HMRC fuel rate increase creates new considerations for employers and employees

HMRC’s latest update to advisory fuel rates and mileage allowances is likely to have a wider impact than many businesses initially expect, particularly for employers with large mobile workforces or employees who regularly use their own vehicles for business travel.

While much of the attention will focus on employees being able to claim a higher approved mileage rate, the announcement also creates an important decision point for employers around reimbursement policies and business costs.

For many businesses, 45p per mile has become the standard benchmark for employee mileage reimbursement. The rate has remained unchanged for many years and is now deeply embedded within company expense policies and payroll processes.

However, with HMRC increasing the approved mileage rate, employers now need to decide whether to increase their reimbursement rates in line with HMRC guidance or retain their existing policy.

Although businesses are not required to match the HMRC approved rate, the change creates both practical and employee relations considerations.

Many employers are likely already reimbursing employees at 45p per mile, meaning the increase now creates a commercial and operational decision around whether reimbursement policies should be updated.

Some businesses may decide to absorb the additional cost and increase rates in line with HMRC guidance, particularly where employees travel extensively for work. Others may choose to retain existing reimbursement levels, especially in sectors already facing cost pressure.

However, where employers reimburse below the HMRC approved mileage rate, employees may still be entitled to claim tax relief on the difference directly from HMRC.

This means businesses should review not only the financial impact of any increase, but also how clearly reimbursement policies are communicated internally.

If an employee receives less than the approved HMRC mileage rate for business travel, they may be able to claim Mileage Allowance Relief on the difference through a self-assessment tax return or directly with HMRC.

For some employees, particularly those travelling significant business mileage throughout the year, the difference could become meaningful.

As Chris, explains: “Many employers will now be reviewing whether their current mileage reimbursement policies remain appropriate. Even where businesses choose not to increase rates immediately, employees may still be able to claim tax relief on the shortfall between what they receive and the HMRC approved rate.

“This means there are considerations on both sides. Employers need to think about cost, consistency and policy, while employees should understand what reliefs may still be available to them.”

The updated rates are not simply an administrative adjustment. For businesses with field-based teams, multiple sites or regular client travel, mileage reimbursement can represent a significant operational cost.

The changes may also prompt wider conversations around fleet strategy, hybrid working and travel policies, particularly as businesses continue balancing rising costs with employee expectations.

Reviewing reimbursement arrangements now can help businesses avoid confusion later and ensure policies remain commercially appropriate and aligned with current HMRC guidance.

Changes to mileage and fuel rates can have implications for payroll, expenses, employee tax relief and wider business policy. Employers should review current reimbursement arrangements carefully and consider how the updated HMRC rates affect both business costs and employee claims.

At Old Mill, we help businesses and individuals navigate changing tax rules with practical, commercially focused advice. Our team can support with reviewing mileage policies, understanding tax relief opportunities and ensuring expense processes remain compliant and efficient.

If you would like to discuss how the latest HMRC mileage and fuel rate changes may affect your business or employees, please contact Chris Watts on or speak to your usual Old Mill adviser.