Approved mileage rates may provide relief from income tax where an employee or a self-employed individual makes business journeys in their own vehicle. Similar rules apply for the purposes of national insurance contributions (NIC).

Increase in approved mileage rates 

On 21 May 2026, the government announced a 10p per mile increase in the rate applying for cars and vans for the first 10,000 business miles in the tax year (all business miles in the tax year for NIC). The government says that it will legislate retrospectively for this change, with the increased amount applying with effect from 6 April 2026, as shown in the table below.

Separate rates apply for motorcycles and bicycles, and there is also a rate for passenger payments. No changes have been announced to these rates. However, the government has committed to a review of all rates and has indicated that this will be set out at a future Budget. 

How AMAPs may be used 

For the purposes of this article, an amount calculated using approved mileage rates is referred to as the ‘AMAP amount’.  

The employer may make a payment to the employee to compensate them for the costs of using their own vehicle for business journeys. Payments cannot be made for ordinary commuting. The payment is free of income tax and NIC to the extent that it is below or equal to the AMAP amount. Where the payment exceeds the AMAP amount, the excess is liable to income tax/NIC. Employers who made payments in excess of the AMAP amount may need to re-run their payroll for April to May 2026 to account for the change in the rate.  

The employee may claim a deduction from earnings where: 

• the payment made by the employer is less than the AMAP amount, in which case the deduction is equal to the difference between the payment and the AMAP amount; or
• no payment is made, in which case the employee may claim a deduction from taxable earnings equal to the AMAP amount.  

The self-employed can claim a deduction for the costs of making business journeys in calculating their taxable profits. They have the option of: 

• claiming for the actual costs incurred, subject to a private use adjustment where necessary; or
• claiming an amount equal to the approved mileage rate for their business miles. This is often referred to as the ‘flat rate’ or ‘simplified expenses’.

Other changes 

The government says that the increase in approved mileage rates is being made “in recognition of the pressures facing drivers as a result of the effects of the Iran war”. It follows the announcement, on 20 May 2026, of the following package of measures related to transport:   

• an extension of the 5p per litre cut in fuel duty until the end of 2026;
• a cut in the rate of duty on red diesel by over a third, from 10.18p to 6.48p per litre. This will be from 15 June until the end of 2026; and
• the introduction of a 12-month holiday from vehicle excise duty for the majority of heavy goods vehicles.