How do HMRC travel expenses rules impact employers in the 2026/27 tax year?

On 6 April 2026 , HMRC raised the Approved Mileage Allowance Payment (AMAP) rate for cars and vans to 55p per mile for the first 10,000 business miles, the first increase since 2011 (GOV.UK). For UK employers, that means reviewing every mileage policy, payroll setting and P11D workflow before the next pay run to keep reimbursements tax-free and RTI-compliant . This guide walks you through what qualifies as business travel , the 24-month rule , the new 2026/27 rates and how to report any excess correctly.

What are the HMRC travel expenses rules for the 2026/27 tax year?

HMRC classes allowable business travel as any journey an employee makes to carry out their work duties, separate from ordinary commuting to a permanent workplace. The travel must be genuinely needed for the job. In practice, that means payroll teams check each claim against HMRC's definition before approving it, which keeps payroll compliance intact across the tax year.

Qualifying journey types include:

• Travel from a permanent workplace to a client meeting.

• Journeys between two different workplaces for the same employment.

• Travel from home to a temporary workplace .

What qualifies as an allowable business journey?

A journey qualifies as allowable when it is made in the performance of the duties of the employment (HMRC EIM32350). The test is whether the employee has to be at a specific destination to do their job. Payroll teams should only approve the claim where the evidence (work diary, calendar, manager sign-off) confirms that need.

What is the 24-month rule for travel expenses?

The HMRC 24-month rule decides whether a workplace counts as temporary or permanent. If an employee spends, or is expected to spend, 40% or more of their working time at one site for a continuous period of over 24 months , that site becomes a permanent workplace under section 339(5)–(6) ITEPA 2003 (HMRC EIM32080). Tax-free travel relief stops the moment the expectation of exceeding 24 months changes, not when the 24 months have already passed.

How to apply the rule:

1. Check the assignment's expected duration  before  travel begins.

2. Stop tax-free reimbursements as soon as the expectation goes beyond  24 months .

3. Process all later payments to that site through payroll as  taxable earnings , subject to  PAYE  and  Class 1 NICs . 

What types of travel do not qualify for tax relief?

Ordinary commuting and private journeys never qualify for tax relief. HMRC defines a permanent workplace as the site where an employee routinely performs their duties, so travel between home and that site is not deductible. Employers should keep clear records of declined claims to show how compliance was applied if HMRC asks.

⚠️ Warning: Disguising ordinary commuting as business travel is a serious compliance breach. Under Schedule 24 of the Finance Act 2007 , it can trigger an HMRC audit, backdated tax, and penalties of 30% (careless) up to 100% (deliberate and concealed) of the lost revenue (HMRC CH82150).

Checklist of non-allowable journeys:

• Travel between an employee's home and their permanent workplace.

• Weekend travel to a permanent workplace outside of normal working hours.

• Personal deviations or private errands made during an otherwise allowable business trip.

• Travel to a location that has triggered the 24-month rule .

What is the statutory HMRC mileage allowance for 2026/27?

The Approved Mileage Allowance Payments (AMAP) framework allows employers to reimburse employees for business travel in their own vehicles tax-free up to specific statutory limits. These rates vary by vehicle type, with the allowance for cars dropping after a specific 10,000-mile threshold. In practice, that means payroll software needs to track each employee's running business mileage across the 2026/27 tax year , so that employee reimbursements stay accurate and don't tip into taxable territory.

Has the 45p mileage rate increased in 2026/27?

Yes. The statutory rate for cars and vans rose from 45p to 55p per mile on 6 April 2026 (GOV.UK), the first increase since 2011. Payroll teams should review their software settings and policy documents so the old 45p rate is not carried over into 2026/27 calculations.

💡 Good to know: This change represents the first statutory increase to the car and van AMAP rate since 2011 .

What is the fuel allowance per mile for alternative vehicles in 2026/27?

The flat rates for alternative transport are 24p per mile for motorcycles and 20p per mile for bicycles (GOV.UK). Unlike the car and van rate, these do not drop after 10,000 miles in a tax year. Payroll teams should log each claim under the correct vehicle type so the 10,000-mile threshold isn't applied incorrectly. For company-provided vehicles instead of employee-owned ones, different rules apply under the company car tax regime.

How do travel expenses impact PAYE and National Insurance?

Reimbursements made at or below the approved AMAP rates are free from PAYE and National Insurance contributions (NICs) . Anything paid above the approved rate becomes taxable earnings. The role of PAYE here is straightforward: the excess is added to the employee's gross pay before the next FPS submission, then taxed and NIC'd as standard.

Can I claim travel expenses if I am on PAYE?

Employees on PAYE can claim Mileage Allowance Relief (MAR) directly from HMRC if their employer reimburses them at a rate lower than the statutory maximum. If an employer pays less than the approved 55p per mile threshold for business travel, the individual employee must claim this relief independently using a P87 form or their annual Self Assessment tax return. The employer doesn't need to take any payroll action in this case.

What happens if an employer pays more than the approved rate?

Any amount paid above the approved AMAP rate is treated as taxable earnings . Payroll adds the excess to the employee's gross pay, then deducts PAYE at their marginal rate (20%, 40% or 45%) and employee Class 1 NICs (8% on weekly earnings between £242 and £967, 2% above) . The employer then pays 15% Class 1 NICs on the excess. This is reported through RTI , or alternatively on a P11D form by 6 July following the tax year.

📌 Example: An employer pays 60p per mile for a car journey, 5p above the approved 55p rate . For a 100-mile trip , the 55p portion (£55.00) is tax-free. The 5p excess (£5.00) is added to the employee's gross pay for that period and is subject to PAYE and Class 1 NICs in the next pay run.

How do employers report travel payments to HMRC?

Employers report excess mileage payments either through Real Time Information (RTI) during the pay run, or on an end-of-year P11D return. Whichever route is used, every excess payment needs a clear audit trail showing the rate paid, the business miles claimed and the date of approval.

To report travel payments accurately via payroll, follow these steps:

• Isolate all business mileage payments that exceed the statutory 55p per mile limit.

• Add the excess amount to the employee’s gross earnings within the payroll system.

• Calculate and deduct the appropriate PAYE tax and Class 1 NICs during the active pay run.

• Submit the consolidated figures to HMRC on the Full Payment Submission (FPS) using standard RTI protocols.

What evidence is needed for an HMRC mileage claim?

Detailed mileage logs and receipts are required. Under Schedule 24 of the Finance Act 2007 , any claim HMRC can't verify during an audit is reclassified as taxable earnings, with backdated PAYE and Class 1 NICs , plus penalties of up to 100% of the tax due for the most serious inaccuracies.

Checklist for validating claims:

• Comprehensive mileage log (dates, postcodes, and business reasons).

• Valid fuel receipts (mandatory for corporate VAT reclamation).

• Formal managerial approval logged before payment.

What records must employers keep for business travel?

Beyond individual claims, the core record is a consolidated business mileage ledger . HMRC checks these against employee work patterns to confirm the 40% threshold for temporary workplaces hasn't been breached, so mileage entries should line up with calendars, meeting invites and project records.

How long must travel expense receipts be retained?

Employers must keep PAYE records, including expense claims, for at least 3 years from the end of the tax year they relate to (GOV.UK). Many SMEs go further and retain records for 6 years to align with general HMRC tax record-keeping practice. Payroll automation systems make this far simpler by tracking each employee's running mileage total and storing receipts in one place.

👉 To note: Digital copies of receipts are fully acceptable to HMRC as long as they are legible and accessible.

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