Mileage Allowance Increase 2026: What the New 55p Rate Means for Self-Employed Workers, Sole Traders & Small Businesses in Wirral & Beyond

The Chancellor’s recent announcement has delivered welcome news for anyone who uses their own car for work. From 6 April 2026, the HMRC approved mileage allowance rate for cars and vans has risen from 45p to 55p per mile for the first 10,000 business miles in the tax year. This change is backdated, meaning many drivers can benefit for the entire 2026/27 tax year.

At Jan McDermott Chartered Accountant in Birkenhead, we help self-employed professionals, sole traders, contractors, and small business owners across the Wirral, Merseyside, and beyond make the most of tax reliefs like this. Here’s everything you need to know about the mileage allowance increase and how to claim it properly.

What Has Changed with the Mileage Allowance?

For over 15 years, the rate was stuck at 45p per mile for the first 10,000 business miles and 25p thereafter. The new 55p rate (still 25p after 10,000 miles) better reflects rising fuel, insurance, maintenance, and vehicle costs.

Who benefits?

• Employees whose employers pay below the approved rate (or nothing at all).
• Self-employed individuals and sole traders claiming expenses on their Self-Assessment tax return.
• Limited company directors using personal vehicles for business travel.
• Care workers, tradespeople, consultants, delivery drivers, and anyone whose job involves regular business mileage (not normal commuting).

How the Approved Mileage Allowance Works in Practice

For Employees: Your employer can pay you up to 55p per mile tax- and National Insurance-free (Approved Mileage Allowance Payment – AMAP). If they pay less, you can claim tax relief on the difference via your P60 or Self-Assessment.

For Self-Employed & Sole Traders: You claim the mileage rate directly against your business income on your tax return. This is often simpler and more generous than claiming actual running costs (fuel, servicing, etc.), especially if you have a relatively efficient car or lower actual expenses.

Important rules:

• Only business miles count (travel between work locations, client visits, etc.). Commuting from home to a regular workplace does not qualify.
• Keep accurate records: date, purpose of journey, miles driven, and client/location.
• You cannot claim both mileage allowance and actual vehicle running costs for the same miles.
• After 10,000 miles, the rate drops to 25p.

Example Calculation (New 55p Rate): A self-employed accountant or consultant in Birkenhead drives 8,000 business miles in the year:

• At old rate: 8,000 × 45p = £3,600 tax-deductible
• At new rate: 8,000 × 55p = £4,400 tax-deductible
• Extra relief: £800

If you’re a higher-rate taxpayer, this could save you hundreds in tax. For those with higher mileage, the benefit is even greater.

Why This Matters for Small Businesses & the Self-Employed in Wirral

Many of our clients in Birkenhead, Wallasey, Heswall, Prenton, and across the Wirral use their cars extensively for client visits, site meetings, material pickups, or care work. With fuel prices and insurance costs still elevated, this 10p increase provides real cashflow support.

Related tax planning opportunities we often discuss with clients:

• Self Assessment deadlines: Ensure your 2025/26 return is filed accurately and claim backdated relief where possible.
• Sole trader vs limited company: We advise on the best structure for maximising mileage claims and other expenses.
• Capital allowances on vehicles or equipment.
• VAT reclaim on fuel (if using the mileage rate, there are specific rules).

How to Claim the New Mileage Rate

1. Employees: Speak to your employer first. Submit a mileage claim form. Use Form P87 if claiming tax relief directly from HMRC.
2. Self-Employed: Record mileage in a logbook or app (e.g., MileIQ, Driversnote, or a simple spreadsheet). Include it in your Self-Assessment under “Car, van and travel expenses.”
3. Limited Companies: Reimburse directors/employees at the approved rate to avoid benefit-in-kind tax charges.

Pro Tip: Digital mileage tracking tools make compliance easy and HMRC-friendly. We recommend apps that automatically log journeys and categorise business vs personal use.

Common Mistakes to Avoid

• Claiming commuting miles.
• Mixing mileage claims with actual expense claims.
• Poor record-keeping – HMRC can query claims without evidence.
• Forgetting the backdated element for 2026/27 – review your records from April onwards.
• Not reviewing company car vs own vehicle tax efficiency.

Our team at Jan McDermott Chartered Accountants regularly reviews client mileage claims during bookkeeping and year-end accounts to ensure maximum legitimate relief.

Other Tax Reliefs for Self-Employed & Small Businesses

While focusing on mileage, remember these work well alongside it:

• R&D Tax Credits – Especially relevant for games development, construction, and creative sectors we support.
• Capital Allowances and Annual Investment Allowance.
• Pension contributions and IR35 compliance for contractors.
• VAT services and payroll for growing teams.
• Construction Industry Scheme (CIS) tax deductions.

We provide full Xero accounting, payroll, VAT returns, and tax planning tailored to Wirral businesses.

Get Expert Help with Your Tax Return & Mileage Claims

The new 55p mileage allowance is a positive step but maximising it alongside other reliefs requires proper planning and accurate records.

Whether you’re a sole trader in Birkenhead, a contractor across Merseyside, or running a small business in the Wirral, our local Chartered Accountant team can help you:

• Optimise your Self-Assessment.
• Set up efficient mileage tracking and reimbursement systems.
• Minimise your tax bill legally.
• Stay compliant with HMRC while claiming everything you’re entitled to.

The increase in allowance is one of the more practical Budget measures in recent years. For many self-employed drivers and small business owners, it translates to hundreds or even thousands of pounds in extra tax relief.

Don’t leave money on the table. Let us help you claim it correctly while building a robust, tax-efficient financial setup for your business.

Contact Jan McDermott Chartered Accountants today for a no-obligation consultation. We serve clients in Birkenhead, Wallasey, Heswall, Prenton, Moreton, and throughout the Wirral and Merseyside.

This article is for general information only and does not constitute individual tax advice. Tax rules can be complex – always consult a qualified accountant for your specific circumstances.