You're a sole-director limited company owner, it's 6 April 2026, and you're about to drive to a client meeting. One question immediately matters: do you claim 45p, 25p, or a different rate because the car is electric or hybrid? Getting that decision wrong can turn a straightforward reimbursement into a taxable payment, an inaccurate company expense, or a director's loan account problem.
HMRC's approved mileage rates are practical rules, not abstract figures. They determine how much your company can reimburse for qualifying business journeys using your own vehicle, and whether the payment can normally be made tax-free. The correct treatment depends on the vehicle, the cumulative mileage, the purpose of the journey, and how your company records and authorises the claim.
Why the Approved Mileage Rate Matters to Directors
For a director-shareholder, mileage is part of the wider remuneration picture. A company can reimburse genuine business travel, but it cannot label private driving as business mileage or pay an arbitrary amount and assume it's tax-free. The payment must match a qualifying journey and an applicable HMRC rate.
HMRC set the car and van AMAP at 55p per mile for the first 10,000 business miles in the 2026/27 tax year, with 25p per mile after that threshold. The same official table lists 24p per mile for motorcycles and 20p per mile for bicycles. These rates and their historical structure are set out in HMRC's travel, mileage and fuel rates.
The rate matters in pounds because every qualifying trip creates a reimbursement decision. If you drive your own car to a customer, the company can repay the business cost using the approved rate. If you drive to your normal workplace, the journey may be ordinary commuting and won't become allowable because you're the director.
Practical rule: The approved rate protects the reimbursement only when the journey itself qualifies.
Using the wrong rate, or applying the right rate to the wrong journey, is a common weakness in small-company expense records. A director may accidentally claim commuting, restart the mileage threshold incorrectly, or use company-car fuel rates for a privately owned vehicle.
The safest approach is simple. Identify the vehicle, establish whether the journey is business travel, track the tax-year mileage cumulatively, and process the claim through the company's normal records. The wider rules on allowable expenses for a limited company also matter, particularly where the company reimburses a director who owns the vehicle personally.
The 2026 AMAP Rates at a Glance
The 2026/27 AMAP structure is straightforward for most directors. Cars and vans use a tiered mileage scale, while motorcycles and bicycles have single rates. HMRC's official rates page confirms the following figures.
| Vehicle | Rate per business mile | Notes |
|---|---|---|
| Car or van | 55p for the first 10,000 miles, then 25p | The threshold applies cumulatively during the tax year |
| Motorcycle | 24p | Single approved rate |
| Bicycle | 20p | Single approved rate |
| Qualifying passenger | 5p additional | Applies for each qualifying passenger carried on a business journey |
The key change for cars and vans is the move from the previous 45p first-tier rate to 55p, while the rate above 10,000 business miles remains 25p. HMRC confirmed that the increase applies retrospectively from 6 April 2026, so the higher first-tier rate covers the whole 2026/27 tax year. The change is explained in HMRC's announcement on the increase to AMAPs and simplified mileage rates.
That retrospective application matters if your company paid claims at the old figure earlier in the tax year. You'll need to review those claims and decide whether a top-up is appropriate, based on the updated rate and the company's records.
One scale for cars and vans
HMRC doesn't provide separate AMAP figures for every make, model, fuel type or engine size. The car and van scheme uses one scale because it's intended to provide a standard reimbursement benchmark rather than calculate the precise running cost of each vehicle.
That creates a useful administrative boundary. If you're driving your privately owned petrol car, diesel car, electric car or van for qualifying business travel, you generally start with the applicable AMAP category rather than attempting to calculate actual fuel, servicing, insurance and depreciation for every trip.
Don't confuse this scheme with Advisory Fuel Rates. AFRs are a separate HMRC system for employees using company cars, and those rates depend on fuel type and engine size. HMRC's Advisory Fuel Rates guidance lists 2026 petrol rates of 14p, 17p or 26p per mile, diesel rates of 15p, 17p or 23p, and LPG rates of 11p, 13p or 21p, depending on the relevant engine category. HMRC reviews AFRs quarterly, so check the live table before each reimbursement run.
How to Apply the Rates on Real Business Journeys
A director can drive to a client meeting in a private car and submit a valid mileage claim. The same car used for the usual journey from home to the company's registered office normally creates no tax-free mileage claim. Start with the journey, then choose the rate.
Qualifying travel can include trips between workplaces, site visits, client meetings and supplier runs. Travel from home to a meeting may qualify where the destination is a temporary workplace or the journey is not ordinary commuting. Record the facts rather than relying on the meeting label.
Use this process:
- Identify the destination. Record where you travelled and the business reason.
- Classify the journey. Confirm that it is a client, supplier, site or qualifying workplace trip.
- Confirm the vehicle. Select the relevant car, van, motorcycle or bicycle category.
- Check cumulative mileage. Add the journey to the tax-year total for that vehicle category.
- Apply the rate. Use the first-tier rate up to the relevant threshold, then the lower rate for later miles. See the rates table above.
- Submit evidence. Keep the mileage log and record the reimbursement in the company's accounts.
For cars and vans, the threshold applies cumulatively. It does not restart for a new trip, client or invoice. The first 10,000 business miles in the tax year use the first-tier rate. Each later business mile uses the lower rate.
A director who drives 600 business miles in April remains below the threshold. Each mile therefore uses the first-tier car or van rate. At 55p per mile, the company can reimburse £330. Keep that calculation tied to the tax-year mileage total, not just the individual journey.
A company should pay only for qualifying business travel. It cannot turn a private commute into an allowable expense by adding it to an expense form. For a wider explanation of the tax deduction for mileage, keep the company reimbursement separate from the director's personal travel.
Employee, Director and Self-Employed Treatment Compared
The correct mileage regime depends on how you work. An employee claiming through an employer isn't in exactly the same position as a sole trader claiming business costs personally, even where the journey looks identical.
| Position | AMAP tax-free? | Who authorises claim | Reporting route |
|---|---|---|---|
| PAYE employee | Usually, where the employer pays no more than the applicable approved rate for qualifying business travel | Employer's expenses process | Employer records and payroll treatment where required |
| Company director | Usually, where the journey qualifies, the vehicle is treated correctly and the company has authorised the policy | Board, directors' resolution or written expenses policy | Company bookkeeping, payroll and benefit reporting where applicable |
| Sole trader or partnership member | Uses the relevant self-employed simplified-expense rules where elected | The individual or partnership's accounting process | Self-assessment or partnership tax return |
PAYE employees normally claim through their employer. If the employer pays less than the approved amount, the employee may have a personal tax relief question. If the employer pays more, the excess generally needs separate tax treatment rather than being treated as automatically tax-free.
Directors are employees for many mileage purposes, but their position requires stronger governance. A director who owns the company shouldn't approve their own unsupported claim and rely on the company's small size as protection. A written expenses policy or board authorisation should set out eligible journeys, evidence, rates and approval.
A dispensation doesn't usually solve this problem for a director. The company still needs a genuine business purpose and an auditable record. Treating the director as an employee doesn't remove the need to distinguish business travel from commuting.
Sole traders and partnerships use a different route. Under Schedule 1 simplified expenses, opening a mileage claim for a vehicle in a tax year generally fixes the flat-rate approach for that vehicle for the year. Reverting to actual costs may be possible under the relevant carryover rules, but the choice needs to be made carefully.
VAT is a separate issue. The income tax and employment-tax mileage treatment doesn't automatically determine the VAT position, so VAT-registered businesses should keep that analysis distinct.
A Worked Example for a Limited Company Reimbursement
Consider a director-owner who uses a personally owned car and records 8,500 business miles during 2026. Because the total remains below the car and van threshold, the entire mileage is calculated at 55p per mile, producing a reimbursement of £4,675.
The arithmetic is direct:
- Business mileage: 8,500 miles
- Applicable rate: 55p per mile
- Reimbursement: 8,500 multiplied by 55p, equal to £4,675
The company should support that payment with a mileage log showing the date, destination, distance and business purpose. It should also have a policy or board approval confirming that the company reimburses qualifying business mileage using HMRC's approved rates.
Recording the payment
The bookkeeping entry depends on how the company settles the claim.
If the director has paid the costs personally and the company owes the reimbursement, the company may:
- Debit a travel or motor expense account.
- Credit the director's loan account when the amount is owed.
- Credit the bank when the company pays the director.
Some bookkeeping systems record the expense directly against the bank if the reimbursement is paid immediately. The accounting label can vary, but the underlying evidence shouldn't.
The reimbursement is payment for business use of the director's private vehicle. It isn't a dividend, and it shouldn't be disguised as one. The company's treatment should follow the applicable tax and accounting rules rather than the director's preferred extraction method.
The over-claim trap
Suppose the company pays 50p per mile across the same 8,500 miles. That figure is below the 55p approved rate, so the issue isn't an excess. The company could reimburse at 50p, but it would be choosing to pay less than the approved benchmark.
The problem arises when the company pays more than the applicable approved amount without supporting the additional payment under a different valid treatment. Any excess can create a taxable benefit or another remuneration issue for the director, with possible reporting and employer National Insurance consequences. Don't assume a generous rate is automatically tax-free.
A company may instead pay commercial rent for use of a director-owned vehicle, but that route changes the analysis. If you use it, scale the mileage claim appropriately and document the arrangement carefully. Combining a full rental payment with unrestricted mileage reimbursement is an obvious double-recovery risk.
Mileage Claims vs a Company Car vs a Flat-Rate Allowance
For most directors who already own a car and drive modest business mileage, an AMAP claim is the cleanest starting point. It links payment to actual business use and avoids turning private vehicle ownership into a company-car benefit.
A company car can make sense where the company provides the vehicle and pays the running costs. But the convenience comes with a benefit-in-kind calculation based on factors including the car's list price and emissions. Private use can create a benefit even when business mileage is high, and reimbursed private fuel can create a separate fuel benefit. The company may also face Class 1A National Insurance.
A flat-rate allowance looks simpler, but it usually isn't. An allowance paid regardless of journeys is generally earnings rather than a tax-free reimbursement. The same applies to a broad mileage budget that covers private and business driving without a reliable allocation. Calling it a “car allowance” doesn't change its tax character.
The decision rule
Use these tests rather than chasing a headline tax saving:
- Existing private vehicle: If you already own the car and business travel is limited, claim qualifying mileage and keep the records clean.
- High business use: If driving is central to the role, compare the cumulative mileage reimbursement with the cost and tax consequences of company ownership.
- Expensive or higher-emission car: A company car can produce a substantial benefit calculation, so assess list price and emissions before committing.
- Private fuel: Don't accept company-paid private fuel without comparing the resulting tax charge with the actual value you receive.
- Fixed allowance: Treat it as taxable pay unless a specific rule supports a different treatment.
The company car or cash allowance comparison can help frame the broader decision. The important variables are annual business mileage, the vehicle's list price, its emissions profile and whether the director already owns it personally.
Electric Vehicle and Hybrid Mileage Treatment
Electric and hybrid vehicles need careful handling because several HMRC schemes can appear similar. A director using a privately owned electric car for business travel should start with the AMAP rules, not a fuel-only reimbursement calculation.
The supplied 2026 AMAP data confirms rates for cars and vans, motorcycles and bicycles, but it doesn't provide a separate 2026 electric-vehicle figure or a distinct hybrid figure. That means you shouldn't insert an invented EV rate into a company policy. Check the current HMRC table and the vehicle's precise status before paying claims.
| Vehicle type | First 10,000 business miles | Over 10,000 business miles | Notes |
|---|---|---|---|
| Electric car or van | Use the applicable current HMRC car or van treatment | Use the applicable current HMRC car or van treatment | Don't substitute a company-car AFR without checking the vehicle arrangement |
| Plug-in hybrid | Confirm the applicable HMRC treatment for the vehicle and journey | Confirm the applicable HMRC treatment | Don't assume petrol and electricity can be claimed separately |
| Company car | Use the relevant AFR where the claim is for business fuel | Check the live AFR table | AFRs depend on fuel type and engine size |
For a company car, Advisory Fuel Rates are separate from AMAPs. HMRC uses AFRs to reimburse business fuel in company cars, and the rates vary by fuel type and engine size. A company should check the live table before each reimbursement run because HMRC reviews those rates quarterly, as set out in HMRC's Advisory Fuel Rates guidance.
Public charging creates another practical question. Keep charging receipts and identify whether the electricity relates to business travel, private use or a company vehicle arrangement. Don't bolt a fuel-only add-on onto an AMAP claim without checking the rules, because that can produce double reimbursement.
For directors with an electric vehicle, the cleaner answer is often a well-supported mileage policy rather than an improvised electricity scheme. The electric car mileage allowance guidance can help you identify the questions to resolve before the next claim run.
Recordkeeping, Compliance and Common Pitfalls
A tax-free mileage payment needs evidence. Your mileage log should make it possible for someone unfamiliar with the journey to understand why it happened and how the amount was calculated.
Every entry should include:
- Date: The day the journey took place.
- Destination: The client, supplier, site or workplace visited.
- Distance: The business miles claimed.
- Purpose: A specific explanation, such as a client meeting or supplier collection.
- Odometer support: Start and end readings where available, so the mileage can be checked.
HMRC may also ask for MOT records, insurance documents and evidence that the vehicle was available for business use. These documents don't replace a mileage log, but they can support the wider picture.
The record-retention period depends on the tax obligation. For corporation tax, retain relevant records for at least six years after the company year-end. For self-assessment, records generally need to be kept for three years from the later of 31 January following the tax year, with longer retention where a return was filed late. Check the applicable recordkeeping rules for your circumstances.
Patterns that weaken a claim
Round-number mileage on every entry can look estimated rather than measured. Duplicate client visits, regular journeys resembling commuting and vague descriptions such as “work travel” all create avoidable questions.
Directors should also avoid paying claims without board minutes or a written expenses policy. The company may be small, but a director-shareholder still needs to show that the payment was authorised, business-related and calculated consistently.
Quick Reference and Policy Review Checklist
For 2026/27, the approved car and van rate is 55p per mile for the first 10,000 business miles, followed by 25p per mile. The motorcycle rate is 24p, the bicycle rate is 20p, and a qualifying passenger can add 5p per mile. Confirm the current HMRC treatment before applying any separate electric or hybrid assumption.
Your company policy should answer five questions:
- Eligibility: Which directors and employees can claim?
- Evidence: Does every entry show the date, destination, miles and business purpose?
- Threshold: Is cumulative car and van mileage tracked across the tax year?
- Vehicle type: Are private cars, company cars, motorcycles, bicycles and electric vehicles distinguished correctly?
- Processing: Are reimbursements recorded consistently through the company's bookkeeping and payroll processes where required?
If your mileage policy was written before 2025, your records omit destinations or journey purposes, or reimbursements are being paid gross without the right payroll treatment, review the setup with a tax adviser before the next year-end. That's sensible housekeeping, not a reason to panic.
Tax Compass provides practical decision support for limited company directors reviewing expenses, remuneration and vehicle choices. Visit Tax Compass to assess your mileage setup and identify the questions to take to a specialist tax adviser.