For the first time in fifteen years, employers and employees alike are seeing a substantial change to the statutory mileage allowance rules. On 21 May 2026, the government issued a written ministerial statement confirming a newly announced increase in the statutory mileage allowances for cars and vans. Crucially, this change applies to the 2026-27 tax year and has been backdated to 6 April 2026. HMRC has already updated paragraph EIM31240 of its Employment Income Manual to reflect the new structure, and the government has confirmed it will legislate retrospectively for this change at the earliest opportunity.
This unexpected mid-quarter update introduces a layer of retrospective compliance for HR and payroll teams, who must now assess how they manage expenses paid out over the last two months.
The New Mileage Allowance Rates at a Glance
The revised Approved Mileage Allowance Payments (AMAPs) framework breaks down as follows for cars and vans:
| Vehicle Type | Business Miles | New Rate (From 6 April 2026) | Change From Previous Rate |
| Cars and Vans | First 10,000 | 55p a mile | 25p a mile |
| Cars and Vans | Additional | 25p a mile | Remaining unchanged |
Key Considerations for Employers and Payroll
With the increases backdated to the start of April, your immediate focus should shift to assessing your current expense policies and payroll reporting. Employers should accordingly consider increasing the amount that they reimburse their employees to reflect the revised rates. This includes making a strategic decision on whether to uplift payments already made for April and May 2026 to reflect the backdated increase.
If your organisation has historically aligned its mileage reimbursement with the maximum statutory threshold, you face two distinct operational scenarios depending on your recent practice:
- Employers reimbursing at the old 45p rate: If you have been paying the previous maximum of 45p during April and May, you may want to issue top-up payments of 10p per mile for those journeys. Employees who have been or will be reimbursed less than the revised 55p rate may wish to consider claiming tax relief for the difference directly from HMRC.
- Employers reimbursing above the old 45p rate: If your business chose to reimburse staff above the previous 45p limit, you would have previously treated the excess as taxable income. Because the tax-free threshold has retroactively jumped to 55p, you may need to revise your payroll calculations for April and May 2026 to correct any overpaid tax and National Insurance contributions.
Key Considerations for Employers and Payroll
The ripple effect of this announcement extends beyond standard employment contracts. HMRC simultaneously updated paragraph BIM75005 of its Business Income Manual and paragraph PIM2220 of its Property Income Manual on 21 May 2026. These updates reflect the identical 55p revised mileage rate for the 2026-27 tax year onwards for self-employed traders and unincorporated landlords claiming fixed rate deductions for motoring expenses. This brings welcome parity to the wider business community, ensuring that sole traders and landlords can also benefit from heightened fixed-rate relief on their business journeys.
Reviewing your expense policies today will ensure you stay ahead of the legislative curve. If you need support updating your employment contracts, refreshing your staff expense policies, or navigating the complexities of retrospective payroll adjustments, please reach out to the team at Refreshing Law.
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We’re here to help with any questions or concerns you may have. Whether you need expert advice or would like an initial conversation about our services, pricing, or the options available, please don’t hesitate to get in touch. At Refreshing Law, what sets us apart from other law firms is that you’ll get to speak to an experienced employment lawyer right from the very first call.
lreynolds@refreshinglawltd.co.uk
Lousha Reynolds
Refreshing Law
