycle rates stay at 24p and 20p. The Treasury release itself does not give a start date, so check the Budget documents and HMRC guidance before changing your claims.

How mileage rates work

• Employees: employers can pay up to the approved rates tax free for business journeys in an employee's own vehicle. Employers do not have to pay these rates. If they pay less, or nothing, the employee can claim tax relief on the difference.
• Self-employed: sole traders and partnerships using simplified expenses can claim the flat mileage rate for business journeys in a car or van instead of working out actual running costs.

Keep a log of each business journey with the date, destination, purpose and miles driven.

Also announced: parental pay for self-employed partners

The same announcement said two weeks of parental pay, currently worth up to £194 a week, will be extended to more than 150,000 additional parents a year, including self-employed dads and partners who previously missed out. The Treasury did not give a start date or say how claims will work. Self-employed founders expecting a child should watch for HMRC and GOV.UK guidance.

What founders should do now

This section is editorial guidance, not tax advice.

• Check your mileage policy. If you reimburse staff below 55p, decide whether to raise your rate. Paying less is allowed, but employees can claim relief on the shortfall.
• Budget for high-mileage staff. If the 35p rate starts in April 2027, employers paying the full approved rate will pay more for drivers who travel over 10,000 business miles a year.
• Review your own method. If you are self-employed, compare simplified mileage with actual costs.
• Keep good records. HMRC can ask for journey logs. A mileage app or simple spreadsheet is enough if it is kept up to date.
• Ask your accountant. Confirm the start dates once the Budget documents are published.

Frequently asked questions

What is the HMRC mileage rate for 2026?

For cars and vans, the approved rate is 55p a mile for the first 10,000 business miles and 25p a mile above that, after HMRC raised the first-tier rate from 45p, backdated to 6 April 2026.

Is the 55p mileage rate permanent?

Yes. HM Treasury announced on 26 October 2026 that the 55p rate for the first 10,000 business miles will be made permanent.

When does the 35p mileage rate above 10,000 miles start?

The Treasury announcement does not give a start date. Brit Brief reports that it applies from 6 April 2027, so check HMRC guidance before claiming the higher rate.

Sources

1. HM Treasury: Everyday fixes to make life easier for millions of Britons (26 October 2026) (reviewed 28 October 2026)
2. HMRC: Increase to Approved Mileage Allowance Payments (AMAPs) and self-employed simplified mileage rates (17 June 2026) (reviewed 28 October 2026)
3. Brit Brief: Government makes 55p mileage rate permanent for first 10,000 miles (27 October 2026) (reviewed 28 October 2026)
4. PAYadvice.UK: Mileage rates increase for 3 million workers (27 October 2026) (reviewed 28 October 2026)