In this post we’ll review the current mileage allowance, along with the potential for it to increase in the near future. We’ll also explore how you can effectively manage your grey fleet no matter what tomorrow brings.
For more information on how we can help you and your fleet, get in touch with us on 020 8290 9099 or email us at commercial.motor@anthonyjones.com.
What is the Business Mileage Rate For?
The business mileage rate is the maximum tax-free amount that you can pay your grey fleet drivers for business travel. A grey fleet driver is any employee who uses their own vehicle for business travel. This rate is intended to cover fuel costs, along with the costs of servicing, maintenance, car insurance, car tax, and vehicle depreciation.
Business Mileage Rates 2026/2027
HMRC have confirmed that the business mileage rates will not change in the 2026/2027 tax year. Until at least 5 April 2027, the business mileage rates will be as follows:
| Vehicle Type | First 10,000 Miles | Over 10,000 Miles |
| Cars and vans | 45p | 25p |
| Motorcycles | 24p | 24p |
| Bicycles | 20p | 20p |
Can Employees Choose to Pay a Different Mileage Rate?
Employers can choose to pay lower rates. If they do so, employees can claim the difference from HMRC as Mileage Allowance Relief.
Employers can also choose to pay higher rates, but they will have to pay tax on anything they pay above the official HMRC rates.
Also, self-employed workers and sole traders can use these rates as “simplified expenses” when claiming business mileage on their tax return, to save them from having to claim separately for fuel, maintenance, insurance, and so on.
Calls To Raise Mileage Allowance
The business mileage allowance has now been the same for 15 years. Driving in 2026 costs a lot more than it did when these rates were first introduced. Motorists have to contend with higher fuel costs, along with increased maintenance and repair expenses. These tax-free mileage rates could therefore leave any grey fleet driver out of pocket.
The outdated rates may also penalise people in lower paid roles that require a lot of driving, such as carers and social workers, along with anyone who works in a rural setting.
Raising the mileage allowance could make life a lot easier for millions of UK employees. Unfortunately, the Government, while acknowledging that there is an issue, have not made it clear whether motorists can expect the mileage allowance to rise in the near future.
Chancellor Rachel Reeves recently told MPs: “Motoring costs have evolved significantly. We’re looking at the issue and will consider it further as part of a future fiscal event.”
So will the mileage allowance be increased any time soon? Unfortunately, we’ll just have to wait until an unspecified “future fiscal event” to find out.
Getting The Best For Your Grey Fleet
As we mentioned above, you can choose to give your grey fleet drivers a higher mileage allowance if you wish. But you will have to pay tax on anything above the official HMRC rates.
But there are other ways you could support your grey fleet drivers. Read our full guide to keeping your grey fleet drivers safe and happy. You can also read our guide to controlling and reducing your fleet fuel costs.
Steve Blackmore, Anthony Jones Director says:
“There’s no denying that the business mileage rates are outdated, and unfortunately, there are few signs that they’ll be increased any time soon.
“In the meantime, you can do all you can to make life easier for your grey fleet drivers. We can advise you on risk management procedures that will help you meet your duty of care requirements, and we can also help you access the specialist insurance you need to keep your employees safe.”
For more information on how we can help you and your fleet, get in touch with us on 020 8290 9099 or email us at commercial.motor@anthonyjones.com.
