---
title: "How does the Mileage Allowance work in 2026/27? | UK Tax Guide"
description: "If you use your own vehicle for business purposes, you can legitimately claim tax relief or receive tax-free reimbursements for your journey costs. Understanding **how does the Mileage Allowance work** is essential for both employees and self-employed individuals to ensure they claim…"
url: "https://www.accountingfirms.co.uk/knowledge-bank/how-does-the-mileage-allowance-work/"
updated: "2026-08-11"
category: The tax basics
---

# How does the Mileage Allowance work in 2026/27? | UK Tax Guide

If you use your own vehicle for business purposes, you can legitimately claim tax relief or receive tax-free reimbursements for your journey costs. Understanding **how does the Mileage Allowance work** is essential for both employees and self-employed individuals to ensure they claim their full legal entitlement without triggering unexpected tax liabilities.

For the 2026/27 tax year, the government implemented a significant increase to the Approved Mileage Allowance Payments (AMAPs) to reflect the rising costs of motoring.

## Approved Mileage Allowance Payments (AMAPs)

For employees who use their private vehicles for work, the tax legislation provides a statutory exemption for mileage reimbursements paid by employers.  Under section 229 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), these payments do not generate an income tax liability as long as they do not exceed the "approved amount".

The approved amount is calculated by multiplying your business miles by the statutory rate applicable to your vehicle.  For the 2026/27 tax year (with retrospective effect from 6 April 2026), the rates are:

- **Cars and vans:** 55p per mile for the first 10,000 miles, and 25p per mile for any business miles over 10,000.
- **Motorcycles:** 24p per mile for all business miles.
- **Bicycles:** 20p per mile for all business miles.

Employers hold no obligation to pay these exact rates; they are purely advisory tax-free limits.  If your employer reimburses you at a rate higher than the AMAP limit (for example, paying 60p per mile for a car), the excess over 55p is treated as earnings and is liable to [Income Tax and National Insurance](https://www.accountingfirms.co.uk/blog/hmrc-payment-niers/).

## Mileage Allowance Relief (MAR)

If your employer reimburses you at a rate lower than the statutory AMAP limit (or pays you no mileage allowance at all), you do not lose out. Section 231 of ITEPA 2003 entitles you to [claim Mileage Allowance Relief](https://www.accountingfirms.co.uk/blog/how-many-miles/) (MAR) from HMRC.

To calculate your MAR claim, take the approved AMAP amount for your total business miles and subtract the total mileage payments actually made by your employer.  The resulting figure forms a deduction against your taxable earnings for the year.  MAR acts as the exclusive mechanism for claiming vehicle running costs; you cannot claim for actual expenditure like fuel, insurance, or repairs, even if they exceed the statutory mileage allowance.

## Passenger Payments

The legislation encourages carpooling on business journeys. Section 234 of ITEPA 2003 allows an employer to make an additional tax-free passenger payment of 5p per mile when you carry one or more colleagues who are also travelling for business.  If you carry multiple qualifying passengers, you can claim 5p per mile for *each* passenger.

## Self-Employed Simplified Mileage Rates

The mileage allowance system extends to unincorporated businesses and self-employed individuals. Under section 94F of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), self-employed individuals can opt to use "simplified mileage rates" to calculate their vehicle expenses instead of tracking actual costs and [capital allowances](https://www.accountingfirms.co.uk/blog/impact-of-tax-planning-on-business-growth/).

For the 2026/27 tax year, the simplified mileage rate for cars and goods vehicles perfectly mirrors the AMAP rate: 55p per mile for the first 10,000 miles, and 25p per mile thereafter.  Once you choose to use the simplified mileage rates for a specific vehicle, you must continue to use this method for as long as that vehicle is used in the business.

## What Qualifies as Business Travel?

You can only use the mileage allowance for genuine "business travel".  Section 338 of ITEPA 2003 specifically excludes "ordinary commuting" from deductible [travel expenses](https://www.accountingfirms.co.uk/blog/hmrc-pilot-tax-relief/).  Ordinary commuting is defined as travel between your home and a permanent workplace.

A permanent workplace is one that you regularly attend for the performance of your duties.  Conversely, travel to a temporary workplace—defined as a place you attend to perform a task of limited duration or for a temporary purpose—qualifies for the mileage allowance.  Even if you are "on call" and obliged to take your vehicle home, travel between your home and your permanent workplace remains classified as private use and cannot be claimed.

## Summary of 2026/27 Mileage Allowance Mechanics

| Party | Provision / Event | 2026/27 Rate / Amount | Outcome |
| --- | --- | --- | --- |
| **Employee** | AMAPs (Car/Van) - first 10,000 miles | 55p per mile | Tax-free reimbursement from employer. |
| **Employee** | AMAPs (Car/Van) - over 10,000 miles | 25p per mile | Tax-free reimbursement from employer. |
| **Employee** | Passenger Payments | 5p per mile per passenger | Additional tax-free payment for carrying business colleagues. |
| **Employee** | Mileage Allowance Relief (MAR) | Difference between AMAP limit and actual payment | Claimable as an income [tax deduction](https://www.accountingfirms.co.uk/blog/common-bookkeeping-mistakes-to-avoid/) against earnings. |
| **Self-Employed** | Simplified Mileage Rates | 55p (first 10k miles) / 25p (thereafter) | Deductible business expense from trading profits. |

*For completeness, practitioners advising employers should ensure that any lump-sum car allowances are correctly aggregated with per-mile payments to determine if the total exceeds the AMAP limits, triggering a Class 1 National Insurance charge and a P11D reporting requirement.*