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55p A Mile, But No Employer Has To Pay It: The Mileage Rise Catch

ended 04. June 2026

The tax-free mileage rate has jumped from 45p to 55p a mile for the first time in 15 years, but no employer is under any legal obligation to pay a penny of the increase.

In her statement to Parliament on 21 May 2026, Chancellor Rachel Reeves confirmed the Approved Mileage Allowance Payment (AMAP) for cars and vans will rise from 10p to 55p per mile for the first 10,000 business miles, with the rate above 10,000 miles unchanged at 25p. The figure had been frozen at 45p since the 2011/12 tax year, despite years of lobbying from the RAC, the AA and the Association of Taxation Technicians.

Crucially, the increase is backdated to 6 April 2026, so it applies to the full 2026/27 tax year, meaning claims already submitted at 45p will need checking.

But here is the part the headlines tend to bury: AMAP is a tax ceiling, not a pay floor, and that applies to every employer regardless of size. It is the maximum a business can reimburse free of tax and National Insurance, not a rate anyone is required to pay. A firm can lawfully pay 45p, 30p, or nothing at all. Where an employer pays less than 55p, the employee can claim Mileage Allowance Relief for the shortfall directly from HMRC. So the real pressure isn't legal, it's the gap between what staff now expect and what cash-strapped firms can afford.

Many employers also fix their mileage rate contractually in policies and staff handbooks, so the new cap won't apply automatically and shouldn't be changed without checking the wording.

We want your views:

  • Should businesses absorb the 10p rise to keep staff onside, or hold their rate and let employees reclaim the difference from HMRC themselves? 
  • Is a tax-free ceiling that most workers assume is an entitlement a recipe for workplace disputes, and whose job is it to manage that expectation? 
  • After 15 years frozen, does a 10p uplift genuinely reflect the real cost of running a car for work, or is it already out of date? 
  • For firms with field-based, lower-paid staff who drive their own cars, is backdated relief a lifeline or just more payroll admin no one asked for? 
  • Could the higher rate actually backfire by encouraging more car use at a time when employers are trying to cut their carbon footprint?

5 responses from the Newspage community

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Kate Underwood
Founder & Chief People Strategist at Kate Underwood HR and Training
Cue the outrage when staff discover 55p isn't theirs by right. AMAP is a tax ceiling, not a pay cheque, and no amount of wishful thinking turns "the most you can pay tax-free" into "the least you must." Fifteen years frozen, and the big reveal is 10p. Thrilling. It's already behind the real cost of motoring, so let's not pretend the Chancellor's solved anything beyond a headline. For a small firm, that 10p a mile is a genuine bill, not spare change down the back of the sofa. Match the cap to look generous, and you've bought yourself a precedent you can't unbuy. So spare yourself the grief: tell staff plainly what you pay, point them to Mileage Allowance Relief for the rest, and read your own handbook before you "helpfully" rewrite it. Honesty is cheaper than a grievance and far less paperwork.
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Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
Most firms will not pass this increase on to their staff because it's an added expense that small businesses cannot afford at this time. The real winners here are the self employed where this will be a direct saving to their tax bill at the end of the year. This is significant, but it is disappointing to see the rate above 10,000 miles has not changed, meaning the cost to the treasury is mitigated very cleverly.
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Anita Wright
Chartered Financial Planner at Ribble Wealth Management
What strikes me is the gap between what people think they've been handed and what's actually changed. A tax ceiling went up. Nobody's pay packet did, unless their employer chooses to follow. That distinction will be lost on most people. Should firms absorb the rise? The ones who can afford to probably should, because goodwill is cheap compared to losing good staff. But plenty can't, and telling a cash strapped business to find another 10p a mile is easier said than paid. As for whether 55p reflects reality after fifteen frozen years, I'd say it's already behind. Running costs have run hard, and a number that took that long to move is unlikely to have caught up. It's a step, not a fix. The real risk is an expectation problem dressed up as a pay rise, and someone in HR is about to find that out.
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Kate Allen
Owner at Finest Stays
I was pretty annoyed when I discovered by reading this alert that the new 55p mileage rate isn't actually mandatory. Our HR software provider flagged the increase with no explanation, so I announced it to the team, increased our rate and even agreed to backdate payments to April. I suspect none of my staff would have known about the change if I hadn't raised it myself.

As a small business, the extra cost isn't huge because our mileage claims are relatively low, but we still count the pennies. My frustration isn't with the increase itself after 15 years of no movement, it's that employers are often left managing expectations because changes like this are communicated as if they're an entitlement rather than simply a tax-free maximum.
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Nouran Moustafa
Practice Principal & IFA at Roxton Wealth
This is a good example of a policy that sounds simple but creates a messy workplace conversation. The 55p rate is not a legal entitlement; it is a tax-free ceiling. That distinction matters because employees may hear “mileage rate has gone up” and assume their employer must pay it.

For lower-paid, field-based workers, the rise is important. Running a car for work is not cheap once fuel, insurance, servicing, tyres and depreciation are included. After 15 years frozen, 55p is welcome, but it is not some generous windfall.

Businesses now need to be clear. Either absorb the rise if cash flow allows, or explain properly how employees can claim relief where the firm pays less. Silence will create resentment.

The backdating also means payroll and expenses teams need to check what has already been submitted. The real risk here is not just cost; it is confusion turning into a trust problem.