Mileage Tax Calculator Guide for UK Practitioners (2026/27)

When building or updating a mileage tax calculator for the 2026/27 tax year, practitioners must implement a significant legislative change. To account for rising motoring costs, the government has increased the core Approved Mileage Allowance Payment (AMAP) rate for the first time in over a decade.

Employment Income: AMAPs (ITEPA 2003, s 230)

Section 229(1) of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) exempts approved mileage allowance payments from income tax liability.  The legislation determines the approved amount by multiplying the number of business miles travelled by the applicable statutory rate.

For the 2026/27 tax year, the government increased the AMAP rate for cars and vans to 55 pence per mile for the first 10,000 miles.  The rate for travel exceeding 10,000 miles remains fixed at 25 pence per mile.

The approved amount for mileage allowance payments that is applicable to a kind of vehicle is— M × R … where M is the number of miles of business travel by the employee … R is the rate applicable to that kind of vehicle.”

Table: AMAP Rates for Employees (2026/27)

Your calculator must aggregate the total business mileage across the entire tax year, not merely the mileage submitted on individual claim forms, to determine when the employee breaches the 10,000-mile threshold.  Furthermore, section 234 of ITEPA 2003 grants an additional tax-free passenger payment of 5p per mile for carrying fellow employees on the same business journey.

Crucially, the AMAP regime strictly excludes company vehicles.  Section 236(2) of ITEPA 2003 confirms that a vehicle qualifies as a company vehicle if the employer makes it available to the employee by reason of their employment.

Mileage Allowance Relief (MAR)

If an employer pays less than the approved statutory rates, or pays no allowance at all, the employee can claim the shortfall as a deduction from their earnings. Section 231 of ITEPA 2003 provides for this Mileage Allowance Relief (MAR).

Your calculator must compute the maximum approved amount (e.g., 10,000 miles at 55p = £5,500) and subtract the total mileage allowance payments the employer actually made during the tax year.  The resulting positive difference forms the MAR deduction, which directly reduces the employee’s net taxable earnings.

When programming the NIC mechanics alongside income tax, note the Upper Tribunal’s decision in Laing O’Rourke Services Limited v The Commissioners for HMRC. The tribunal confirmed that flat-rate car allowances paid to employees with genuine business mileage can constitute Relevant Motoring Expenditure (RME) for National Insurance purposes, broadly aligning the NIC and income tax treatments of mileage allowances.

Self-Employed and Property Businesses: Simplified Expenses

The tax system mirrors these rate increases for self-employed individuals and unincorporated landlords. Section 94F of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) allows sole traders to use a fixed rate per business mile to compute their vehicle expenses instead of tracking actual costs.

For the 2026/27 tax year, the simplified mileage rate for cars and goods vehicles aligns with the new AMAP rate at 55 pence per mile for the first 10,000 miles, and 25 pence thereafter.

If your client elects to use this simplified flat rate, it completely replaces actual expenditure deductions for fuel, insurance, servicing, and repairs.  Most importantly, your calculator must block the use of the simplified mileage rate if the client has previously claimed capital allowances in respect of that specific vehicle, as the flat rate inherently accounts for depreciation.  Unincorporated property businesses can also utilise these mileage rates under sections 94C to 94G of ITTOIA 2005.

Next steps for research: Review the specific reporting requirements for declaring AMAP excesses (where the employer pays more than 55p per mile) on the P11D form, and examine how the cash basis default rules interact with the restriction on switching between actual costs and simplified mileage rates when replacing a vehicle.