Business Mileage Rates 2026/27: Which Rate to Pay Drivers in Their Own Car, a Company Car or an Electric Car

Which business mileage rate should you pay?

An employee’s own car, electric included, can be paid up to the approved mileage rate tax-free: 55p a mile for the first 10,000 business miles from 6 April 2026, then 25p. A company car gets HMRC’s advisory fuel rate for its fuel and engine size. A fully electric company car gets 7p a mile at home or 15p at public chargers from 1 September 2026.

Take 1,000 business miles. Our arithmetic on the gov.uk rates gives £550 in an employee’s own car, £170 in a 1,401 to 2,000cc petrol company car, £70 in a company electric car charged at home and £150 on public chargers. The wrong rate means tax to sort out or a driver out of pocket. The £550 holds only inside the first 10,000 miles of the tax year.

Own car on business: the 2026/27 approved mileage rates

For an employee’s own car or van, the approved rate from 6 April 2026 is 55p a mile for the first 10,000 business miles in the tax year and 25p after.

The 55p rate applies from 6 April 2026, so employers who paid 45p earlier may want to top up and may need to correct payroll.

Announced on 27 October, not yet law: the rate above 10,000 miles is due to rise from 25p to 35p from 6 April 2027, and 55p stays.

Company cars: advisory fuel rates from 1 September 2026

On a company car, pay no more than HMRC’s advisory fuel rate for the car’s fuel and engine size and there is no taxable profit and no Class 1A National Insurance on the mileage. Those rates are worked out from fuel prices and average mpg, so they sit far below 55p, which is not an exempt rate on a company car. Per mile:

• Petrol: 14p up to 1400cc, 17p for 1401 to 2000cc, 27p over 2000cc
• Diesel: 15p up to 1600cc, 16p for 1601 to 2000cc, 22p over 2000cc
• LPG: 11p, 13p and 20p across the petrol bands

Electric cars: own-car rate or advisory electric rate

An employee’s own electric car can be paid up to the same approved rate as any car they own. That rate covers owning and running the vehicle, so electricity is not claimed on top.

A fully electric company car uses the advisory electric rate instead: 7p a mile at home and 15p at public chargers from 1 September 2026. If the car charges in both places, split the miles by how much charging happens at each, on a fair and reasonable basis. A higher rate needs proof of a higher cost per mile. The free AER calculator does the split.

What happens when you use the wrong rate

Pay an employee in their own car more than the approved amount and you report the excess on a P11D or add it to pay and tax it as normal. For National Insurance the limit is 55p for every business mile from 6 April 2026, and any excess counts as Class 1 National Insurance earnings.

Pay a company car driver above the advisory rate without showing a higher fuel cost per mile and the excess is taxable profit and Class 1 earnings.

Pay less and the employee can claim Mileage Allowance Relief on the balance, for tax only. National Insurance has no equivalent. General information, not tax advice: check gov.uk before paying and ask an accountant about edge cases.

Vans and self-employed drivers: where these rates stop

These rules stop at employees in cars: advisory fuel rates cover company cars only, so do not borrow them for a company van. See our guide to van benefit in kind and ask an accountant about mileage. An employee’s own van is inside the approved rates for cars and vans.

Self-employed drivers claim simplified expenses or actual costs themselves, not an approved rate paid through you, and gov.uk excludes cars designed for commercial use, such as black cabs, from simplified expenses.

What to record for every business journey

Employers must keep records of the payments made and the business journeys they relate to, even when every payment sits inside the approved amount. For an employee claiming relief, HMRC’s list for a mileage log has the date and mileage of each journey, the reason, and the start and end postcodes. Start your claim form there and add the vehicle, plus where a company electric car was charged, because the rate depends on both. Those two extras are good practice, not gov.uk requirements. Ask an accountant how long to keep records.

How mileage records fit a grey fleet policy

A grey fleet policy meets the money at the mileage claim form. With those fields on every claim, the right rate gets applied before anyone is paid. Our grey fleet policy guide covers the form’s MOT and tax tick-box, and our grey fleet management guide covers duty of care. Our grey fleet service uses real odometer readings where the vehicle reports them, so you can check a claim against what the car actually did rather than what was typed into a form.

For branch, sales or yard staff in their own cars, or taxi, rental and dealership staff, the rate follows the vehicle.

Check a claim against the business mileage rates 2026/27 with our free mileage claim calculator. If you cannot easily show the journeys behind your claims, we can talk through how your fleet records business journeys.

Frequently asked questions

Is 55p tax-free for an electric car?

Yes, for an employee’s own electric car, for the first 10,000 business miles, then 25p. A company electric car uses 7p at home or 15p at public chargers from 1 September 2026.

Can I pay more than the approved rate?

For an employee’s own car, yes. Anything above the approved amount is reported on a P11D or added to pay and taxed as normal, and it counts as Class 1 earnings.

Which rate applies to a hybrid company car?

The petrol or diesel advisory fuel rate for its engine size, because gov.uk treats hybrids as petrol or diesel. The 7p and 15p rates are for fully electric cars only. A hybrid the employee owns can be paid up to the approved rate.

How often do advisory fuel rates change?

HMRC reviews them quarterly, on 1 March, 1 June, 1 September and 1 December. You can use the previous rates for up to a month after new ones apply.