New mileage allowance rates: what employers need to do now
The government has announced an increase to approved mileage allowance payments (AMAPs), directly impacting how businesses reimburse employees for business mileage. The new rates apply from 6 April 2026 and mark the first change in 15 years.
For employers, this change creates both an opportunity and a compliance consideration. Reviewing payroll processes now will help ensure reimbursements remain tax-efficient and aligned with HMRC guidance.
AMAPs rate changes
The updated rates are:
- 55p per mile for the first 10,000 business miles;
- 25p per mile for each additional mile.
These rates apply to employees using their own vehicles for business travel. The increase reflects rising costs and long-standing calls for reform in this area.
AMAPs implications for employers
Employers who reimburse business mileage should assess whether their current rates still align with the new AMAP thresholds.
If reimbursements fall below the approved rates, employees may claim tax relief on the difference through HMRC. While this ensures employees are not financially disadvantaged, it can create additional administrative steps and potential confusion.
To avoid this, many businesses may choose to:
- update mileage rates in their payroll systems;
- review policies for reimbursing travel expenses;
- consider making backdated adjustments for payments already made in the 2026/27 tax year.
This change may also prompt businesses to revisit how they manage expense claims more broadly, especially where manual processes are still in place.
Payroll considerations
From a payroll perspective, implementing the new rates requires careful coordination.
Backdating to 6 April 2026 means that some employers will need to review earlier payroll runs and assess whether any adjustments are required. This can introduce complexity where large workforces or high travel volumes are involved.
Payroll teams should also ensure that:
- systems are updated with the correct rates;
- employee communications clearly explain any changes;
- records of mileage reimbursements remain accurate and audit-ready.
Where businesses don’t update their rates, it’s important to ensure employees are aware of their ability to claim mileage allowance relief.
AMAPs impact on the self-employed
The new rates will also apply to self-employed individuals, who can use them when calculating allowable expenses in their 2026/27 tax returns.
This will be particularly relevant for sole traders and partnerships that rely heavily on travel, providing a more generous deduction against taxable profits.
How we can help
Keeping pace with regulatory changes is essential for maintaining compliant and efficient payroll operations.
Moore Kingston Smith’s payroll specialists can support businesses in:
- reviewing and updating mileage reimbursement processes;
- implementing payroll system changes;
- managing backdated adjustments accurately;
- ensuring clear communication with employees.
Our team can also provide wider guidance on expenses and benefits to help you maintain a tax-efficient approach. If you would like to discuss how these changes affect your organisation, please get in touch with our payroll team.
