Tax year: 2026/27 | Last reviewed: 2 October 2026
If you use your own vehicle for business journeys, you can be reimbursed tax-free at HMRC’s approved mileage rates. It is one of the most overlooked ways to take money out of a limited company, and a valuable deduction for sole traders. The car and van rate rose from 45p to 55p a mile from 6 April 2026, the first increase since 2011, but the rules about which journeys count still catch people out.
Approved mileage rates
| Vehicle | First 10,000 business miles | Over 10,000 miles |
|---|---|---|
| Cars and vans | 55p | 25p |
| Motorcycles | 24p | 24p |
| Bicycles | 20p | 20p |
An employer can also pay 5p a mile tax-free for each colleague carried as a passenger on the same business trip.
Directors and employees
For qualifying journeys in your own car, 8,000 business miles at 55p per mile gives an approved Income Tax amount of £4,400 in 2026/27. The company should retain a mileage log and review the business purpose of the payments before claiming a corporation tax deduction. National Insurance has a separate qualifying-amount calculation, so do not assume that its rules are identical to Income Tax.
If your employer pays less than 55p, you can claim tax relief on the difference through your tax return or HMRC’s online form.
Sole traders and partners
Sole traders can use the same rates as a simplified expense instead of claiming actual running costs. If you choose the mileage rate, you cannot also claim fuel, insurance, servicing or capital allowances on that vehicle. Once chosen for a vehicle, you must stick with the method while you have it. For cars bought on finance, check which method gives more relief. See our sole trader expenses guide.
What counts as a business journey?
- Visiting clients, customers or suppliers
- Travelling to a temporary workplace, such as a site you are at for less than 24 months
- Trips to the bank, post office or a trade counter for business
- Travel between two workplaces of the same business
Ordinary commuting is not business mileage. Driving from home to your normal permanent workplace does not count, even if you take a work phone call on the way. If you genuinely work from home and your home is your base, journeys from home to clients usually do count.
Keeping a mileage log
HMRC regularly checks mileage claims and expects a record of each trip showing:
- date
- start and end point
- purpose of the journey
- business miles
A mileage app or a log in Xero makes this easy. Round numbers in a spreadsheet at year end are a red flag.
Mileage in a company car
The 55p rate is only for your own vehicle. If you drive a company car, the company can reimburse business fuel at HMRC’s advisory fuel rates, or electricity at the advisory electric rate. Read electric vs hybrid company cars.
FAQs
Is mileage allowance taxable?
No, up to the approved rates. Anything paid above 55p or 25p is taxable and goes on a P11D or through payroll.
Can I claim mileage and fuel?
Not both for the same journeys. The 55p rate is designed to cover fuel, wear and tear, insurance and depreciation.
Does the 10,000 mile limit reset?
Yes, each tax year, and it applies per employment rather than per vehicle.
Talk it through with Digivolve
We set up mileage claims properly for directors and sole traders, including app-based logs that make HMRC enquiries painless.
This article is general information based on the rules for the 2026/27 tax year as at October 2026. It is not personal tax advice. Rates and thresholds can change, so please speak to us before acting.