The government has announced an increase in the tax-free mileage rate that employees can claim for business mileage in cars, vans, Electric Vehicles, motorcycles or bicycles.

There is a new rate that applies to the first 10k business miles travelled in a car or van in a tax year and it reduces to a lower rate after the first 10k business miles. Cars and vans include electric and hybrid vehicles as well as those that run on petrol and diesel.

The increases, backdated to April 2026, means that the rates that can be claimed for the 2026-27 tax year are now as follows:

Type of Vehicle                                              Business Miles                Claim per Mile

Car or Van (incl. EV & Hybrids)              First 10,000                            £0.55

Car or Van (incl. EV & Hybrids)              After 10,000                          £0.25

All Motorcycles                                        All Mileage                             £0.24

Bicycles                                                     All Mileage                             £0.20

These new rates mean that employers can reimburse their workers claims for business travel at these rates (or below) free of tax and national insurance.

The  self-employed can make a deduction based on their business mileage without needing to make any adjustment for private use. The business is just required to keep a mileage log of business journeys. A business can only use these rates if capital allowances have not been claimed on the vehicle, and the cost of the vehicle has not been claimed as a deduction under cash basis accounting.

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