The UK Government has announced an increase to the Approved Mileage Allowance Payments (AMAPs) for cars and vans, raising the rate from 45p to 55p per mile for the first 10,000 business miles travelled in the 2026/27 tax year. Although the change was announced on the 21st May, the new rate is backdated to apply from 6 April 2026, meaning eligible claims from this date can qualify for the increased 55p rate. The 25p rate for mileage above 10,000 miles remains unchanged, however.
This is the first increase in over 15 years and reflects growing pressure on the government to bring mileage allowances more in line with rising fuel, insurance and vehicle running costs. In this bulletin, Danbro Umbrella explains what this means for umbrella company contractors, as well as recruiters and end clients.
What are Approved Mileage Allowance Payments (AMAPs)?
Approved Mileage Allowance Payments (AMAPs) are often simply referred to as ‘mileage rates’, ‘mileage claims’, or ‘mileage expense reimbursements’. Put simply, they are a rate paid per mile as a reimbursement to workers who use their own personal vehicle for business purposes.
This reimbursement is intended to cover the cost of petrol, diesel or EV charging, as well as the costs of depreciation, road tax, vehicle maintenance, insurance etc.
‘Business Purposes’ typically refers to journeys such as travelling to visit clients, a different office, attending meetings, or visiting suppliers. A regular commute, wherein you drive from home to your regular place of work, does not qualify for mileage claims.
Other restrictions to claiming for business miles may apply, depending on your agency, contract, end client, umbrella company or HMRC criteria.
How have Mileage Rates Changed?
As of 21st May, the mileage allowance for the first 10,000 miles in a tax year increased to 55p per business mile, from 45p. This new rate is backdated to apply from 6 April 2026.
The previous rate had been in place since 2011, leading to pressure on the government to keep up with increased costs of driving.
The rate applied to journeys after 10,000 per tax year remains at 25p per mile, however.
What does the Increased Mileage Allowance Rate Mean for Umbrella Contractors?
For contractors, the increase means a higher reimbursement per each mile you cover in your own vehicle for business (up to 10,000 miles in a tax year).
For example, if you claimed 100 business miles on the old rate, that would be:
- 100 x 45p = £45
With the updated rate, you would now receive:
- 100 x 55p = £55.
This effectively increases your tax-free mileage expense allowance. If your agency or end client agrees to fund the additional 10p per mile, Danbro Umbrella can process the higher reimbursement through our standard expense process.
Where the agency or client does not increase funding, or does not backdate the increase, you may still be able to claim tax relief on the difference directly from HMRC through Mileage Allowance Relief (MAR).
For example:
- Previously reimbursed: 45p per mile
- New HMRC approved rate: 55p per mile
- Difference claimable via HMRC: 10p per business mile
What Does This Mean for Recruitment Agencies & End Clients?
Agencies and clients should review current assignment rates and expense processes as soon as possible. Recruitment agencies in particular should check with their end clients if they will uplift backdated mileage claims already paid in April to the new rate.
With the above, there are two main outcomes:
- Increased assignment funding to cover the additional 10p per mile so contractors receive the full HMRC-approved amount through payroll.
- Continued reimbursement at the previous rate, with contractors claiming tax relief themselves through HMRC by MAR (mileage allowance relief).
Businesses choosing the second option should ensure contractors understand that tax relief is only received at their marginal tax rate, rather than receiving a reimbursement from HMRC in cash.
FAQs about Mileage Claims
Why has HMRC Changed Mileage Rates?
Mileage rates had remained frozen since 2011 despite significant increases in fuel prices and vehicle costs. Industry bodies and unions have long argued that workers using personal vehicles for business were being left out of pocket.
The new rates are intended to better reflect the real cost of business travel and provide fairer reimbursement for workers who rely on their own vehicles.
Do Approved Mileage Allowance Payments (AMAPs) apply to Electric Vehicles?
Yes, you still get the same rate of AMAPs (55p/mile) if you use your EV for business purposes.
Depending on the purchase, depreciation, maintenance and insurance costs of the EV, this can make them a tax-efficient option for business journeys.
What is the difference between Approved Mileage Allowance Payments (AMAPs) and Mileage Allowance Relief (MAR)?
Approved Mileage Allowance Payments (AMAPs) are the HMRC-approved mileage rates that employers can reimburse tax-free for business travel in a personal vehicle.
Mileage Allowance Relief (MAR), on the other hand, applies when a contractor is reimbursed less than the approved AMAP rate, allowing them to claim tax relief from HMRC on the difference. However, MAR only provides tax relief based on the contractor’s tax band, rather than reimbursing the full unpaid amount.
What Should Contractors do Now?
Ask your agency/ end client if they will be reimbursing at the new higher rate. If your agency agrees to reimburse you at the new higher rate, Danbro Umbrella contractors should continue to follow our process for chargeable expenses, which is as follows:
If you are claiming business mileage as part of your chargeable expenses, you must provide full details of your vehicle including:
- make
- model
- fuel type
- engine size
- registration number
This can be done on your online portal or via email to your payroll team. Every time you submit a mileage claim, you must provide VAT receipts for the fuel used.
The same information must be provided for any new or additional cars you use.
Should your agency or end client not agree to reimburse at the higher rate, you may still be able to claim tax relief back on the difference by liaising with HMRC yourself.
How much tax-free reimbursement can I get with the new rate?
The total maximum amount you can get reimbursed tax free on your mileage expenses depends on the distance travelled.
For example, if you travelled exactly 10,000 miles in a tax year, you could potentially be reimbursed tax-free:
100 x 55p = £55
This is £10 more than you would have received on the previous rate.
Do my agency have to pay me the new rate?
No, it is not a legal requirement for your recruitment agency or end client to pay you the Approved Mileage Allowance Payment (mileage rate). They may, at their discretion, set their own rate, or in some cases, not pay mileage expenses at all.
In these cases, you may be able to claim the difference using the mileage allowance relief (MAR) through HMRC instead.
For example, if your agency/end client only agrees to reimburse 30p per mile, you could claim tax relief on the remaining 25p through MAR. Here’s how this looks.
- Agency reimburses: 100miles x 30p = £30
- You claim from HMRC: 100miles X (55p – 30p) = £25
- Assuming you are on the base 20% tax rate, this would give you a tax saving £5.
Questions? Get in Touch.
We hope this article has helped answer your questions about the new mileage rate.
If you still have any queries, whether you are a recruiter, end client, or contractor, get in touch today.
