The approved mileage allowance payments (AMAP) system allows employers to make tax-free mileage allowance payments to employees who use their own vehicles for work.
The payment is tax-free as long as it does not exceed the ‘approved amount’. This is the number of business miles in the tax year multiplied by the approved rate for the vehicle in question.
Different rates are set for cars and vans, motorcycles and cycles. Additionally, for cars and vans there are two rates – a higher rate for the first 10,000 business miles in the year and a lower rate for any further business miles in the tax year.
In light of the fuel price rises as a result of the Iran war, the rate for the first 10,000 business miles in a car or a van was increased from 45p per mile to 55p per mile for 2026/27. The other rates were unchanged.
Consequently, the approved mileage rates for the 2026/27 tax year are as follows:
| Rate | |
| Cars and vans First 10,000 business miles Subsequent business miles | 55p per mile 25p per mile |
| Motorcycles | 24p per mile |
| Cycles | 20p per mile |
It is important to note that the approved amount is calculated for the tax year as a whole, rather than for each individual journey.
Payments not exceeding the approved amount
As long as the payment does not exceed the approved amount, the payment can be made tax-free.
If the amount paid is less than the approved amount, the employee can claim tax relief for the shortfall.
Example 1
Andy uses his own car for business and drives 15,000 business miles in the 2026/27 tax year. His employer pays a mileage rate of 45p per mile for all business miles. Andy receives a mileage payment of £6,750 (15,000 miles @ 45p per mile).
The approved amount is also £6,750 ((10,000 miles @ 55p per mile) + (5,000 miles @ 25p per mile)).
As the amount paid does not exceed the approved amount, the payment can be made tax-free.
Example 2
Ben uses his car for business journeys. He drives 6,000 business miles in the 2026/27 tax year. His employer pays a mileage rate of 50p per mile. Ben receives a mileage payment of £3,000. The approved amount for 2026/27 is £3,300 (6,000 miles @ 55p per mile).
In this case, the mileage payment made to Ben of £3,000 is less than the approved amount of £3,300. Ben can claim tax relief for the shortfall.
Where employers have not increased their rates in line with the increase in the approved rate, employees may be entitled to tax relief.
Amount paid exceeds the approved rate
The approved amount is the maximum amount that can be paid tax-free, even if it is possible to demonstrate that actual costs exceed the approved amount.
Where the amount paid exceeds the approved amount, the excess is taxable.
Example 3
Callum uses his own van for work. His employer makes mileage payments for business travel at the rate of 55p per mile for all business mileage. In 2026/27, Callum uses his own van for 25,000 business miles. He receives mileage payments of £13,750 (25,000 miles @ 55p per mile).
The approved amount is £9,250 ((10,000 miles @ 55p per mile) + (15,000 miles @ 25p per mile)).
As the amount paid exceeds the approved amount, Callum is taxed on the excess of £4,500.
National Insurance
A similar system applies for National Insurance, except that the higher rate for cars and vans (55p per mile for 2026/27) applies to all business miles in the tax year, not just the first 10,000. This means that while there is a tax liability in example 3 above, there will be no National Insurance to pay.
Call to Action
To find out more about how the AMAP system applies to your business, or to discuss whether your current mileage rates are compliant, please get in touch with our team today.