Issue 03/October 2026 Mileage allowances changed for tax year 2026-27
Mileage Allowance Rates Increase for 2026-27: What Employers Need to Know
HMRC has announced changes to the Approved Mileage Allowance Payments (MAPs) for the 2026-27 tax year, bringing welcome news for employees who use their own vehicles for business travel. The approved mileage rate for the first 10,000 business miles has increased from the previous rate to 55p per mile, while the rate for any mileage above 10,000 miles remains at 25p per mile.
Importantly, these changes have been backdated to 6 April 2026, meaning employers should review their existing mileage reimbursement arrangements and consider whether any adjustments need to be made.
What Does This Mean for Employers?
If your business reimburses employees for business travel using HMRC's approved mileage rates, you may wish to increase your reimbursement rates to align with the new allowance. Doing so can help ensure employees are fairly compensated for the costs associated with using their own vehicles for work-related journeys.
Employers who have continued to use the previous rates since the start of the tax year may also need to consider whether backdated adjustments should be made to employee reimbursements.
Review Previous Mileage Payments
The changes may have wider implications for payroll. If mileage payments or Relevant Motoring Expenditure (RME) were paid above the previous approved rates, Income Tax and Class 1 National Insurance contributions may have been deducted unnecessarily.
As the revised rates apply from 6 April 2026, some businesses may need to revisit payroll records for earlier months in the tax year. Correcting these records could allow overpaid tax and both employer and employee National Insurance contributions to be refunded.
Don't Miss an Opportunity to Claim Back Overpayments
Reviewing mileage payments now could save your business money and ensure employees receive the correct reimbursement. Taking action sooner rather than later can help avoid complications later in the tax year and ensure payroll records remain accurate and compliant.
Need Help?
Understanding changes to tax and payroll legislation can be time-consuming, particularly when updates are applied retrospectively. If you're unsure how these mileage allowance changes affect your business, or if you need assistance correcting payroll records and processing refunds, AP Robinson are here to help.
Get in touch with our team today for expert advice and support tailored to your business.
