For many years, employees and directors using their own vehicles for business journeys have relied on HMRC’s approved mileage allowance rates as a straightforward way to recover motoring costs.
The recent increase from 45p to 55p per mile from 6 April 2026 provides welcome support.
However, with ongoing cost pressures, the position remains finely balanced for both motorists and employers, as rising costs continue to influence reimbursement decisions and overall cost management.
For businesses across Oxford and Oxfordshire, this is less a technical issue and more a question of balancing fair reimbursement with wider cost control and financial planning.
A long‑standing rate under pressure
The previous 45p rate was introduced in April 2011 and remained unchanged for fifteen years.
Over that period, the cost of running a vehicle has increased significantly.
Fuel, insurance, servicing, and vehicle finance costs have all risen, particularly in recent years.
When adjusted for inflation, the original 45p rate would now equate to approximately 65–67p per mile, suggesting that even with the recent increase, the allowance may not fully reflect current costs.
“The uplift to 55p is a positive step and provides some immediate support,” says Jordan Lyne partner at The MGroup. “However, it still requires a balance between reflecting real costs and maintaining manageable expense levels for businesses.”
The impact on employees and employers
For employees and business owners who rely on personal vehicles, the financial impact can build over time, particularly where mileage is high.
For example:
- 10,000 business miles at 45p = £4,500
- Inflation-adjusted equivalent = c. £6,600
At the same time, for employers, increased mileage rates can represent a material rise in operating costs, particularly where large teams or regular travel are involved.
The challenge therefore sits on both sides:
- Employees may feel costs are not fully covered
- Employers must manage rising expense claims within overall budgets
Modern motoring costs extend beyond fuel and now include:
- Higher insurance premiums
- Servicing and repair costs
- Tyres and maintenance
- Finance and depreciation
Even with electric vehicles becoming more common, cost pressures remain, albeit in different forms.
A step forward, but still a balancing act
The increase to 55p per mile is widely seen as a practical step in the right direction, offering additional support in a period of rising costs.
However, the underlying issue remains one of alignment:
- Ensuring reimbursement reflects genuine costs
- While maintaining sustainable expense policies for businesses
“This isn’t just about mileage rates in isolation,” adds Darren Green partner at The MGroup. “It’s about understanding how travel costs fit into the wider cost base of the business.”
Practical considerations for businesses
In light of the changes, businesses may wish to take a balanced view when reviewing:
- Mileage reimbursement policies
- Employee expense structures
- The use of personal vehicles versus company vehicles
- Travel patterns and efficiency
- The cash flow impact of rising transport costs
Maintaining accurate mileage records remains essential for both employees and employers. Clear documentation helps support claims and reduces the risk of HMRC challenge.
Further support on managing costs and planning can be found here:
👉 https://www.themgroup.co.uk/services/accountancy-services/financial-forecasts/
A balanced approach to rising costs
While the recent uplift provides some relief, the cost of business travel continues to evolve.
Both employees and employers are navigating the same underlying pressures, albeit from different perspectives.
Taking a balanced and informed approach can help ensure that reimbursement remains fair, sustainable and aligned with overall business performance.
A trusted, expert and supportive approach, backed by independent advice, can help ensure that policies remain appropriate for both the business and those travelling on its behalf.
If you would like to discuss mileage claims, reimbursement policies or the wider impact on your business, we are always happy to help
👉 https://www.themgroup.co.uk/contact-us/