HM Revenue and Customs (HMRC) has confirmed that self-employed drivers covering 8,000 business miles per year can now benefit from an £800 tax saving, thanks to an increase in the Approved Mileage Allowance Payments (AMAPs) rate. The rate for cars and vans has risen from 45p to 55p per mile for the first 10,000 business miles, a change introduced by the Labour Party government.
How the Mileage Rate Increase Works
AMAPs are tax-free reimbursements for business use of a personal vehicle. The 10p per mile increase means that a self-employed worker driving 8,000 business miles can now claim £4,400 against their taxable profit, up from £3,600 under the previous rules. This represents an extra £800 deduction, according to Lee Murphy, managing director at The Accountancy Partnership.
Speaking to GB News, Murphy explained: "The mileage rate for cars and vans had been stuck at 45p for years, despite the cost of running a vehicle rising sharply." He added that the increase "does not just recognise higher motoring costs; it can directly reduce the tax bill for sole traders and partners who use their own car or van for business."
Tax Savings for Basic-Rate Taxpayers
For a basic-rate taxpayer, the additional £800 deduction could be worth around £160 in income tax alone, and potentially more once national insurance is considered. Murphy noted that the 10p increase is "meaningful, particularly for lower- and moderate-mileage self-employed workers." However, he cautioned that fuel is only one part of the cost of running a vehicle, with insurance, servicing, repairs, tyres, and depreciation all having become more expensive.
Warning for High-Mileage Drivers
Murphy also issued a warning for those covering more than 10,000 business miles a year. "Someone doing 15,000 business miles will benefit from the increase on the first 10,000 miles, giving them an extra £1,000 deduction, but the remaining 5,000 miles are still only claimable at 25p per mile," he said. This means that the benefit is less generous for higher-mileage drivers.
Record-Keeping Requirements
HMRC expects proper mileage records, not a rough estimate at the end of the year. Drivers must maintain accurate logs of business journeys to claim the allowance. The HMRC interactive calculator can be used to calculate car and car fuel benefits.
The changes come as part of the government's efforts to support self-employed workers amid rising motoring costs. The increased AMAPs rate provides a direct reduction in taxable profit, offering financial relief for those using their personal vehicles for business purposes.
