HMRC mileage rate increase to 55p from 6 April 2026: what agency owners need to know

Key takeaways

• The HMRC mileage rate increases to 55p per mile from 6 April 2026 for the first 10,000 business miles in cars and vans. This is a 10p increase from the current 45p rate.
• This applies to both employees and directors using their own vehicles for business travel. Agency owners can claim this rate tax-free from their company.
• Miles above 10,000 stay at 25p per mile for cars and vans. The rate for motorcycles and bicycles is unchanged.
• You need proper records to claim mileage. A log of business trips, dates, mileage, and purpose is essential for HMRC compliance.
• This change affects your tax planning for the 2026/27 tax year. Reviewing your agency mileage reimbursement 2026/27 approach now can save you money.

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

The HMRC mileage rate increase to 55p from 6 April 2026 means the approved amount for business travel in cars and vans rises from 45p to 55p per mile for the first 10,000 miles. This is the first increase in over a decade. The rate applies to the 2026/27 tax year and is confirmed on GOV.UK. Rates can change in future tax years.

For marketing and creative agency owners, this is good news. If you or your team use personal vehicles for client meetings, site visits, or events, you can claim more tax-free mileage. The 55p rate covers the cost of fuel, wear and tear, insurance, and vehicle depreciation.

The 25p rate for miles above 10,000 stays the same. Motorcycle rates remain at 24p per mile. Bicycle rates stay at 20p per mile. Passenger payments (5p per mile for carrying a colleague) are unchanged.

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

For agency directors using their own car for business, the 55p mileage rate works the same as for employees. Your agency pays you 55p per business mile tax-free. This is called a Mileage Allowance Payment (MAP). You do not pay tax or National Insurance on this payment.

The 55p mileage rate directors can claim applies to the first 10,000 business miles in the tax year. After that, the rate drops to 25p per mile. If your agency pays you less than 55p per mile, you can claim tax relief on the difference through your Self Assessment tax return.

Here is a simple example. Say you drive 8,000 business miles in 2026/27. Your agency pays you 55p per mile. That is £4,400 tax-free in your pocket. If your agency only pays 45p per mile, you can claim tax relief on the missing 10p per mile (£800) through your tax return.

For agency owners who are also directors, this is a straightforward way to extract money from your company tax-free. It is not a salary or dividend. It is a reimbursement for business expenses. You just need to prove the miles were genuinely for business.

What counts as business travel for an agency?

Business travel expenses agency owners can claim include journeys made wholly and exclusively for work. For a marketing or creative agency, this typically covers client meetings at their offices, site visits for photoshoots or events, trips to networking events or conferences, and travel between different work locations.

Your regular commute does not count. Travel from home to your main office is not business travel. HMRC is strict on this. If you work from home and travel to a client meeting, the journey from home to the client is business travel. The journey from the client back home is also business travel.

Many agency owners make the mistake of claiming commuting miles. This is a common flag in HMRC investigations. Keep your records clean and only claim genuine business journeys.

Why did HMRC increase the mileage rate to 55p?

HMRC reviews the Advisory Fuel Rates and Approved Mileage Allowance Payments regularly. The 45p rate had been in place since 2011. Fuel costs, vehicle running costs, and inflation have all risen significantly since then. The increase to 55p reflects these higher costs.

For agency owners, this means the tax-free amount you can claim better matches the real cost of running a car for business. If you have been claiming 45p per mile, you have effectively been subsidising your business travel from your own pocket. The 55p rate brings the allowance closer to reality.

This is not a permanent rate. HMRC can change it again in future. But for the 2026/27 tax year, 55p is the confirmed figure on GOV.UK.

How should agencies handle mileage reimbursement for employees?

Your agency mileage reimbursement 2026/27 process needs updating. If you currently pay employees 45p per mile, you can increase this to 55p from 6 April 2026. You do not need HMRC approval to pay the approved rate. It is automatically tax-free.

If you pay more than 55p per mile, the excess is taxable and subject to National Insurance. This creates extra payroll admin. Most agencies stick to the approved rate to keep things simple.

Here is how to set it up properly:

• Update your expenses policy to reflect the new 55p rate from 6 April 2026.
• Tell your team about the change so they know what to claim.
• Use a mileage log system to capture business trips. Spreadsheets work. Apps like MileIQ or Driversnote are better.
• Process payments through payroll or as a separate expense reimbursement. Keep records of every payment.

For agencies with multiple employees driving regularly, the difference adds up. An employee doing 5,000 business miles per year at 55p instead of 45p receives an extra £500 tax-free. That is a meaningful benefit for your team.

What records do you need to keep for HMRC mileage claims?

HMRC can ask to see your mileage records at any time. If you cannot prove the business purpose of a journey, they can disallow the claim and charge you tax and interest. For the HMRC mileage rate increase to 55p from 6 April 2026 to benefit you, you need solid records.

For each business journey, record:

• The date of the trip.
• The start and end locations (addresses or postcodes).
• The purpose of the journey (client meeting, site visit, conference).
• The miles driven for that specific trip.
• The total miles on your odometer at the start and end of the tax year (to calculate business vs personal use).

A mileage log app makes this much easier. Many sync with accounting software like Xero or QuickBooks. If you are a director claiming the 55p mileage rate, your records need to be just as thorough as for any employee. HMRC does not give directors a free pass.

How does the 55p rate affect your agency's tax position?

When your agency pays mileage at the approved 55p rate, the payment is tax-deductible for the company. It reduces your corporation tax bill. For a company paying 25% corporation tax, every £1,000 of mileage payments saves £250 in tax.

For the employee or director receiving the payment, it is tax-free. No income tax. No National Insurance. This makes mileage reimbursement one of the most tax-efficient ways to handle business travel.

Compare this to paying someone extra salary to cover travel costs. Salary is subject to income tax and employer National Insurance. Mileage at the approved rate is not. The difference is significant.

For agency owners thinking about the 55p mileage rate directors can use, this is a smart part of your overall tax planning. It is not a replacement for salary or dividends. But it is a legitimate, tax-free way to cover genuine business costs.

What about electric cars and the 55p rate?

The 55p rate applies to cars and vans. This includes electric vehicles (EVs). The rate is the same regardless of fuel type. However, HMRC also publishes Advisory Electricity Rates for company car drivers who charge at work. These are separate from the mileage rate.

For agency owners with electric cars, the 55p rate still works well. Your actual running costs for an EV are lower than for a petrol or diesel car. So the 55p rate may more than cover your costs. This is fine. HMRC does not require you to profit from mileage payments. But you cannot claim more than the approved rate tax-free.

If your agency provides a company car, the rules are different. You use Advisory Fuel Rates instead of the 55p mileage rate. Check HMRC guidance for company car fuel calculations.

How do you claim the 55p rate if you are a sole trader?

Sole trader agency owners use the 55p rate differently. You do not receive a payment from your company. Instead, you claim the mileage as a business expense on your Self Assessment tax return. The 55p rate for the first 10,000 miles applies to you too.

You have two options for claiming vehicle expenses:

• Simplified expenses (mileage rate): Claim 55p per mile for the first 10,000 business miles, then 25p per mile after that. This is simpler and covers all vehicle costs.
• Actual costs method: Claim the actual costs of running your vehicle (fuel, insurance, repairs, depreciation) based on the business percentage of total use. This requires more record-keeping but may give a higher deduction if your costs are high.

Most sole trader agency owners use the simplified expenses method. It is easier and the 55p rate is generous enough for most situations. You cannot switch between methods for the same vehicle in the same tax year. Choose one and stick with it.

What mistakes do agency owners make with mileage claims?

We see the same errors repeatedly. Here are the most common ones to avoid with the HMRC mileage rate increase to 55p from 6 April 2026:

Claiming commuting miles. Travel from home to your regular workplace is not business travel. This is the most common HMRC flag. If you work from home and your office is your home, travel from home to a client is business travel. But if you have a separate office you attend regularly, that commute is personal.

Not keeping a mileage log. HMRC expects a contemporaneous record. That means recording journeys as they happen, not reconstructing them months later. A spreadsheet updated weekly is fine. An app is better.

Claiming for personal errands. A trip to the supermarket on the way home from a client meeting is not business travel. Only the business portion of a journey counts. If you detour for personal reasons, record only the direct business route.

Using the wrong rate. The 55p rate applies from 6 April 2026. If you claim 55p for miles driven before that date, you are overclaiming. If you claim 45p after that date, you are underclaiming. Update your systems on the correct date.

Not claiming at all. Some agency owners simply do not bother with mileage claims. They absorb the cost personally. This is leaving money on the table. If you drive for business, claim what you are entitled to.

How can you prepare your agency for the 55p rate change?

Here is a simple action plan for the HMRC mileage rate increase to 55p from 6 April 2026:

Step 1: Update your expenses policy. Write down the new rate and the effective date. Share it with your team. Make sure everyone knows what counts as business travel.

Step 2: Set up a mileage tracking system. If you use spreadsheets, create a template. If you use an app, make sure everyone has access. Test it before April 2026.

Step 3: Review your payroll or reimbursement process. If you pay mileage through payroll, update the rate. If you reimburse separately, set up a clear process for approvals and payments.

Step 4: Check your vehicle situation. If you are a director, consider whether the 55p rate changes your approach to business travel. If you are thinking about an electric car, factor in the mileage rate.

Step 5: Talk to your accountant. Your accountant can confirm the rules apply to your specific situation. They can also help with tax planning around the 55p mileage rate directors can use.

Getting this right is straightforward. But getting it wrong can cost you tax, interest, and penalties. A little preparation now saves headaches later.

Where can you get help with agency mileage and tax planning?

The HMRC mileage rate increase to 55p from 6 April 2026 is one piece of your agency's tax picture. If you want to make sure your entire financial approach is solid, specialist advice helps. Score your agency's financial health with our free Agency Profit Score. It takes five minutes and gives you a personalised report on your margins, cash flow, and tax efficiency.

For more on managing agency finances, read our insights on tax planning, pricing, and profitability. We cover the specific challenges marketing and creative agencies face.

If you need hands-on help with your agency's tax and accounting, Sidekick Accounting specialises in working with agencies like yours. We understand the 55p mileage rate, business travel expenses agency owners deal with, and how to structure your finances for growth.