HMRC mileage rise exposes outdated expense processes

Capture Expense has warned that the increase in HMRC mileage rates is exposing outdated business expense processes, putting pressure on policies and systems that have not been updated for years.

HMRC's Approved Mileage Allowance Payment for cars and vans has risen from 45p to 55p per mile for the first 10,000 business miles, the first increase in more than 15 years. According to Capture Expense, the higher rate could leave employers facing inaccurate reimbursements, extra administration and compliance issues if internal processes still reflect the previous figure.

The issue is likely to be most acute in industries where staff regularly use personal vehicles for work and submit large numbers of claims. Construction, field services and logistics were highlighted as areas where mileage is a routine part of day-to-day operations, meaning even small errors can add up quickly when claim volumes are high.

James Rowell, founder and managing director of Capture Expense, said the problem for many businesses was not mileage reimbursement itself, but how claims were handled in practice.

"This isn't necessarily about businesses getting mileage wrong. The important thing now is updating processes that were left unchanged for years: manual tracking, outdated policies and systems that haven't evolved with the way people actually work. Those are the things creating risk now. What is catching organisations out isn't necessarily the mileage itself, but how it is being recorded, approved and managed," Rowell said.

Policy review

One immediate area of concern is company policy. Employers that directly reference HMRC mileage rates in staff guidance, expenses manuals or internal reimbursement rules may need to revise those documents to avoid mismatches between policy and practice.

Although businesses are not required to reimburse staff at the full HMRC approved rate, continuing to pay 45p per mile could create tensions with employees who know the allowance has increased. Staff may also seek tax relief on the difference between what they receive and the approved rate, adding another layer of complexity for finance and payroll teams.

Any business that has not reviewed its mileage arrangements since the rate change risks falling behind. That includes not only written policy, but also line manager guidance and approval thresholds used during expense checks.

System changes

The rise also creates practical challenges for payroll and expense software. In many organisations, mileage rates are built into longstanding systems and may not have been revised for years, particularly where the process remains partly manual or relies on spreadsheets and legacy tools.

Because the revised rate applies from April 2026, employers may need to revisit claims already submitted in the current tax year. That raises the prospect of recalculations, corrections and additional work for finance teams if systems have not been updated promptly or consistently.

Any disconnect between payroll and expense systems could result in staff being reimbursed at the wrong level. It could also increase the risk of reporting errors, especially in businesses where large workforces travel frequently between customer sites, depots or project locations.

What the rate covers

Capture Expense also pointed to confusion over what the HMRC mileage allowance is intended to cover. The approved rate is designed to reflect more than fuel costs alone, including broader running costs such as insurance, servicing, depreciation, and wear and tear.

That distinction matters in sectors where vehicles are heavily used and operating conditions may be demanding. For employees travelling long distances or visiting multiple sites, the cost of using a personal vehicle can extend well beyond petrol or diesel, particularly after years of rising maintenance and ownership costs.

Understanding the scope of the allowance is important for employers shaping reimbursement policies that are fair to staff and aligned with HMRC rules, the company said. Misunderstanding the rate can lead to inappropriate comparisons with other motoring allowances, including Advisory Fuel Rates for company cars.

Tracking claims

A further issue is how mileage is recorded. Capture Expense said it is the most commonly submitted expense category across businesses, increasing the importance of accurate records at a time when each claim is now worth more.

Manual entry, missing journeys and inconsistent approvals can all inflate costs or create compliance risks. In businesses processing high volumes of mileage claims, even modest inaccuracies may have a noticeable financial effect over time.

The latest change should prompt organisations to look again at how journeys are logged and checked, particularly where different rates apply depending on whether an employee uses a personal vehicle or a company car.

Rowell said the increase should also encourage employers to review their wider systems.

"This increase has been a long time coming, and it's an important step toward reflecting the real cost of using a personal vehicle for work. The organisations that benefit most will be those that use this moment to modernise their processes, ensuring claims are accurate, policies are up to date and finance teams have full visibility over what is being spent and why," he said.