Every Worker Using Their Car Could Claim £300 From HMRC at 55p a Mile

• The 55p a mile tax-free rate for business trips in a personal car has been made permanent, and the rate above 10,000 miles rises from 25p to 35p in April 2027.
• The Treasury says the changes are worth £120 a year at 6,000 business miles and £300 a year at 15,000 miles, and about 3 million people stand to benefit.
• Employers do not have to pay the full rate, and workers paid less can claim tax relief on the gap from HMRC for the current tax year and the four before it.

The 55p Rate Is Now Permanent, and Your Employer Could Be Paying Less

The Government announced on Monday 26 October that the 55p a mile tax-free rate for work trips in a personal car will stay for good. It was scheduled to end in April 2027. The Treasury says about 3 million people will benefit, with the saving worth £120 a year to someone covering 6,000 business miles and £300 a year to someone covering 15,000. Those figures compare the current rates with the ones in force before April 2026.

The headline rate hides the detail that counts most for ordinary employees. Employers are free to reimburse less than 55p a mile. They can pay 30p, 20p or nothing at all. When a worker is paid less than the tax-free maximum, HMRC lets them claim tax relief on the shortfall, and that refund is where the money sits.

What the Mileage Rates Are Now

HMRC sets a tax-free rate for every business mile driven in your own vehicle. For cars and vans it is 55p a mile for the first 10,000 miles in a tax year and 25p a mile after that. Before 6 April 2026 the first-band rate was 45p, so the rise is 10p a mile. Motorcycles stay at 24p a mile and bicycles at 20p. GOV.UK lists these figures for the 2026 to 2027 tax year.

MoneySavingExpert reports that the rate above 10,000 miles climbs from 25p to 35p on 6 April 2027. The first rise helps anyone who drives a few thousand work miles a year. The second helps the people who cover long distances, such as sales staff, carers, surveyors and engineers who visit several sites a week.

The rate covers business trips only. Travel between home and your normal place of work does not count, and the one exception is a temporary workplace. Drivers of company cars are treated differently. They can claim relief on fuel and electricity used for business trips, based on the actual cost, and they need to keep records of that cost. If an employer reimburses part of it, only the difference can be claimed.

How the £300 Figure Works Out

The Treasury figures can be rebuilt with a calculator. At 6,000 business miles, the move from 45p to 55p lifts the tax-free amount by £600. A basic rate taxpayer pays 20% on money that would otherwise be taxed, so £600 becomes a £120 saving. At 15,000 miles, the first 10,000 gain 10p each, which is £1,000, and the extra 5,000 gain 10p each once the 35p rate starts, which is £500. That makes £1,500 and a £300 saving at 20%. The Treasury has not published its workings in the report MoneySavingExpert cites, but the numbers fit a basic rate taxpayer.

MoneySavingExpert gives a worked example for an employee. At 6,000 business miles and 55p a mile, the most an employer can pay tax-free is £3,300. If the employer pays 30p a mile, that is £1,800, and the shortfall is £1,500. A basic rate taxpayer can claim back 20% of that gap, which is £300. A higher rate taxpayer, paying 40%, would claim £600 on the same numbers. These are illustrations, not guarantees, and the refund depends on your own tax band and your mileage records.

Workers whose employers pay no mileage allowance at all sit at the top of the scale. HMRC says to subtract whatever your employer pays for your vehicle costs from the amount you can claim. If that payment is zero, the full £3,300 on 6,000 miles is the starting point, and a basic rate taxpayer would claim £660. Workers already reimbursed at 55p a mile or more have nothing to reclaim.

Martin Lewis, the founder of MoneySavingExpert, described the earlier rise in the rate as a “really important” change. He also said it would be “really quite useful for people.”

What Self-Employed Drivers Can Deduct

Self-employed drivers can use HMRC simplified expenses instead of working out the actual cost of running a vehicle. The flat rates are the same: 55p a mile for the first 10,000 business miles, 25p after that and 24p for motorcycles. A sole trader who covers 10,000 qualifying miles can deduct £5,500 from taxable profit. At 20% income tax that is worth £1,100, before any National Insurance effect. Under the old 45p rate the same miles produced a £4,500 deduction, so the extra £1,000 of deduction is worth £200 to a basic rate taxpayer.

The system has limits. It covers cars, vans and motorcycles, but not vehicles designed for commercial use, such as black cabs, hackney carriages and dual control cars used by driving instructors. It cannot be used for a vehicle where you have already claimed capital allowances, or where you have counted the vehicle as an expense when working out profit. Once you use flat rates for a vehicle you must keep using them for as long as you use it in the business. Parking and other travel costs, such as train fares, can be claimed on top of the flat rate.

That lock-in rule deserves a pause before you choose. A driver with a high-mileage, fuel-hungry van might do better claiming actual costs. A driver with a small car and a long round of client visits will usually do better with the flat 55p.

How to Claim From HMRC and What You Need to Keep

Employees who are paid less than the tax-free rate need records. HMRC asks for the date and mileage of each work trip, totalled by vehicle type. When you send copies of your mileage logs, every trip needs its purpose and its start and end postcodes. If you have more than one employment, send a separate log for each. Employees who already file a Self Assessment tax return claim through the return instead, and everyone else uses the online claim service.

The claim window is longer than most people expect. You can claim for the current tax year and the four previous ones, if you are eligible. Bear in mind that the 55p rate applies from 6 April 2026. For earlier years the first-band rate was 45p, so older claims will be worth less per mile than a claim for this year.

A practical routine helps. Check your payslip or expenses policy to find out how many pence per mile your employer pays. Pull together diary entries, calendar bookings or satnav history to build a log. Work out the tax-free maximum by multiplying your miles by the HMRC rate, subtract what your employer paid, and claim relief at your tax rate on what is left. Keep every record, as HMRC can ask to see them.

What Changes in April 2027 and Who Gains Most

Two dates are worth noting. The 55p rate for the first 10,000 miles no longer has an end date, so the uncertainty about April 2027 is gone. The rate above 10,000 miles rises to 35p from 6 April 2027, a 10p increase on the 25p now in force. Motorcycle and bicycle rates do not change.

Employers are not obliged to follow suit. MoneySavingExpert points out that employers do not have to pay anything for business mileage, and a firm still paying 45p a mile or a flat monthly sum is not breaking any rule. Workers in that position have a case for asking the payroll team to review the policy, and a fallback in HMRC relief if the answer is no.

Those who gain most are people with long business mileage and a low employer allowance: community nurses, home carers, field engineers, delivery drivers on their own insurance and sales staff covering a wide territory. Take someone who drives 15,000 business miles and is paid 40p a mile, or £6,000. Once the 35p band arrives the tax-free maximum is £7,250 (10,000 miles at 55p plus 5,000 at 35p), so the shortfall is £1,250. The tax relief on that gap is £250 at 20%. The same worker taxed at 40% would claim £500.

The first step is to find out what you are actually being paid per mile, because that figure decides whether there is anything to claim.

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Sources:

• MoneySavingExpert: Use your own car or van for work? You could get extra tax relief worth £100s as mileage rates rise announced
• GOV.UK: Claim tax relief for your job expenses: Vehicles you use for work
• GOV.UK: Simplified expenses if you’re self-employed: Vehicles