It has only taken 15 years and a Middle East crisis for the Government to recognise the reality of today’s costs of running a car or van for business purposes.
On the 21st May, Chancellor Rachel Reeves announced that the Approved Mileage Allowance Payment (AMAP) rate is to be increased from 45p per mile to 55p per mile and that this rate would be backdated to the start of this tax year on 6 April 2026.
The increase will, however, only apply to the first 10,000 business miles covered in a tax year. The rate for business mileage in excess of this figure will remain at 25p and the single rate for motorbikes and cycles will also remain unchanged at 24p and 20p respectively. The Chancellor said she would be reviewing rates generally again at the time of her next Budget.
What exactly is the Approved Mileage Allowance Payment (AMAP)?
It is a payment rate set by HMRC designed to cover the running costs of a car, van etc used by the owner (an employee or a self-employed person) for business purposes.
Small businesses owners and limited company contractors who use their own personal vehicles will use this rate for mileage expense claims and reimbursement from their limited company.
The mileage rate is deemed to cover the cost of fuel, insurance, road tax, maintenance, repairs, wear and tear and any other costs involved in using a car or van (or motorbike/cycle) for business purposes.
Who can claim the AMAP?
Employees:
If your employer pays you less than the AMAP rate for genuine business mileage incurred on their behalf, you can claim Mileage Allowance Relief through your Tax Return for the difference in the two rates.
If your employer pays you more than the AMAP rate for your business mileage, the excess is treated as a taxable benefit and is also subject to National Insurance Contributions.
Self Employed persons:
If you use a car or van (or motorbike/cycle) for business purposes, you have the choice of claiming a proportion of all your motoring costs which relate to your business journeys or of claiming a deduction from your trading profits based on the AMAP rates.
Example:
Total car running costs for year: £6000
Total mileage for year: 20,000
Business mileage for year: 10,000
Private use 50%
Claim as deduction from profits £6000 less 50% private = £3000
Claim as deduction from profits under AMAP 10,000 @ 55p = £5500
What is meant by business mileage?
Here’s a reminder of what is or isn’t considered to be business mileage for any claim to AMAP:
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You must be using your own vehicle (different rules apply if you’re using a company car)
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Mileage covered by ordinary commuting between home and your normal workplace is not business mileage
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Visiting a temporary workplace and travel between temporary workplaces may be business mileage
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For self – employed tradespeople, travelling to clients for work purposes, from your place of business would be allowable.
What record of business mileage do I need to keep?
Whether you are claiming AMAP as an employee or a self-employed person you need to ensure that you keep proper records of your business mileage.
We recommend that you record information such as:
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The date of each trip
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The purpose of the trip
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The start and destination of each trip
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The mileage covered
As an employee claiming business mileage reimbursement from your employer you may be asked to record more or less information than shown above. We believe that this is the minimum information taxpayers need to retain as evidence in the event of an HMRC enquiry.
