Mileage allowance calculator
HMRC’s approved rate for your own car or van is 55p a mile for the first 10,000 business miles in the tax year and 25p after that, paid tax-free. What it saves depends on whether you claim as a company director, a sole trader or an employee.
Rates for the 2026/27 tax year. Checked 7 November 2026.
| 10,000 miles at 55p | £5,500.00 |
|---|---|
| 2,000 miles over 10,000 at 25p | £500.00 |
| Total tax-free allowance | £6,000.00 |
| Corporation tax the company saves | £1,590.00 |
|---|---|
| Worked at 26.5% on £6,000.00 |
Assumes the company pays you the full allowance and deducts it from profit.
You do not need fuel receipts, but you do need a mileage log: date, journey, purpose and miles.
Worked example
A contractor drives 12,000 business miles in their own car in 2026/27. The first 10,000 miles at 55p come to £5,500.00. The other 2,000 miles at 25p come to £500.00. Their limited company can pay them £6,000.00 tax-free.
The company had £80,000.00 of profit before the payment. Paying the allowance cuts its corporation tax by £1,590.00, which is 26.5% of the payment because profit sits in the marginal relief band.
Why the result moves
Every car or van mile up to 10,000 in the tax year is worth 55p; after that each mile is worth 25p. The limit counts all your business miles for the same employer in the year, not per journey. Motorcycles get 24p and bicycles 20p on every mile.
The tax saved depends on who claims. A company saves corporation tax at 19%, 26.5% or 25% depending on profit. A sole trader saves income tax and Class 4 National Insurance at their marginal rate. An employee only gets relief on any shortfall, at their income tax rate.
When this calculator is wrong for you
- You use a company car. The approved rates are for your own vehicle; company cars use the advisory fuel rates.
- You are a sole trader who already claims actual vehicle costs or capital allowances on the vehicle. You cannot switch to the mileage rate for that vehicle.
- You pay Scottish income tax. The saving uses rates for England, Wales and Northern Ireland.
- You are paid above the approved rate. The calculator shows the income tax on the excess but not the National Insurance, which uses a different rule.
- Your company has associated companies or a short accounting period.
Questions people ask
Why is the rate 55p and not 45p?
The car and van rate for the first 10,000 business miles rose from 45p to 55p from 6 April 2026, the first change since 2011. The rate after 10,000 miles stayed at 25p. Many pages still show 45p.
What counts as a business journey?
A trip you make for work: to a client site, a temporary workplace, a meeting or a supplier. Your normal commute between home and a permanent workplace does not count. A contractor at one client site for more than 24 months, or expected to be, usually treats it as permanent.
Can my limited company pay me mileage?
Yes. The company can pay you up to the approved rates for business miles in your own car, tax-free and with no National Insurance, and deduct the payment from its profits. Anything above the approved rates is taxable pay.
Do the same rates apply to electric cars?
Yes. The approved rates do not depend on fuel, so an electric car you own gets 55p and 25p like any other car. The separate advisory electricity rate is for company cars, not your own.
Do I need fuel receipts?
No. The rate covers fuel, wear and insurance, so you claim it per mile. You do need a mileage log with the date, where you went, why, and the miles, in case HMRC asks.
Is the rate over 10,000 miles going up to 35p?
It has been reported that the rate after 10,000 miles will rise from 25p to 35p from 6 April 2027. That is not confirmed in legislation yet, so this calculator uses 25p until it is.
My employer pays less than the approved rate. Can I claim the rest?
Yes. You can claim mileage allowance relief on the difference, through Self Assessment or form P87. Relief is given at your marginal rate of income tax, so you get back tax on the shortfall, not the shortfall itself. Passenger payments cannot be claimed this way.
How this is worked out
For a car or van, miles up to 10,000 in the tax year are multiplied by the first-band rate and any miles above by the lower rate; motorcycles and bicycles use one rate for every mile. Passenger miles are multiplied by 5p for cars and vans paid by an employer or company. Any amount already paid per mile is compared with the vehicle allowance to give a shortfall or a taxable excess. The tax saved is the difference between tax on the profit or income without the claim and tax with it: corporation tax with marginal relief for a director’s company, income tax plus Class 4 NI on the vehicle allowance for a sole trader, and income tax on the shortfall for an employee. Rounded to the penny.
Full formulas, rounding rules and test cases are on the methodology page. Every rate update is listed in the changelog.