In a welcome move for business owners, directors and employees, HMRC has increased the Approved Mileage Allowance Payment (AMAP) rate for cars and vans from 45p to 55p per mile for the first 10,000 business miles. This is the first increase in 15 years, since 2011, and will have an immediate impact on tax relief and business expense
How to account for mileage in FreeAgent?
For those using FreeAgent, the process remains straightforward as the software supports HMRC-compliant mileage claims.
- 1
Navigate to FreeAgent's Expenses menu
To record your mileage, go to: My Money → Expenses for Limited Companies.
- 2
Add your mileage claim
Select “Add New” and choose “Mileage Claim”.
- 3
Add your mileage claim details
You’ll need to enter the date, number of miles, business purpose and vehicle type.
- 4
Reclaim your Approved Mileage Allowance Payments
complete the process by selecting the option to reclaim at the AMAP (Approved Mileage Allowance Payments) rate. FreeAgent will automatically apply the correct mileage rate.
FreeAgent says it has automatically updated the rate for journeys dated on or after 6th April 2026, except where those journeys had already been re-billed on invoices or were in locked accounting periods when the change was announced.
Important Practical Point
However, because the rate increase has been backdated, there is a practical point to be aware of. While FreeAgent will apply the updated 55p rate to new entries and those not re-billed or locked, claims recorded before the update and re-billed or locked, will still reflect the old 45p rate. It is therefore important to review mileage claims from 6th April 2026 onwards. Where claims have not yet been reimbursed, they can be edited and re-saved. Where they have already been paid, a separate adjustment claim for the additional 10p per mile should be entered. For audit clarity, it is advisable to label such entries clearly, for example: “Mileage rate adjustment (45p to 55p – April 2026 backdate)”.
Worked Example for a Directors Mileage Claim
To illustrate, consider a director who used their personal vehicle for 4,000 business miles between April and July 2026 and claimed at the old 45p rate. The original claim would have been £1,800. Under the new rate, the correct claim is £2,200, creating a £400 shortfall. This additional amount can now be reimbursed tax-free by the company, with the full £2,200 treated as an allowable business expense for corporation tax purposes. Payments within the approved mileage limits should not create income tax or benefit-in-kind issues. For National Insurance, reimbursements are exempt up to the relevant qualifying amount of 55p per business mile for cars and vans from 6th April 2026.
If the original claim has not yet been paid, the simplest solution is to update it to reflect the new rate. If it has already been reimbursed, a top-up claim can be submitted or included within the next expense submission.
From a practical perspective, for directors using a personally owned vehicle for genuine business travel, mileage claims remain a tax-efficient way to reimburse business costs, provided the journeys are properly recorded and the claim stays within HMRC’s approved limits. With the increase to 55p per mile, this has become even more beneficial. Ensuring that all mileage is accurately recorded and updated where necessary will help maximise the available tax relief.
If you require assistance with your mileage claims or any other questions about your tax affairs, please get in touch with your dedicated accountant for custom support.