HMRC Mileage Rate Increase 2026 — What UK Sole Traders and Self-Employed Need to Know

🆕 Breaking — announced 21 May 2026

HMRC Mileage Rate Increase 2026 — What UK Sole Traders and Self-Employed Need to Know

The HMRC approved mileage rate has increased from 45p to 55p per mile for the first time since 2011 — backdated to 6 April 2026. If you’re self-employed and drive for work, this is the most significant mileage tax change in 15 years. Here’s exactly what it means for your tax bill.

Verified from GOV.UK
Backdating explained
Worked examples included
Updated May 2026

Updated May 2026 · This guide is for informational purposes only and does not constitute financial or legal advice — consult a qualified accountant for advice specific to your situation.

The HMRC mileage rate increase 2026 is the most significant change to approved mileage allowance payments in 15 years. On 21 May 2026, Chancellor Rachel Reeves announced a 10p per mile increase to the tax-free mileage rate for cars and vans — rising from 45p to 55p per mile for the first 10,000 business miles per year. The rate above 10,000 miles remains unchanged at 25p per mile. The increase is backdated to 6 April 2026, meaning it applies to all eligible business mileage from the start of the current 2026/27 tax year. See GOV.UK expenses guidance for the self-employed for the official HMRC rates.

45p → 55p
per mile for the first 10,000 business miles · backdated to 6 April 2026 · first increase since 2011

HMRC mileage rate increase 2026 — the new approved rates

Old rate (up to 5 April 2026)
45p
per mile · first 10,000 miles · frozen since 2011

🆕 New rate (from 6 April 2026)
55p
per mile · first 10,000 miles · backdated to 6 April 2026

Above 10,000 miles (unchanged)
25p
per mile · no change · same as before

Motorcycle and bicycle rates unchanged: The 55p increase applies only to cars and vans. Motorcycle rates remain at 24p per mile and bicycle rates remain at 20p per mile. The new rate applies equally to petrol, diesel, hybrid, and electric vehicles — HMRC has not introduced a separate rate for electric cars.

HMRC mileage rate increase 2026 — what it means in pounds for UK sole traders

The HMRC mileage rate increase 2026 translates directly into lower tax bills for self-employed sole traders who drive for work. Every additional mile you can legitimately claim at the higher 55p rate reduces your taxable profit — saving you income tax and National Insurance on that amount.

Annual business miles Old claim (45p) New claim (55p) Extra deduction Tax saving (20% rate)
3,000 miles £1,350 £1,650 +£300 ~£60/year
5,000 miles £2,250 £2,750 +£500 ~£100/year
8,000 miles £3,600 £4,400 +£800 ~£160/year
10,000 miles £4,500 £5,500 +£1,000 ~£200/year
12,000 miles (mixed rate) £5,000 £6,000 +£1,000 ~£200/year
Tax saving note: The figures above show the additional tax-deductible expense from the rate increase. The actual cash tax saving depends on your income tax rate — 20% for basic rate taxpayers, 40% for higher rate. A basic rate taxpayer driving 10,000 business miles saves approximately £200 in income tax. A higher rate taxpayer saves approximately £400. National Insurance savings add further to this. Consult an accountant for a precise calculation specific to your situation.

HMRC mileage rate increase 2026 — who benefits most

🚗 Driving instructors (ADIs)
+£1,000+/year
ADIs driving to pupils’ homes and test centres accumulate high business mileage. At 10,000 business miles per year, the rate increase adds £1,000 to claimable expenses. See our guide for UK driving instructors.

🔧 Tradespeople and contractors
+£500-£1,000/year
Plumbers, electricians, and builders driving between job sites accumulate significant business mileage. Every journey to a client’s premises qualifies. See our guide for UK tradespeople.

🏠 Landlords
+£100-£500/year
Journeys to rental properties for inspections, maintenance visits, and meetings with letting agents qualify as business mileage. See our guide for UK landlords.

💼 Freelancers and consultants
+£100-£500/year
Client visits, networking events, and travel to temporary workplaces all qualify. Working from home does not create a commute — so most client visits are claimable business mileage. See our guide for UK freelancers.


HMRC mileage rate increase 2026 — what you need to do now

If you’ve already been recording mileage this tax year at 45p

You can claim the difference. The increase is backdated to 6 April 2026 — the start of the 2026/27 tax year. If you’ve been recording mileage since April 2026 at the old 45p rate, you are entitled to claim at 55p for all eligible business miles driven since 6 April 2026. If you already use FreeAgent, QuickBooks, or another accounting tool to track mileage, check whether it has been updated to reflect the new 55p rate — and update your records accordingly.

If you use the simplified mileage method

No change to your process — just use 55p per mile when you complete your 2026/27 Self Assessment return instead of 45p. If you already use accounting software that tracks mileage, update the rate in your settings. FreeAgent and QuickBooks both have mileage tracking built in.

If you’ve never tracked business mileage

Start now. At 55p per mile, every business journey is worth more than it was last week. A straightforward mileage log — recording the date, start and end point, business purpose, and miles driven for each journey — is all HMRC requires. FreeAgent’s mobile app has a built-in mileage tracker. Dedicated mileage apps like MileIQ and Driversnote also automate this. The key rule: record journeys at the time, not from memory months later. Contemporaneous records carry significantly more weight in an HMRC enquiry.

⚠️ What doesn’t qualify as business mileage: Your regular commute from home to a fixed, permanent workplace does not qualify as business mileage — even at 55p per mile. However, most self-employed sole traders don’t have a fixed workplace, which means most of their driving is potentially claimable. Travel from home to a client’s premises, between client sites, to a temporary workplace, or to purchase supplies for the business all qualify. If you’re unsure whether a specific journey qualifies, consult an accountant.

HMRC mileage rate increase 2026 — frequently asked questions

When did the HMRC mileage rate increase take effect?

The HMRC mileage rate increase was announced by Chancellor Rachel Reeves on 21 May 2026 and is backdated to 6 April 2026 — the start of the 2026/27 tax year. This means the 55p rate applies to all eligible business mileage from 6 April 2026 onwards, even though the announcement came later. If you’ve already been recording mileage this tax year at 45p, you can claim the additional 10p per mile when you file your Self Assessment for 2026/27.

Does the HMRC mileage rate increase apply to electric vehicles?

Yes — the new 55p rate applies equally to petrol, diesel, hybrid, and electric vehicles. HMRC has not introduced a separate lower rate for electric cars under the approved mileage allowance payment scheme. All cars and vans qualify for 55p per mile for the first 10,000 business miles regardless of fuel type.

How does the HMRC mileage rate increase affect my Self Assessment?

If you’re a sole trader using the simplified mileage method, you claim business mileage as an allowable expense on your Self Assessment return. For the 2026/27 tax year (6 April 2026 to 5 April 2027), you can claim 55p per mile for your first 10,000 business miles and 25p per mile after that. This reduces your taxable profit by the total mileage claim, which in turn reduces your income tax and Class 4 National Insurance bill. The more business miles you drive, the larger the saving from the 10p increase.

Do I need to switch accounting software to benefit from the higher mileage rate?

No — but you do need to ensure your mileage tracking tool is updated to use 55p rather than 45p. If you use FreeAgent, QuickBooks, or another accounting platform with built-in mileage tracking, check the mileage rate setting and update it to 55p. If you track mileage manually on a spreadsheet, simply update the rate you apply to each journey recorded since 6 April 2026.


HMRC mileage rate increase 2026 — our summary

The HMRC mileage rate increase 2026 is straightforward good news for UK sole traders and self-employed workers who drive for business. The 10p per mile increase — the first since 2011 — is backdated to 6 April 2026 and applies to all eligible business mileage in the current tax year. At 10,000 business miles, the increase adds £1,000 to your allowable expenses and approximately £200 to your income tax saving at the basic rate.

The action items are simple: update your mileage tracking rate to 55p, ensure you have a contemporaneous record of all business journeys since 6 April 2026, and use the higher rate when you complete your 2026/27 Self Assessment. If you haven’t been tracking business mileage until now, start today — the savings justify the effort.

→ See also: FreeAgent review — includes mileage tracking · QuickBooks review · Best AI tools for UK sole traders · Best AI tools for UK freelancers · Best AI tools for UK driving instructors

Last updated: May 2026. HMRC mileage rate increase announced 21 May 2026, backdated to 6 April 2026. Verified from GOV.UK expenses guidance. This guide is for informational purposes only and does not constitute financial or legal advice — consult a qualified accountant for advice specific to your situation.