Using your own car for work: mileage rates and tax relief

The rates

The car and van rate was 45p for years. 55p was brought in as a temporary rate from 6 April 2026, and the 28 October 2026 Budget made it permanent and raised the rate above 10,000 miles. The changes are due to be made law in the Finance Bill 2026-27. The rates are the same for petrol, diesel, hybrid and electric cars. An employer can also pay 5p a mile tax-free for each work passenger you carry.

What counts as business miles

Journeys you make for your work: to see clients or customers, to a temporary workplace, or between sites during the day. Your commute from home to your usual workplace doesn’t count, and nor do private trips in the same car. Keep a log of each work journey: the date, where you went, why and the miles. HMRC asks for it if you claim.

If you’re an employee

Your employer can pay you up to the approved rate for your business miles with no tax or National Insurance to pay. What happens next depends on what they pay:

• Less than the rate, or nothing. You can claim Mileage Allowance Relief on the difference. Work out your miles at the approved rates, take away what your employer paid, and you get tax relief on what’s left.
• Exactly the rate. Nothing to do: it’s all tax-free.
• More than the rate. The extra is taxed as pay, and your employer reports it.

An example. You drive 6,000 business miles a year and your employer pays 30p a mile. At 55p, 6,000 miles is £3,300 tax-free; your employer pays £1,800, so you can claim relief on £1,500. As a basic rate taxpayer that’s £300 less tax. Before 6 April 2026, at 45p, the gap was £900, and the relief £180.

You can claim online through your Personal Tax Account, or on your Self Assessment return if you fill one in. You can claim for the past four tax years.

If you’re self-employed

You can claim the approved rates as a business expense instead of your vehicle’s actual costs (fuel, insurance, repairs, finance and so on). They come off your profit, so they save Income Tax and Class 4 National Insurance: 26p in the pound for a basic rate taxpayer. Once you’ve used the mileage rates for a vehicle, you have to keep using them for it.

For 15,000 business miles, the rates from April 2027 give £7,250 (10,000 at 55p and 5,000 at 35p) against £5,750 at the old 45p and 25p: £1,500 less profit and, for a basic rate taxpayer, £390 less tax and National Insurance.

What the Budget’s changes are worth

Against the 45p and 25p that would have come back without them, the rates from April 2027 are 10p a mile more for every business mile. The Budget’s own examples, for a basic rate taxpayer: £120 a year on 6,000 business miles, and £300 on 15,000. A higher rate taxpayer saves twice as much.

Work out what the mileage rates and the fuel duty freeze save you →

Common questions

Does a company car count? No. These rates are for a vehicle you own or lease yourself. Company cars have their own rules, with lower advisory fuel rates.

What if I drive more than 10,000 business miles? The first 10,000 in each tax year are at 55p, and every mile after that at the higher-mileage rate: 25p in 2026/27 and 35p from 6 April 2027.

Can I claim for parking and tolls? Yes, on top of the mileage rate, if they’re part of a business journey. Fines can’t be claimed.