Helping you prosper
Like an oil tanker stuck in the Straight of Hormuz, the approved mileage rate for business travel in your own car was stuck itself more than a decade at 45p pear mile for the first 10,000 miles (25p thereafter).
However, this rate finally increased to 55p per mile from 6 April 2026, which is a welcome uplift for businesses and specifically for those individuals who use their own vehicles for work as this better reflects the rising cost of business travel.
This long-awaited increase presents a valuable opportunity for SMEs to enhance tax efficiency while ensuring employees and directors are fairly reimbursed for genuine business journeys.
Why the tax and NIC treatment matters
Companies can reimburse directors and employees up to the approved rate of 55p per mile for qualifying business journeys without triggering Income Tax or National Insurance liabilities.
The tax benefits for sole traders and partnerships
For sole traders and partnerships using HMRC's simplified mileage method, the increase to 55p per mile for the first 10,000 business miles provides a larger deduction against taxable profits, reducing the overall tax bill.
The tax benefits for limited companies
For limited companies, mileage payments made for business travel are deductible for corporation tax purposes and at the same time, directors and employees can receive reimbursement without suffering Income Tax or National Insurance, creating a highly efficient outcome for both the business and the individual.
The approved mileage rate also simplifies administration as rather than dealing with actual fuel costs, businesses can apply a straightforward mileage calculation based on qualifying business journeys, albeit these must be evidenced by accurate record keeping of all journeys.
What counts as business mileage?
Qualifying business mileage covers travel that isn't ordinary commuting. This typically includes:
- travel to client or customer meetings
- journeys to temporary workplaces
- travel between different business locations or sites.
However, it is important to remember that ordinary commuting between home and a permanent workplace does not qualify and cannot be claimed.
Time for a policy review
With the new rate now in force, businesses should review their mileage and expense policies to ensure they are applying the correct rates and maintaining adequate records for their employees.
One final word of caution, however, is that this 55p rate only applies to travel in your own vehicle for business. Those provided with company cars have a totally different set of rates to consider, based upon fuel types and engine sizes, so it is important to make sure you are using the right system to avoid any problems with HMRC.
The next step
If you would like help reviewing your mileage processes or ensuring that your business is maximising the available tax benefits, please get in touch with Ian Dickinson or your usual UHY tax adviser.
