Drivers who use their own cars for work could be missing out on hundreds of pounds in tax relief after HMRC increased its approved mileage rate to 55p per mile.
The change, which was backdated to April 6, 2026, means employees who are still being reimbursed at the old 45p rate could be entitled to claim extra tax relief on the difference.
A basic-rate taxpayer who drives 10,000 qualifying business miles and receives 45p per mile from their employer could be eligible for an extra £200 in tax relief.
For higher-rate taxpayers, the figure could reach £400.
The increase marks the first rise in the main approved mileage rate for 15 years, with the Government estimating that around two million employees and one million self-employed people could benefit.
However, workers may not realise that receiving mileage payments from their employer does not necessarily mean they have received the full amount they are entitled to claim.
Andy Wood, tax barrister at Tax Barrister UK , said: "A common misunderstanding is that once an employer has reimbursed an employee for business mileage, there is nothing further they can claim.
"However, HMRC's approved mileage rate and the amount an employer chooses to pay are not necessarily the same. Where an employer pays less than the approved rate, an employee may be entitled to tax relief on the difference.
"With the approved rate increasing to 55p per mile this year, workers who have continued receiving 45p should check whether they have additional relief available.
"The increase was backdated to April, meaning eligible business journeys made earlier in the current tax year can also be included. It's worth checking rather than assuming that the amount on your payslip is the full amount you're entitled to."
How drivers could claim £200 or £400 in tax relief
Under HMRC's Mileage Allowance Relief rules, employees who use their own cars or vans for qualifying business journeys may be able to claim tax relief if their employer pays less than the approved mileage rate.
For the 2026/27 tax year, the approved rate is 55p per mile for the first 10,000 qualifying business miles, falling to 25p per mile after that.
For example, someone who drives 10,000 qualifying business miles and receives 45p per mile from their employer will have been paid £4,500.
A basic-rate taxpayer paying 20% Income Tax could claim £200 in tax relief on that difference, while a higher-rate taxpayer paying 40% could receive £400.
Received a letter about a tax refund? Last year, over 700,000 people didn’t claim back the money they’re owed. Download the HMRC app to check if you’re owed a refund. 📲 https://t.co/ksvr0qwqh6 https://t.co/eJDiYAh8n9
— HM Revenue & Customs (@HMRCgovuk) October 26, 2026
However, at the new 55p rate, the approved amount would be £5,500 – leaving a £1,000 difference.
People whose employers pay even less could potentially claim more.
For example, an employee who travels 6,000 qualifying business miles but receives just 25p per mile would have a shortfall of £1,800 against the 55p rate. This could mean £360 in tax relief for a basic-rate taxpayer.
Who can claim mileage tax relief?
The rules can apply to employees who use their own vehicles for qualifying business travel.
This could include care workers travelling between appointments, sales representatives visiting clients and employees who need to travel between different work locations.
However, ordinary journeys between home and a permanent workplace generally do not qualify.
Wood said: "It's important to distinguish between ordinary commuting and journeys that genuinely qualify as business travel.
"Employees should also understand that this is tax relief, rather than HMRC simply reimbursing the full difference in mileage payments. The amount they receive depends on their eligible mileage, what their employer has already paid and their Income Tax position.
"Keeping accurate records throughout the year is essential. Without evidence of the journeys undertaken, employees could find it difficult to support a claim."
Recommended reading:
- Calls to cut state pension age to 65 and free up jobs for younger workers grow
- Blue Badge drivers could face unexpected fines despite having a permit
- Martin Lewis breaks down new pension tax rules with £13,037 threshold
How to check if HMRC owes you money
Workers should start by checking their mileage records and how much their employer has paid them for qualifying business journeys.
They can then compare the amount received with HMRC's approved mileage rates to work out whether there is a shortfall.
HMRC requires supporting records, including the dates and reasons for journeys, as well as the start and end postcodes.
Eligible employees can check their entitlement and make a claim through GOV.UK .
Those who complete Self Assessment tax returns must claim through their return.
Claims can cover the current tax year and up to four previous tax years, although the old 45p rate applies to qualifying journeys made before April 6, 2026.
Wood added: "At a time when household budgets remain under pressure, it makes sense for employees to check whether they are claiming the tax relief they're entitled to.
"For people who regularly use their own vehicles for work, even a relatively small difference in mileage payments can add up over a year.
"The important thing is to check the rules carefully, keep the right evidence and make sure any claim reflects genuinely qualifying business journeys."
Share