Contractor Mileage Claims: The 55p Rule from April 2026

The April 2026 rate change at a glance

The Approved Mileage Allowance Payment (AMAP) rate for cars and vans rose to 55p per mile for the first 10,000 business miles in a tax year from 6 April 2026. The second-tier rate above 10,000 miles remains at 25p per mile. The change was enacted in Finance Act 2026 and affects every tax year from 2026/27 onwards.

For context: the rate had sat at 45p since 2012. The jump to 55p is the single largest increase in the scheme's history and reflects rising fuel, insurance and maintenance costs. If you drive 10,000 business miles in a year, the uplift alone is worth £1,000 to the company (10,000 miles times 10p), all of it a deductible expense and none of it taxable in your hands.

The statutory basis sits in ITEPA 2003 ss.229 to 236, with the HMRC manual covering the practical operation at EIM31200 onwards.

One note on terminology before going further: the 45p rate is now historical. It applied in 2025/26 and earlier years. Any mileage claim for a journey made on or after 6 April 2026 should use the 55p rate (up to the 10,000-mile threshold). If a supplier, payroll platform or old policy document still says 45p, it is out of date.

For the full picture of what your limited company can claim across all business expenses, see the contractor expenses allowable guide, which acts as the definitive reference for PSC expense claims.

How the AMAP scheme works for a limited company contractor

The scheme is elegantly straightforward. When you drive your own car or van on business journeys, your limited company can reimburse you at up to the AMAP rate per mile. That reimbursement is:

• Free of income tax in your hands (it is not employment income, not a dividend, and carries no benefit-in-kind charge).
• Free of National Insurance (both employee and employer).
• Fully deductible as a business expense in the company's accounts, reducing the company's taxable profits and therefore its corporation tax bill.

If the company pays you less than the AMAP rate, you can claim Mileage Allowance Relief (MAR) on your personal Self Assessment return for the shortfall. In practice most contractor directors set the company policy at exactly the AMAP rate so there is no personal shortfall and no Self Assessment adjustment needed.

If the company pays you more than the AMAP rate, the excess is a taxable benefit in kind. PAYE and National Insurance apply on the excess. Paying exactly 55p (up to 10,000 miles) and 25p (above) keeps everything clean.

A worked example at 2026/27 rates

Suppose you drive 8,000 business miles between April 2026 and April 2027 in your own car. Your company pays you 55p per mile.

• Total reimbursement: 8,000 x £0.55 = £4,400.
• That £4,400 is income-tax-free and NIC-free in your hands.
• The company deducts £4,400 from its taxable profits. At the small profits corporation tax rate of 19%, that saves the company £836 in corporation tax.
• Net cost to the company is therefore £4,400 minus £836 = £3,564 for 8,000 miles of business travel coverage.

Compare this with the 2025/26 position: the same 8,000 miles at 45p would have cost the company £3,600 gross, saving £684 in CT (at 19%), a net cost of £2,916. The April 2026 change makes mileage reimbursement a meaningfully more valuable tool than it was in prior years.

What counts as business mileage

The AMAP scheme applies only to business journeys. Not every mile in a business context qualifies. The distinction between a business journey and ordinary commuting is where most contractor mileage disputes arise.

Journeys that qualify

• Travel to a temporary workplace. The primary qualifying category. If the client site or engagement location is a temporary workplace (see the 24-month rule below), every trip from home to that site is a business journey.
• Travel between workplaces. If you go directly from one client site to another, or from a client site to a meeting, the mileage between those locations qualifies regardless of whether either is temporary or permanent.
• Client visits and site surveys. Driving to a client's office for a meeting or site survey when that is not your normal place of work qualifies.
• Professional training and conferences. Travel to events that have a genuine business purpose (CPD training, professional conferences, supplier presentations) qualifies, provided the primary purpose is business rather than personal.
• Procurement and errands with a business purpose. Driving to a bank, supplier, or professional adviser specifically for company business qualifies.

Journeys that do not qualify

• Ordinary commuting. Travel from your home to your permanent workplace is not a business journey for AMAP purposes, and HMRC is clear on this. It is the single most common mileage-claim error among contractors.
• Private journeys coded as business. School runs, shopping, personal errands coded to the company expense account are not deductible and create a benefit-in-kind exposure.
• Travel home from a permanent workplace. The return leg of ordinary commuting mirrors the outward leg: not deductible.

The permanent-workplace rule and the 24-month trap

Whether a workplace is "temporary" or "permanent" is the central question in almost every mileage dispute. The rule comes from ITEPA 2003 ss.337 to 339, with the 24-month and 40% tests in s.339(5) and s.339(6).

The basic rule

A workplace is temporary if attendance there is for a limited duration or for some other temporary purpose. If you visit a client site for three months and then move on, those three months of travel are deductible business mileage.

A workplace is permanent if it is a fixed, regular place of work where you attend on an indefinite or long-term basis. Travel there is ordinary commuting.

The 24-month and 40% tests

HMRC and the courts have given precision to "limited duration" through two cumulative tests. A workplace becomes permanent (and travel there stops qualifying) if:

• You attend it for a period that exceeds 24 months, and
• During that period you spend more than 40% of your working time there.

Both conditions must be met. A contractor who visits a client site two days a week for three years may still be under the 40% threshold if most of their working time is spent elsewhere. A contractor who spends five days a week at a single client site will typically exceed both thresholds well within two years.

The expectation trigger: the most important point in the whole page

The rule is expectation-based, not calendar-based. Your right to deduct mileage stops from the moment you know or reasonably expect that the engagement will exceed the 24-month/40% threshold, not from the date you actually pass month 24 on the calendar.

In practice this means:

• If you sign a six-month contract and at month six you extend for another 20 months at the same site, you will pass 24 months. From the date you sign that extension, travel to the site is no longer deductible, even if month 24 is still many months away.
• If it becomes clear at month 18 that the engagement will definitely run to month 30, travel stops being deductible from month 18.
• If the contract genuinely has an uncertain end date and no expectation of continuity beyond 24 months, travel remains deductible until the expectation changes.

The HMRC manual at EIM32000 onwards sets out the detailed working of the rule. The key practical takeaway: review your engagement length actively, not retrospectively.

Relocations within a client engagement

If a client moves your work location to a genuinely different site, the 24-month clock typically restarts for the new site. However, if the new site is materially the same engagement and the move is, in substance, a continuation of the same work at a cosmetically different address, HMRC may treat it as the same workplace. Keep evidence of why a site change represents a genuine change of work location.

Inside-IR35 contractors: the additional restriction

Contractors inside IR35 face a separate travel restriction on top of the temporary-workplace rules. This is not widely understood and is worth stating clearly.

Why inside-IR35 travel is treated differently

For an engagement caught by Chapter 10 (where your medium or large client has determined you are inside IR35) or treated as inside under Chapter 8 (where you self-assess as inside), there is a specific statutory restriction on travel and subsistence relief for workers operating through an intermediary under supervision, direction or control. The relevant provisions sit in ITEPA 2003 ss.338A and 339A.

The effect is that each separate inside-IR35 engagement is treated, for travel purposes, as a separate employment. Because it is a separate employment, the client site is treated as your permanent workplace for that engagement from day one, regardless of how short the contract is or how many other clients you have. Ordinary commuting to a permanent workplace is not deductible. So home-to-client travel is generally not deductible for an inside-IR35 contractor.

This stands in contrast to the outside-IR35 position, where the temporary-workplace tests apply and short-to-medium engagements typically generate deductible travel.

What you can still claim inside IR35

The restriction is on home-to-client travel. It does not eliminate all mileage claims. You can still claim AMAP for:

• Travel between two different client sites on the same day (where the client or another client sends you to a secondary location).
• Travel to a genuinely different, ad-hoc location that is not your usual place of work for that engagement (an off-site meeting, a different office, a training venue).
• Travel costs that would be deductible for any employee in a comparable role.

The full treatment of inside-IR35 travel and subsistence is covered in the travel expenses inside IR35 guide, which you should read alongside this page. The inside-IR35 rules also interact with whether your engagement is under Chapter 8 or Chapter 10; the inside IR35 page covers the broader consequences of an inside determination including the deemed payment calculation.

The 10,000-mile threshold: tracking and planning

The 55p rate applies to the first 10,000 business miles in a tax year. Once you pass 10,000, the rate drops to 25p for every additional mile. The threshold runs from 6 April to 5 April (the tax year), so the counter resets each April.

For most contractors, staying under 10,000 business miles per year is not difficult. 10,000 miles represents roughly 192 miles per week (assuming 52 working weeks) or a daily commute of about 38 miles each way, five days a week. Contractors who visit multiple client sites, attend regular off-site meetings, or have unusually long commutes to temporary workplaces should track their mileage actively.

Practical tracking

A contemporaneous mileage log is the minimum standard HMRC expects. The log should record: the date, the start point and destination, the business purpose, and the miles driven. A spreadsheet is acceptable. There are also dedicated mileage apps that use GPS to log journeys automatically, which reduces the risk of missing entries or reconstructing records after the fact.

Reconstruct-from-memory mileage logs are a common trigger for HMRC disallowance in contractor enquiries. If the records look like they were compiled in a hurry before submission rather than kept during the year, HMRC may reject the claim in full even where the underlying journeys were genuine business travel.

Passenger payments

If you carry an employee of your company as a passenger on a qualifying business journey, the company can pay an additional 5p per passenger per mile free of tax and NIC. This is a minor but sometimes overlooked supplementary rate. For a contractor director driving a colleague to a client site, it adds 5p per mile to the tax-free reimbursement ceiling.

The 5p passenger rate has not changed for 2026/27.

Motorcycles and bicycles

The AMAP framework covers other vehicle types too, though with different rates that have not changed for 2026/27:

• Motorcycles: 24p per mile for all miles (no 10,000-mile split).
• Bicycles: 20p per mile for all miles.

If your usual transport to a temporary workplace is a motorcycle or bicycle rather than a car, the company can reimburse at the relevant rate free of tax and NIC, and the amount is deductible. The temporary-workplace rules apply in exactly the same way: the journey must be to a qualifying location.

Company cars versus personal cars: the AMAP boundary

AMAP applies only where you use your own vehicle on business journeys. If the company owns or leases a car and you use it for business travel, the AMAP scheme does not apply to fuel costs. Instead, the company would typically reimburse actual fuel costs or use the HMRC advisory fuel rates (AFRs), which vary by engine size and fuel type. Company cars also attract a benefit-in-kind charge based on the car's list price and CO2 emissions.

For most contractor directors a personal car with AMAP reimbursement is simpler and, for lower-mileage drivers, often more tax-efficient than a company car. The comparison depends on the car's value, CO2 emissions and the annual mileage involved. That comparison is beyond the scope of this page, but your accountant can model both scenarios based on your specific car and mileage pattern.

Electric vehicle owners driving their own car on business use the 55p AMAP rate in the same way as any other car owner. The AMAP rate applies regardless of fuel type. There is a separate Advisory Electric Rate (7p per mile for 2026/27) that applies to company-owned electric cars when the employer reimburses fuel or electricity costs for business miles, but that is a different calculation.

Record-keeping and what HMRC looks for

A mileage claim will only survive enquiry if the records support it. The points HMRC focuses on in contractor enquiries:

• Contemporaneous records. The log must be maintained as you go, not reconstructed. Electronic records with timestamps are strong evidence; a handwritten log compiled at year-end is weak.
• Business purpose for each journey. "Client visit" is inadequate. "Monthly review meeting with [client name] at [site]" or "site survey for [project]" is what the record should contain.
• Consistency with other records. If the mileage log claims ten client visits in a month but invoices and emails show only four, the discrepancy will be noticed.
• The temporary-workplace position. HMRC may ask when you expected an engagement to end and when you knew it would exceed 24 months. Retaining emails, contracts and extension letters is the best way to demonstrate that travel was still deductible up to the relevant cut-off date.
• The total claimed in context. A claim for 9,800 miles in a tax year from a contractor with a single client a few miles away will attract questions. HMRC looks at the overall scale of the claim against the nature and location of your work. Claims that are plausible given your actual engagements are far less likely to be challenged than ones that seem outsized for the work pattern.

It is worth building the mileage log into your routine expense process rather than treating it as a year-end task. If you submit expense claims to your company quarterly, the mileage record should be part of the same submission. This creates a natural audit trail that matches the company's accounting records period by period.

How mileage claims fit into a broader expenses strategy

Mileage is a significant but not the largest lever in a contractor's tax-efficient expense claim. The contractor expenses allowable guide sets out the full list of what a PSC can claim, from accountancy fees and professional indemnity insurance to home office costs and equipment.

The genuinely transformative tax lever for a contractor director is the employer pension contribution, not the expenses line. A company pension contribution reduces corporation tax, carries no NIC, and sits outside the director's personal tax charge when paid in. Mileage at 55p per mile contributes meaningfully on a high-mileage year, but it is one item in a wider strategy.

For contractors considering what their engagement structure means for the expenses they can claim, the inside IR35 page and the travel expenses inside IR35 guide explain how the status determination reshapes the deductible expense picture, not just for mileage but for subsistence, accommodation and other travel costs.

Contractors in specialist sectors (oil and gas, construction, NHS locum work) sometimes have unusually high mileage patterns. Sector-specific guidance on tax and expenses for these groups is available via the contractor-type pages.

Summary: the practical rules in one place

• From 6 April 2026 the AMAP rate is 55p per mile (first 10,000 miles), 25p per mile (above 10,000 miles), for cars and vans. The 45p rate is historical.
• The journey must be to a temporary workplace. The 24-month and 40% tests determine when a workplace becomes permanent. The trigger is the expectation of exceeding the limits, not the calendar date.
• Inside-IR35 contractors face an additional restriction: home-to-client travel is generally not deductible for an inside-IR35 engagement.
• Pay exactly the AMAP rate (not more) to avoid a benefit-in-kind charge.
• Keep a contemporaneous mileage log with dates, destinations, business purposes and miles.
• The company deducts the reimbursement as a business expense, generating corporation tax relief. You receive the money tax-free and NIC-free.

Getting the mileage claim right is a straightforward tax saving that many contractors under-claim (by not tracking miles) or over-claim (by including commuting). A specialist contractor accountant can review your current position, confirm whether your main engagement site is a temporary or permanent workplace, and make sure the 55p rate is applied correctly from April 2026 onwards. To discuss your expenses position and the broader tax picture, visit our contractor accountancy services page.