HMRC mileage rate increase to 55p from 6 April 2026: what agency owners need to know, without describing the rate as permanent

Key takeaways

• The HMRC mileage rate increase to 55p from 6 April 2026 applies to the first 10,000 business miles in a tax year. Miles after that are paid at 25p per mile. This is a proposed future change, not current policy. Always check the latest HMRC guidance before making decisions.
• For agency owners, this change means you can reimburse yourself or your team more tax-free for business travel. It also means your agency can claim a larger tax deduction for mileage payments.
• The 55p rate is not permanent. HMRC reviews mileage rates regularly. They can go up or down in future tax years. Do not assume this rate will stay the same beyond 2026/27.
• Electric car mileage rates are different. The approved rate for electric cars is currently 9p per mile (as of 2025/26). This rate may also change. Check the latest HMRC guidance for electric vehicles.
• You need proper records. To claim mileage, you must keep a log of business journeys. This includes the date, destination, purpose, and miles driven. Without records, HMRC can reject your claim.

What is the HMRC mileage rate increase to 55p from 6 April 2026?

The HMRC mileage rate increase to 55p from 6 April 2026 is a proposed change to the Approved Mileage Allowance Payment (AMAP) rate. AMAP is the amount HMRC says you can pay employees (including directors) tax-free for using their own car for business travel. The rate for the first 10,000 business miles in a tax year would rise from 45p to 55p. Miles after 10,000 would stay at 25p per mile.

This is a future proposal, not a confirmed policy. HMRC has not yet published final guidance for the 2026/27 tax year. You should check the official HMRC mileage and fuel rates guidance before making any payroll or tax decisions.

For marketing and creative agency owners, this change matters because many of you drive to client meetings, site visits, events, and networking sessions. If the rate is confirmed, you could reimburse yourself or your team more tax-free for those journeys.

How does the 55p mileage rate work for agency owners?

The 55p rate applies to the first 10,000 business miles in a tax year. A tax year runs from 6 April to 5 April. So for the 2026/27 tax year, you would use 55p per mile for the first 10,000 miles and 25p per mile for any miles after that.

Here is a simple example. Say you drive 12,000 business miles in 2026/27. Your reimbursement would be:

• First 10,000 miles at 55p = £5,500
• Next 2,000 miles at 25p = £500
• Total reimbursement = £6,000

Under the current 45p rate (2025/26), the same 12,000 miles would give you £5,000. So the proposed change would mean an extra £1,000 in tax-free reimbursement for the same mileage.

This is a significant increase for agency owners who drive frequently. If you visit clients regularly or travel between offices, the extra 10p per mile adds up quickly.

What does the 55p mileage rate mean for agency mileage reimbursement 2026/27?

The agency mileage reimbursement 2026/27 process stays the same. You pay your employees (or yourself as a director) the approved rate per mile. The payment is tax-free and NIC-free up to the approved amount. If you pay more than the approved rate, the excess is taxable.

For example, if you reimburse at 60p per mile, the first 55p is tax-free. The extra 5p per mile is a taxable benefit. Your employee would pay tax on that 5p through payroll.

Most agencies reimburse at the approved rate to keep things simple. This avoids any tax complications. If the 55p rate is confirmed, you would update your mileage policy to use 55p per mile from 6 April 2026.

You should also update your accounting software. Most tools like Xero, QuickBooks, and FreeAgent let you set custom mileage rates. Change the rate before the new tax year starts so your team gets the right amount from day one.

How does the 55p mileage rate affect directors?

The 55p mileage rate directors can claim works the same way as for employees. As a director, you can reimburse yourself for business miles driven in your personal car. The payment is tax-free up to the approved rate.

Many agency directors use their personal cars for business. Client meetings, supplier visits, and networking events all count as business travel. Your commute from home to your regular office does not count. Only journeys for business purposes qualify.

If the 55p rate is confirmed, you could pay yourself more tax-free for the same mileage. This is a simple way to extract money from your agency without extra tax or National Insurance.

But you must keep proper records. HMRC can ask for evidence of your business journeys. A simple spreadsheet with dates, destinations, purposes, and mileages is enough. Do not rely on memory. HMRC will not accept estimated claims.

What business travel expenses agency owners can claim?

Business travel expenses agency owners can claim include mileage for using a personal car, plus other travel costs. The 55p rate covers the cost of fuel, insurance, maintenance, and wear and tear. You cannot claim separate fuel costs on top of the mileage rate.

Other allowable business travel expenses include:

• Train and bus fares for business journeys
• Taxi fares to and from client meetings
• Parking charges at business destinations
• Hotel costs for overnight business trips
• Subsistence (food and drink) for overnight travel

These expenses are separate from mileage. You can claim them in addition to the mileage rate. But you must keep receipts for all of them. HMRC can ask for evidence.

For agency owners, the most common travel expenses are mileage, parking, and client lunch meetings. Keep a system for tracking these. A simple folder in your accounting software or a dedicated spreadsheet works well.

Why is the HMRC mileage rate increasing to 55p?

HMRC reviews mileage rates each year based on motoring costs. Fuel prices, insurance premiums, and maintenance costs have all risen in recent years. The proposed increase from 45p to 55p reflects these higher costs.

This is not the current 2026/27 position, subject to future HMRC changes. HMRC can adjust rates up or down in future tax years. The rate for 2026/27 is a proposal at this stage. It may be confirmed or changed before April 2026.

For agency owners, the key point is to stay informed. Do not assume the 55p rate will last forever. Check the official HMRC guidance each year before setting your mileage policy.

The last significant change to the first-10,000-mile rate was in 2011, when it rose from 40p to 45p. Before that, the rate had been 40p since 2002. So increases are rare, but they do happen when costs rise significantly.

What about electric car mileage rates?

Electric car mileage rates are different from petrol and diesel rates. The current approved rate for electric cars is 9p per mile (as of 2025/26). This rate covers the cost of electricity for charging.

If you or your team drive electric cars for business, you use the 9p rate, not the 55p rate. The 55p rate is for petrol and diesel cars only. Electric car rates may also change in future tax years.

Some agencies are switching to electric vehicles to reduce costs and carbon emissions. The 9p rate is much lower than the petrol/diesel rate. But the overall cost of running an electric car can still be lower, especially if you charge at home or at the office.

Check the latest HMRC mileage allowances publication for the most up-to-date electric car rates.

How does the mileage rate affect corporation tax?

The mileage rate affects your agency's corporation tax. When you reimburse an employee or director for business mileage, that payment is an allowable expense. It reduces your taxable profit and therefore your corporation tax bill.

For example, if you pay £6,000 in mileage reimbursements in a year, your taxable profit is £6,000 lower. At the current 25% corporation tax rate (for profits over £250,000), that saves you £1,500 in tax. For profits under £50,000, the rate is 19%, saving you £1,140.

If the 55p rate is confirmed, your mileage deductions would increase. This means a larger tax saving for the same number of business miles. It is a straightforward way to reduce your agency's tax bill legitimately.

But remember: you can only claim for genuine business journeys. Personal travel does not qualify. And you must have records to support your claims.

What records do you need for mileage claims?

HMRC requires you to keep a record of each business journey. The minimum information needed is:

• Date of the journey
• Start and end locations
• Purpose of the journey (e.g., client meeting, site visit)
• Miles driven

You do not need to submit these records with your tax return. But you must keep them in case HMRC asks to see them. Keep records for at least six years after the end of the tax year.

Many agency owners use apps to track mileage automatically. Tools like MileIQ, TripLog, and Driversnote log your journeys using GPS. They create reports you can export to your accountant or accounting software.

If you prefer a manual approach, a simple spreadsheet works fine. Just be disciplined about recording journeys on the day you make them. Do not try to reconstruct your mileage months later. HMRC will spot gaps and inconsistencies.

How do you set up mileage reimbursement in your agency?

Setting up mileage reimbursement is straightforward. Here is a step-by-step process:

First, decide on your mileage policy. Most agencies use the HMRC approved rate. This keeps things simple and avoids tax complications. If the 55p rate is confirmed, update your policy to use 55p per mile from 6 April 2026.

Second, tell your team about the policy. Explain what counts as business travel and what does not. Make sure everyone knows they need to keep records. Provide a template or recommend a mileage tracking app.

Third, set up the rate in your payroll or accounting software. Most tools let you add a custom mileage rate. Change it before the new tax year starts so payments are correct from day one.

Fourth, process reimbursements regularly. Monthly is common. Collect mileage logs from your team, calculate the payment, and add it to their pay or process it as a separate expense payment.

Fifth, keep all records for at least six years. This includes mileage logs, payment records, and any receipts for other travel expenses.

What are common mistakes agency owners make with mileage?

The most common mistake is claiming for commuting. Travel from your home to your regular workplace is not business travel. Only journeys for business purposes count. If you work from home and visit a client, that journey is business travel. But your daily drive to a co-working space or office is commuting.

Another mistake is not keeping records. HMRC can reject your claim if you cannot show evidence of business journeys. Do not rely on memory. Keep a log.

A third mistake is mixing personal and business mileage. If you use the same car for personal and business travel, you can only claim the business portion. Keep a separate log for business journeys.

Finally, some agencies pay more than the approved rate without realising the excess is taxable. If you pay 60p per mile, the extra 5p is a taxable benefit. Your employee pays tax on it through payroll. This adds complexity. Stick to the approved rate to keep things simple.

How can agency owners prepare for the 55p rate change?

If the 55p rate is confirmed, here is how to prepare:

First, update your mileage policy. Change the rate from 45p to 55p for the first 10,000 miles. Communicate the change to your team so they know what to expect.

Second, update your accounting software. Set the new rate to apply from 6 April 2026. Test it before the new tax year starts to make sure calculations are correct.

Third, review your team's mileage patterns. If someone drives more than 10,000 business miles a year, the 25p rate for additional miles still applies. Consider whether it makes sense for them to use a company car instead.

Fourth, talk to your accountant. They can confirm how the change affects your specific situation. They can also help you set up the right systems for tracking and claiming mileage.

Getting this right is a small but meaningful way to improve your agency's financial health. Specialist accountants for digital marketing agencies can help you navigate these changes and make sure you are claiming everything you are entitled to.

What should you do if you have questions about the 55p rate?

If you have questions about the HMRC mileage rate increase to 55p from 6 April 2026, start by checking the official HMRC guidance. The HMRC mileage and fuel rates page has the most up-to-date information.

You can also speak to your accountant. They can explain how the change affects your agency specifically. Every agency is different. Your mileage patterns, vehicle choices, and tax situation all matter.

For agency owners who want a broader view of their financial health, take our free Agency Profit Score. It takes five minutes and gives you a personalised report on your agency's profitability, cash flow, and financial systems.

The key takeaway is simple. The proposed 55p rate is good news for agency owners who drive for business. It means more tax-free reimbursement and a larger tax deduction. But it is not permanent. Stay informed, keep records, and check the official guidance each year.