If you drive your own car on company business, your limited company can pay you a tax-free mileage allowance. And from 6 April 2026 the rate went up for the first time since 2011.
Quick answer: 2026/27 approved mileage rates (AMAP)
Vehicle First 10,000 business miles Over 10,000 miles Car or van 55p (was 45p) 25p Motorcycle 24p 24p Bicycle 20p 20p Each passenger (business) 5p 5p Paid at or below these rates, mileage is tax-free and NI-free for you and deductible for the company.
What changed in 2026/27
The government announced in May 2026 that the car/van rate rises from 45p to 55p for the first 10,000 business miles, backdated to 6 April 2026, for both income tax and NI.
If your company has been paying 45p since April, it can pay you the 10p-a-mile shortfall for 2026/27 business miles tax-free. Do it now.
What counts as business mileage?
✅ Business travel:
- driving to a client's or supplier's premises
- travelling to a temporary workplace, e.g. a project site you'll attend for under 24 months
- driving to the bank, post office or an accountant's meeting for the business
- trips between two workplaces during the working day
- from home to these places, if your home is genuinely your company's base
❌ Not business travel:
- Commuting to a permanent workplace, such as an office you rent and go to every day
- Mainly private trips with a business errand added
- Travel to a site you've been at, or expect to be at, for more than 24 months, or where you spend 40%+ of your working time over that period
The 24-month rule (temporary workplaces)
A workplace is temporary if you go there for a limited duration or temporary purpose. If you expect to spend 40% or more of your working time there over a period longer than 24 months, it becomes a permanent workplace and travel there is commuting. That's relevant for contractors on long engagements.
Working from home
If your home is your company's base (you run the business from there), travel from home to clients and temporary sites is usually business travel. If you also have a permanent office, home-to-office is commuting.
Worked example
Priya drives her own car 12,000 business miles in 2026/27.
| Amount | |
|---|---|
| First 10,000 miles × 55p | £5,500 |
| Next 2,000 miles × 25p | £500 |
| Tax-free mileage paid to Priya | £6,000 |
| Company corporation tax saving (19%) | £1,140 |
| Pre-tax profit she'd need to take £6,000 as dividends (higher rate) | ≈ £11,530 |
That's £6,000 in her pocket, tax-free, for a net cost to the company of £4,860.
Company car vs own car
Mileage allowance only applies to your own car (or van). If the company owns or leases the car:
- it pays the running costs directly;
- you pay benefit-in-kind tax on the car (see Electric company cars);
- for business fuel/electricity you reimburse or are reimbursed using HMRC's advisory fuel rates (AFR) or advisory electric rate (AER), currently 7p per mile for home charging and 15p for public charging (from 1 June 2026, reviewed quarterly).
VAT on mileage
A VAT-registered company can reclaim VAT on the fuel element of the mileage payment (using the advisory fuel rate), but only if you keep fuel receipts that cover the business miles.
How to claim
- Keep a mileage log for every business journey.
- Submit a monthly expense claim to the company: miles × rate.
- The company pays you (or credits your director's loan account).
- Track your running total so you switch to 25p after 10,000 miles.
Mileage log template:
| Date | From | To | Purpose | Miles | Rate | Amount |
|---|---|---|---|---|---|---|
| 07/04/2026 | Home (base) | Client, Watford | Year-end meeting | 46 | 55p | £25.30 |
| 15/04/2026 | Home (base) | HSBC branch | Bank paperwork | 8 | 55p | £4.40 |
Phone apps that log journeys by GPS are fine, as long as each journey has a business purpose.
If the company pays less than 55p
You can claim Mileage Allowance Relief for the difference through Self Assessment (or form P87 for claims up to £2,500). It's usually simpler for your own company to pay the full rate.
Common mistakes
- Still paying 45p in 2026/27.
- Claiming commuting to a permanent office.
- No mileage log.
- Claiming mileage and fuel receipts for the same journey (double claim).
- Forgetting to drop to 25p after 10,000 miles.
- Claiming mileage in a company car (use AFR/AER instead).
Part of our series: Limited company director expenses: the complete 2026/27 guide
Related: Travel & subsistence expenses · Electric company cars · Working from home
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General information for 2026/27, not personal advice.