Mileage rates review: Will the first AMAP rethink in 15 years benefit contractors?

Contractors who regularly drive to client sites may finally have a reason to pay attention to Westminster’s latest tax announcement.

When was the mileage rates review announced?

The government confirmed on March 25th 2026 that it will review Approved Mileage Allowance Payments (AMAPs) — the tax-free mileage rates that employees, sole traders, and limited company contractors can potentially claim when using their own vehicles for business journeys.

Crucially, this AMAPs review is the first serious rethink of mileage rates 2011, writes Kerry Newman, director of SG Accounting.

What’s the main issue with contractor mileage reimbursement?

The historical review matters because, while fuel, insurance, servicing and vehicle finance costs have all risen sharply over the last 15 years, the main, HMRC-approved AMAP rate has remained frozen.

What is the AMAP rate?

Set in 2011 and unchanged in 2026/27, the AMAP rate is 45p per mile for the first 10,000 business miles, before dropping to 25p thereafter.

According to estimates cited alongside last month’s government announcement to review AMAPs, motoring costs have increased by around 40% since the rates were last updated.

And that might be a very conservative estimate, because the RAC Foundation puts the increase in total motoring costs — over the last ten years alone — at an even heftier 61%. Included in that approximate surge in the overall cost of motoring since 2016 is a more than 200% rise in the price of insurance and tax.

For contractors who travel regularly between client locations, temporary workplaces or project sites, this sizeable gap between how much mileage-related costs are incurred and how much is reimbursable has become difficult to ignore.

What’s a key aspect of the new mileage review?

When HM Treasury announced the mileage rates review, it said the review of the AMAP rates was intended to “support working people.”

Although this key aspect of the review — that it is a “workers-first review”— might concern some atypical workers, contractors should not assume that they sit outside its scope.

Can I claim mileage as a contractor?

Many limited company contractors rely on AMAPs to reimburse themselves tax-efficiently for business mileage undertaken in personally owned vehicles.

The system of HMRC-approved rates effectively allows contractors to recover motoring costs without the need to maintain detailed records covering:

• fuel
• depreciation
• repairs, and
• servicing.

Might HMRC increase approved mileage rates for umbrella company contractors, as well?

For umbrella contractors and agency workers who still qualify for mileage relief on genuine business journeys, any increase in the 45p rate would also be welcome, at a time when travel costs remain stubbornly high.

Importantly for umbrella contractors and others, including sole trader freelancers, Dan Tomlinson MP has openly acknowledged that frozen mileage rates may now be ‘increasing the cost of working.’

What has a minister said about the mileage review?

Last month, Treasury minister Mr Tomlinson also said that “millions of working people rely on their car to do their job.”

Such reliance is probably even greater in the self-employed economy, indicating that contractors should benefit from the mileage rates review, even if contractor tax policy in recent years has tended to focus more on compliance.

Is there a formal mileage rates review consultation?

At the time of writing (May 15th 2026), there does not appear to be a formal ‘mileage rates’ public consultation, inviting responses from contractors, businesses, or any representative bodies.

Instead, the Treasury merely says it intends to engage with workers affected by rising motoring costs as the mileage rates review develops “ahead of a future Budget.”

[Editor’s Note: In the House of Commons on March 10th 2026, chancellor Rachel Reeves said much the same, pledging to Jim McMahon MP that the government would “consider the matter” of updating mileage rates, albeit as “part of a future fiscal event.”]

Is the mileage review perhaps related to Autumn Budget 2026?

While the Treasury’s ‘future Budget’ wording is significant because it represents one of the first nods by the government to Autumn Budget 2026, it will be disappointing for some, as it suggests the process of reviewing Approved Mileage Allowance Payments is currently more exploratory than consultative.

How can contractors have their say on mileage rates?

In practice, then, contractors with an opinion on mileage rates may (for now) need to rely on accountancy firms, trade organisations, and industry bodies to feed their concerns into government discussions indirectly.

Nonetheless, the fact that an official government review into approved mileage rates has been announced publicly, at all, is positive.

How does a contractor accountant like us assess AMAPs?

Our view as a trusted accountancy firm specialising in contractor taxation is that AMAPs have long been treated as a largely forgotten corner of the tax system, despite millions of workers depending on them.

What might the mileage review increase the AMAP rate to?

The most obvious outcome of the mileage review would be a straightforward increase to the headline AMAP rate of 45p.

However, be on guard, as the government may also examine broader structural reforms, including whether the current system properly reflects the growing shift towards hybrid and electric vehicles.

Do HMRC-approved mileage rates cover electric vehicles?

At present, the standard AMAP regime applies regardless of whether the vehicle is petrol, diesel, hybrid, or fully electric.

Yet EVs have a very different cost profile, with lower servicing costs but higher upfront purchase prices and changing charging costs.

This is an issue that connects directly with our very own Dan Mepham’s take on EV tax changes for contractors and limited company directors.

How might the mileage rates review tie in with electric vehicles?

In particular, HMRC has already been adjusting its approach to electric vehicle reimbursement through the Advisory Electric Rate (AER), which increased earlier this year to reflect rising public charging costs.

This new, wider mileage review could therefore become part of a broader rethink of business travel reimbursement, in the UK’s increasingly electrified vehicle market.

What should contractors expect from the Treasury’s mileage rates review?

Contractors should probably steer clear of assuming that a dramatic increase in approved mileage allowance payments is inevitable!

While ministers have acknowledged that the rates of 45p and 25p are outdated, the Treasury will also be conscious that any increase would reduce taxable income and National Insurance receipts while increasing reimbursement expectations across the public and private sectors.

A modest uplift to the current 45/25p rates therefore feels a more likely outcome than a wholesale redesign of the AMAP regime.

Why is the mileage rates review a good indicator for contractors?

Even so, after 15 years of frozen rates, even a relatively small increase would carry symbolic importance.

For contractors who have absorbed years of rising travel costs while navigating wider tax and compliance pressures, the mileage review at least signals that policymakers are beginning to recognise that the economics of work-related travel in 2026 have changed substantially since 2011.

For now, though, contractors may need to wait until a future Budget before any concrete AMAP rate reforms emerge. Until then, the current 45p mileage rate (for the initial 10,000 business miles) remains firmly in place.

The takeaway

So the key takeaway of the mileage rates review is that the government positioning itself on a route to modernise AMAPs will be very welcome by contractors, yet whether this indicator turns into meaningful reform remains unclear.