Wider reform needed following mileage rate rise, says ATT
The increase in the tax-free mileage rate for travel in an employee’s own car or van from 6 April 2026 is a welcome first step, but the system still leaves many employees out of pocket and should be simplified and reviewed annually, says the Association of Taxation Technicians (ATT).
In a Budget representation, the ATT called on the Government to build on the increase earlier this year in the Approved Mileage Allowance Payments (AMAPs) rate for the first 10,000 business miles travelled in an employee’s own car or van in a tax year by reviewing all remaining rates and the structure of the relief.
From April 2026, the main rate for cars and vans increased from 45p to 55p per mile for the first 10,000 business miles, but the 25p rate for mileage above that threshold was left unchanged. The rates for motorcycles and bicycles were also unchanged.
AMAPs allow employers to reimburse employees who use their own vehicles for business travel without creating tax or National Insurance consequences, provided payments do not exceed the approved amounts.
The ATT says the two-tier structure for cars and vans should be replaced with a simpler single 60p per mile rate for Income Tax and National Insurance purposes, to take account of the movements in inflation since the previous 45p per mile rate was introduced back in 2011. It is also calling for all AMAP rates to be reviewed annually, in a similar way to HMRC's advisory fuel rates for company cars (which are reviewed and updated on a quarterly basis).
Jon Stride, chair of the ATT's Technical Steering Group, said:
“The increase to 55p per mile was welcome and long overdue, but it only addressed part of the problem. Employees who drive more than 10,000 business miles still see the tax-free rate fall sharply to 25p, while the motorcycle and bicycle rates were not increased at all.
“A simpler single rate would be easier for employers to administer and fairer for employees, particularly those whose jobs require them to cover substantial distances in their own vehicles.
“The new main rate should not now be allowed to stand still for another 15 years. To align with the rules for mileage travelled in a company car, all of the approved mileage rates should be reviewed every year so that they remain aligned with the real costs workers face.”
Motoring taxes continue to generate significant revenue for the Exchequer. HMRC’s latest receipts figures show that fuel duty receipts totalled £2.1 billion in August 2026, up from £2.0 billion in August 2025, underlining the importance of ensuring that tax-free mileage rates keep pace with the costs faced by employees who use their own vehicles for work.
Notes for editors:
- ATT Budget Representation - HMRC approved mileage rates.
- Bank of England inflation calculator.
- HMRC tax receipts and National Insurance contributions for the UK.