From 45p to 55p: Why the AMAP Mileage Rate Had to Increase

Oct 05, 2026

Why the AMAP Mileage Rate Had to Rise from 45p to 55p

For millions of UK employees, using their own car for business travel is an ordinary part of working life. Yet until this year, the tax-free mileage rate designed to compensate them had remained unchanged since 2011.

From the 2026/27 tax year, the Approved Mileage Allowance Payment (AMAP) rate for cars and vans increased from 45p to 55p per mile for the first 10,000 business miles. The rate above 10,000 miles remains at 25p.

The change applies retrospectively from 6 April 2026.

At first glance, an extra 10p per mile might appear generous. Look at what has happened to the cost of motoring during the 15 years in which the rate was frozen, however, and a different picture emerges.

The 45p rate had been frozen since 2011

The previous 45p AMAP rate was introduced in the 2011/12 tax year and remained unchanged through to 2025/26.

That matters because AMAP is not simply a contribution towards petrol or diesel.

When an employee uses their own vehicle for business, they are providing the vehicle as well as the fuel. The cost of doing so includes:

• fuel or electricity;
• servicing and maintenance;
• tyres;
• insurance;
• depreciation;
• repairs; and
• the capital cost of owning or financing the vehicle.

The employee also carries the financial risk associated with owning that vehicle.

A mileage reimbursement therefore needs to be considered against the whole-life cost of private vehicle use, rather than simply comparing the mileage rate with the cost of fuel.

Inflation alone shows how far 45p had fallen behind

There is a simple way of illustrating the problem.

When the 45p rate was introduced in April 2011, the Office for National Statistics Consumer Prices Index stood at 93.2. By August 2026 it had reached 143.6.

If the original 45p rate had simply risen in line with general consumer price inflation, it would now be worth approximately:

45p × 143.6 ÷ 93.2 = 69p per mile

That does not mean the AMAP rate should necessarily be 69p — general inflation and motoring costs do not move in precisely the same way.

But it does demonstrate something important.

A 55p rate in 2026 is still worth materially less in real terms than 45p was when it was introduced in 2011.

The increase is therefore better regarded as catching up with part of the cost increase that has already occurred rather than creating a particularly generous new allowance.

Fuel prices made the problem more visible

The immediate backdrop to the increase was a sharp increase in fuel prices during 2026.

The Government said the change formed part of a package responding to elevated fuel prices and was intended to make the rates better reflect the average cost of motoring.

The scale of the fuel-price movement was significant.

RAC data shows average petrol rising from 132.83p per litre at the end of February 2026 to more than 158p in April. Diesel increased from 142.38p to around 191p over the same period.

By May, average petrol was around 159.4p per litre and diesel 183.9p.

Fuel was therefore an obvious catalyst for reform.

But focusing exclusively on fuel risks missing the wider issue.

Even when pump prices fall, employees using their own vehicles still face depreciation, servicing, tyres, insurance and financing costs.

Employees were effectively subsidising business travel

This is perhaps the most important point for employers.

AMAP establishes the amount an employer can reimburse an employee for qualifying business mileage in their own vehicle without creating an Income Tax liability.

Employers do not have to pay the full AMAP amount. HMRC specifically describes the rate as advisory, and an employer may reimburse either more or less. Where an employee receives less than the approved rate, they may be able to claim Mileage Allowance Relief on the difference.

However, tax relief is not the same thing as reimbursement.

Consider an employee travelling 10,000 business miles a year.

Under the old rate:

10,000 × 45p = £4,500

Under the new rate:

10,000 × 55p = £5,500

That is a £1,000 annual difference.

Where the genuine cost of providing and operating the employee's car was substantially above the amount reimbursed, some employees were effectively contributing towards the cost of journeys undertaken for their employer's business.

The longer the rate remained frozen, the greater that risk became.

Why doesn't the 25p rate above 10,000 miles change?

One interesting feature of the reform is that only the first-tier rate has changed.

For cars and vans the AMAP structure is now:

The lower second-tier rate recognises that some vehicle costs are fixed or semi-fixed.

Depreciation, insurance and financing do not rise proportionately with every additional mile driven. Once those costs have been recognised across the first portion of annual mileage, the marginal cost of additional miles should normally be lower.

Nevertheless, leaving the 25p rate unchanged means employees undertaking very high levels of business mileage may still warrant closer examination by employers.

At that point, it may also be worth asking whether using an employee's private vehicle remains the most appropriate fleet solution.

The change applies to electric cars too

Another sometimes misunderstood feature of AMAP is that there is not a separate employee-owned electric car rate.

HMRC confirms that cars and vans within the AMAP system include electric and hybrid vehicles, so the same 55p rate applies.

That makes sense when the purpose of AMAP is understood.

An EV may have a much lower energy cost per mile than a petrol or diesel car, particularly where it is charged at home.

But electricity is only one part of the cost.

The employee is still supplying a vehicle that has been purchased, financed or leased, insured, maintained and ultimately depreciates as mileage is added.

This is also why employers should not confuse AMAP rates for privately owned vehicles with HMRC's Advisory Fuel Rates or Advisory Electric Rates for company cars. They perform different functions.

What does the change mean for employers?

Employers should review their mileage policies rather than assuming that HMRC changing the tax threshold automatically changes what they pay employees.

HMRC states that businesses can choose whether to reflect the AMAP increase in their reimbursement rates.

However, organisations should consider several questions.

Are employees expected to use their own vehicles regularly for company business?

Is the mileage rate sufficient to make doing so financially reasonable?

Could low reimbursement rates discourage employees from undertaking necessary journeys?

Are high-mileage employees better served through a company car, salary sacrifice arrangement, rental vehicle or other fleet solution?

And are mileage and business-travel policies still appropriate given the changing mix of petrol, diesel, hybrid and electric vehicles?

There is also a payroll consideration. HMRC has confirmed that the new rate is backdated to 6 April 2026. Employers who had already reimbursed employees above the old 45p threshold and deducted Income Tax or National Insurance may need to correct earlier payroll calculations.

A welcome correction after 15 years

The increase from 45p to 55p represents a 22% rise in the headline AMAP rate.

That sounds substantial until it is viewed against 15 years of rising costs.

Over the same period, general inflation increased by considerably more than that. On a simple CPI comparison, 45p in April 2011 has purchasing power equivalent to roughly 69p in 2026.

The new rate therefore does not return employees fully to the real-terms position they occupied when 45p was introduced.

What it does do is recognise that the old figure had become increasingly detached from modern motoring costs.

The Government itself says the objective is for the rates to better reflect the average costs of motoring and has indicated that AMAP rates are being reviewed beyond 2026/27.

That ongoing review is important.

After a rate has remained unchanged for 15 years, the lesson should arguably be that mileage allowances need to be reviewed periodically rather than allowed to remain static while vehicle costs move around them.

What should fleets do next?

For fleet operators, the AMAP increase is an opportunity to look beyond simply changing an expenses-system setting from 45p to 55p.

Employee-owned vehicles form part of the wider fleet wherever they are being driven on company business.

Businesses should understand who is using private vehicles, how much business mileage they are covering, what they are being reimbursed and whether grey-fleet travel remains the most cost-effective and appropriate option.

In some cases, 55p per mile may be perfectly sensible.

In others, particularly where annual business mileage is substantial, providing a company vehicle, rental solution or alternative mobility arrangement could deliver a better outcome for both employer and employee.

The increase in AMAP is therefore not simply a tax change. It is a useful prompt for businesses to reconsider how — and why — their employees travel.

At LetsTalk Fleet, we help businesses assess grey-fleet mileage, company vehicle provision and alternative funding methods to understand the true cost of business mobility and identify the most efficient solution.