Megan Burnham

HMRC advisory fuel rates from 1 June 2026: what’s changed? 

The new rates reflect updated petrol, diesel, liquefied petroleum gas (LPG), and electricity prices. HMRC reviews AFRs quarterly (on 1 March, 1 June, 1 September, and 1 December each year) using fuel price data from the Department for Energy Security and Net Zero (DESNZ) and the AA. You can view the full published rates on the HMRC advisory fuel rates guidance page. 

Petrol and LPG rates 

The petrol rates have seen a notable increase from the previous quarter, particularly for larger engines. 

For comparison, the rates from 1 March to 31 May 2026 were 12p, 14p, and 22p for petrol. That’s a meaningful jump, especially for larger-engined vehicles, where the petrol rate has risen by 4p per mile. 

Diesel rates 

Diesel rates have also increased substantially this quarter. 

 The previous diesel rates were 12p, 13p, and 18p respectively. For a fleet of vehicles travelling a significant number of miles each month, this kind of change compounds quickly. 

Electric rates 

The advisory electric rates remain split between home and public charging—a distinction that was introduced in September 2025. 

The home charging rate holds at 7p and the public charging rate stays at 15p, consistent with the previous quarter. 

For hybrid vehicles, HMRC treats them as either petrol or diesel for the purposes of advisory fuel rates, so make sure you use the relevant fuel type table. 

How to apportion mileage for electric vehicles 

For fully electric cars charged at both home and public locations, HMRC allows you to apportion the mileage based on how much charging happens at each place. The split must be fair and reasonable, and you’ll need to be able to demonstrate it if asked. 

A quick example 

Imagine someone drives 800 miles in a month. They charge 70% at home and 30% using public chargers. You’d apply 7p per mile to 560 miles and 15p per mile to 240 miles. That gives a total reimbursement of £75.20. 

This is a lot simpler to handle when your mileage tracking system automatically logs journey types and charging locations, rather than asking employees to calculate it themselves.

What do the updated AFRs mean for your expense process? 

Check your rates are up to date 

This may feel obvious, but it’s worth stating! If you’re using a fixed rate in a spreadsheet, payroll process, or expense policy, it needs updating now (or by 30 June 2026 at the latest). 

Ask yourself: do you currently have a process for updating mileage rates when HMRC publishes new figures? If the answer is “someone does it manually, eventually”, it’s a compliance risk worth resolving before the next quarterly update 

Review your expense policy 

Your expense policy should reference HMRC’s advisory fuel rates rather than hardcoded figures. That way, when rates change quarterly, you’re updating one reference point rather than hunting down every place a rate appears. 

Make sure employees know 

It sounds simple, but employees using company cars for business travel need to know what rate applies to their vehicle. That means communicating the change clearly and, ideally, having a system that applies the right rate automatically at the point of claim. 

Don’t overpay (or underpay) 

Overpaying without evidence of higher costs means treating the excess as taxable income. Underpaying means employees aren’t properly covered for their fuel costs—which affects morale and may not meet your contractual obligations. 

Getting this right isn’t complicated, but it does require accurate, current information at the point of reimbursement. 

Stay on top of rate changes, without the manual effort 

HMRC advisory fuel rates will change again in 2026—on 1 September, then 1 December. And so on. 

If your current process relies on someone manually spotting the HMRC update and updating it through your systems, you’re creating four opportunities each year for the wrong rate to be used. That’s manageable when you have a small fleet, but as your organisation grows it becomes a real compliance risk. 

The most reliable approach is to have your expense management software do the heavy lifting, so rate changes don’t depend on someone remembering. 

If you’d like to see how Capture Expense can take the quarterly rate update off your to-do list—and give your finance team a cleaner, more accurate mileage process—book a demo with our team. 

All advisory fuel rates referenced in this article are sourced from HMRC’s official advisory fuel rates guidance, last updated 22 May 2026. 

HMRC mileage rates for 2026/27 are 55p per mile for the first 10,000 business miles and 25p per mile thereafter for cars and vans. These rates are unchanged from 2025/26.

What are HMRC mileage allowance payments? 

Mileage Allowance Payments (MAPs) are the amounts you can pay employees, tax-free, when they use their own vehicles for business travel. Rather than reimbursing individual costs like fuel, insurance, or wear and tear separately, HMRC sets a flat pence-per-mile rate that covers it all in one go. 

These are also known as Approved Mileage Allowance Payments (AMAPs). As long as you pay at or below the approved rate, there’s nothing to report to HMRC and nothing to tax. Simple, in principle. 

Why this matters for you 

A lot of organisations don’t realise that underpaying employees—say, reimbursing at 30p per mile rather than the approved 45p—means employees can claim the shortfall back themselves through Mileage Allowance Relief (MAR). That’s an admin burden you’re quietly pushing onto your finance team, all for the sake of a few pence. 

Overpaying, on the other hand? Any amount above the approved rate is treated as a taxable benefit, meaning that it needs to go on a P11D form (or through payroll), and attracts National Insurance contributions. So, it’s worth getting this right. 

What are the HMRC mileage rates for 2026/27?

Here are the current rates from 6 April 2026 to 5 April 2027: 

The two-tier AMAP structure means the rate drops from 55p to 25p per mile once an employee crosses 10,000 cumulative business miles in a tax year.

One quick note: if an employee carries a work colleague in their own vehicle, they can also claim an extra 5p per mile per passenger on top of the standard rate. That’s worth flagging to any employees who regularly car-share for client visits or site travel. 

How to calculate mileage reimbursement 

It’s straightforward. Multiply the miles driven by the relevant rate, applying the two-tier structure for cars and vans once the 10,000-mile threshold is crossed. 

For example: an employee drives 14,000 business miles in their own car over the year. Their reimbursement would be: 

• First 10,000 miles: 10,000 × 45p = £4,500 
• Next 4,000 miles: 4,000 × 25p = £1,000 
• Total: £5,500 

This works well when employees drive a moderate amount. But be aware that for high-mileage employees—those covering hundreds of miles a week—the 25p rate after 10,000 miles may not cover their actual running costs, particularly with fuel prices currently elevated. It’s worth having a conversation about whether your internal policy needs to reflect this. 

A closer look at each vehicle type 

Cars and vans 

The approved rate for cars and vans is 55p per mile for the first 10,000 business miles, then 25p per mile for everything after that. This applies regardless of the engine size, fuel type, or age of the vehicle. 

Importantly, this includes hybrid cars, too. They follow the same 55p/25p structure as petrol and diesel vehicles. So, whether your employee drives a Toyota Prius or a Ford Focus, the rate is the same. 

What about electric vehicles? For employees using their own electric cars for business, the standard AMAP rate of 55p/25p still applies—there’s no separate rate for personally-owned EVs. This is one area where HMRC’s rates are under some scrutiny, since the running costs of EVs are quite different from petrol or diesel vehicles. For now, though, the same rates apply. 

Motorcycles 

Employees using their own motorcycles for business can claim 24p per mile. Unlike cars and vans, there’s no two-tier system. The 24p rate applies regardless of how many miles are driven. There’s no 10,000-mile threshold to manage. 

For example, if an employee travels 6,000 business miles on their motorcycle, that’s 6,000 × 24p = £1,440 in tax-free reimbursement. 

Bicycles 

Yes, cycling for work counts too. The approved rate is 20p per mile, with no mileage limit. It covers things like maintenance, insurance, and general wear and tear. It might sound small, but for employees who regularly cycle between sites or to client meetings, it adds up—and it’s a great incentive to encourage greener travel habits across your organisation. 

What journeys count as business mileage? 

This is where a lot of organisations—and employees—get caught out. Not every work-related journey qualifies for mileage reimbursement. 

Journeys that do qualify: 

• Travelling from one office location to another 
• Visiting a client, customer, or supplier at their premises 
• Travelling to a temporary workplace (a location where an employee works for 24 months or less) 
• Attending a conference, training event, or business meeting away from the usual workplace 

Journeys that don’t qualify: 

• The daily commute from home to a permanent, regular place of work 
• Any travel for private purposes, even if the employee takes a work call on the way 
• Travelling to a location that’s very close to the regular workplace and is effectively still the regular workplace 

Commute errors are a common mistake, and one that HMRC takes seriously. The key distinction is “temporary workplace” versus “permanent workplace”—and HMRC has detailed guidance on this. 

What are the company car and van benefit charges for 2026/27?

If your organisation provides company cars or vans, different rules apply. Employees using a company vehicle don’t qualify for the AMAP rates above—instead, you’ll be working with Advisory Fuel Rates (AFRs) and benefit-in-kind charges. 

Here’s what’s changed for 2026/27, as confirmed in the Autumn Budget 2025 and on GOV.UK: 

These increases are in line with inflation (based on the September 2025 Consumer Price Index figure). It’s worth updating your payroll system to reflect the new figures before the start of the tax year—see our guide to company car and fuel benefit rates for more detail on how these charges are calculated. 

Zero-emission vans still attract a nil rate of tax under the van benefit charge—so if your fleet includes any fully electric vans, those employees won’t face a taxable benefit.  

What are the HMRC advisory fuel rates for 2026/27?

Advisory Fuel Rates (AFRs) are separate from the AMAP rates and apply specifically to company-owned vehicles. They’re used for two purposes: 

1. Reimbursing employees for business travel in a company car 
2. Calculating repayments when employees use the company car for personal travel and need to pay their employer back for the fuel 

HMRC reviews these rates quarterly—usually on 1 March, 1 June, 1 September, and 1 December. Employers can use the previous rates for up to one month after a new set comes into effect, so you do get a short transition window. 

Here are the rates effective from 1 June 2026 set by the government: 

Petrol 

Diesel 

LPG (Liquefied Petroleum Gas) 

(Rates reduced from previous quarter from 1 March 2026) 

Electric vehicles 

The Advisory Electric Rate (AER) is a guideline set by HMRC for reimbursing employees that use electric vehicles (EVs) for business travel. It’s designed to reflect he costs of charging the vehicles and has been split into two categories based on the charging type.

For 2026/27, these are:

The public charging rate increased from 14p to 15p in the March 2026 update, reflecting higher public charging costs. If employees charge their company EVs across both home and public chargers, you’ll need to apportion the mileage accordingly. For VAT purposes, electricity isn’t treated as a fuel for car fuel benefit charges—so fully electric company cars don’t attract the car fuel benefit charge at all. 

Hybrid vehicles are treated as either petrol or diesel for AFR purposes, depending on their engine type. 

What should you watch out for?

Even organisations with good intentions run into issues with mileage. Here are the most common ones to keep on your radar: 

1. Using the wrong rate for company cars vs personal vehicles. AMAP rates are for employees’ own vehicles. Advisory Fuel Rates are for company cars. Using the wrong set is one of the most common findings during an HMRC Employer Compliance review. 
2. Not tracking cumulative mileage across the year. The 10,000-mile threshold applies across the full tax year, not per trip or per month. If you’re handling this manually, it’s easy to lose track—and overpay at 55p when you should have dropped to 25p. 
3. Accepting commuting claims. Home-to-office travel isn’t eligible, even if the employee also takes a work call during the journey. Make sure your expenses policy is clear on this. 
4. Not keeping adequate records. HMRC can ask to see mileage logs going back several years. Each entry should include the date, start and end point, business purpose, and distance. A log made at the time of the journey carries much more weight than one reconstructed from memory. 
5. Paying above the approved rate without reporting it. If your organisation pays more than 55p per mile, the excess is taxable. It needs to be reported via P11D or through payroll, and Class 1A National Insurance contributions apply. 

If you’re still relying on spreadsheets or paper forms, it might be time to reconsider. Our guide to how mileage reimbursement works covers the process end-to-end. 

How do you report mileage to HMRC?

For most organisations, mileage payments within the approved rates don’t need to be reported at all. But there are situations where reporting is required: 

• If an employee drives more than 10,000 business miles in a year, any payment above 25p per mile for those excess miles must be reported on a P11D form (or payrolled as a benefit). 
• If you pay above the approved rate at any point, the excess is a taxable benefit and needs to be reported accordingly. 
• Employees who receive less than the approved rate can claim Mileage Allowance Relief (MAR) from HMRC directly. If they don’t file a Self Assessment return, they can use form P87—though note that since October 2024, most P87 claims must be submitted by post rather than online. 

You can read more about the P11D reporting process and payrolling benefits in kind in our payroll compliance resources at Cintra. 

Make mileage tracking easier for your organisation 

Tracking mileage manually—across multiple employees, multiple vehicle types, and a 10,000-mile cumulative threshold—can get complicated quickly. The risk of errors, missed thresholds, or inadequate records is real, and the consequences of getting it wrong (whether that’s a tax charge or a failed HMRC compliance check) aren’t worth it. 

Capture Expense automatically calculates mileage based on journey data and HMRC-approved rates. It tracks cumulative mileage across the year, switches rates automatically at the 10,000-mile threshold, supports multiple vehicle types, and keeps a clean audit trail of every claim—ready if HMRC ever asks to see it. 

You can also track carbon emissions alongside mileage, which is increasingly useful for organisations with sustainability reporting requirements. Find out more about tracking CO2 and mileage data together. And if your teams are managing broader expense policies alongside mileage, our expense compliance guide covers everything in one place. 

A new tax year is around the corner, and if you provide company vehicles for personal use, now is the time to get up to speed with car fuel benefits. The 2026/27 tax year brings updated rates, revised reporting requirements, and additional changes that employers need to know.  

We’ve put together everything you need to know about the 2026/27 car fuel benefit charge—from what it is, to the latest rates, and how to report to HMRC. It’s time to get into gear! 

What is a car fuel benefit? 

The car fuel benefit applies to UK taxpayers who use their company car for personal journeys and don’t pay for the fuel themselves. This applies to regular commuting too, it’s not just leisure trips that fall under company car fuel benefits.  

Current company cars and vans rates for 2026/27 

Here’s what that looks like for 2026/27: 

What are HMRC’s advisory fuel rates for company cars in 2026? 

The rates below apply from 1 June 2026: 

Diesel  

Petrol  

Electric: rate per mile 

Hybrid 

For advisory fuel rate purposes, hybrid cars are treated as either petrol or diesel vehicles—so apply the relevant petrol or diesel rate based on the engine type. 

Do HMRC regularly update their fuel rates? 

Yes, HMRC reviews advisory fuel rates every quarter to reflect changes in fuel prices. These updates happen on: 

• 1 March  
• 1 June  
• 1 September  
• 1 December  

The rates above apply from 1 June 2026 and will next be reviewed on 1 September 2026. It’s good practice to keep up to date with these changes so you’re always working with the most current figures.

How to report company car fuel benefits to HMRC 

You have two options when it comes to reporting your company car fuel benefits: 

• P11D Form: Submit this form at the end of the tax year, along with other benefits. 
• Payroll: Process the car fuel benefit through payroll, deducting tax in real time. 

One update to be aware of is the changes to payrolling benefits. From April 2027,  payrolling benefits will become mandatory.  P11D forms are still valid from 2025/26 and 2026/27, but the deadline is closer than it might feel. If you are currently using P11D forms, it’s worth considering the switch to payroll processing now to stay ahead of the change. 

Tax and Class 1A National Insurance Contributions on car fuel benefits 

Your employees will need to pay income tax on any car fuel benefit they receive. The taxable value is worked out using HMRC’s appropriate percentage, which considers the car’s CO2 emissions. Lower emission cars have a lower percentage and higher emission cards receive a higher percentage—the range runs from 3% to 37%.

Your company also has contributions to make. You’ll need to pay Class 1A National Insurance Contributions on the value of the car fuel benefit provided to your people. 

From 6 April 2026, HMRC reshaped how employee expenses and workplace benefits are taxed, and the impact touches almost every UK employer. Some of the changes are genuinely good news. Others mean your teams could see a drop in take-home pay unless you act. Either way, you need to know what’s happening to taxable employee expenses and what to do about it. 

What’s actually changing for taxable employee expenses? 

The 2026/27 tax year brings two headline shifts that will affect how you handle employee expense reimbursements and benefits. 

Reimbursing homeworking equipment is now tax-free 

Here’s something that’s caught employers out for years. If you bought a desk for your home-working employee directly, it was a tax-free benefit under Section 316 ITEPA 2003. But if your employee bought that same desk themselves and you reimbursed them, that exemption didn’t apply, and the reimbursement became taxable. 

From 6 April 2026, that specific inconsistency is fixed. A new exemption (Section 316ZA) makes it tax-free for employers to reimburse employees directly for three categories of expense: 

• Homeworking equipment (desks, monitors, office chairs) 
• Eye tests and corrective glasses for display screen equipment users 
• Seasonal flu vaccinations 

This is a practical improvement for organisations with hybrid or remote teams. You no longer need to act as a purchasing agent, buying equipment directly and owning it, just to avoid a tax charge. You can now reimburse your employee, and the outcome is the same. 

It’s worth being clear about what this doesn’t change. Employers have been able to reimburse running costs (things like broadband or utility bills) tax-free under Section 316A since 2003, and that continues unchanged. The new 2026 exemption is specifically about these three categories of reimbursement, not a broad expansion covering all work-related costs. 

The £6-per-week homeworking relief is being abolished 

Here’s the less welcome news. HMRC is scrapping the £6-per-week flat-rate homeworking tax relief that employees could claim directly through their PAYE tax code or Self-Assessment returns. 

From April 2026, employees can no longer claim this themselves. If they want financial support for working from home, it can only come through employer reimbursement and only where the employer chooses to offer it. 

For employees who’ve been quietly benefiting from this relief, it could mean a noticeable drop in take-home pay—around £62 a year for basic-rate taxpayers, or £124 for higher-rate taxpayers. 

Do you currently know which of your employees has been claiming it? It’s worth finding out, since some may expect you to fill the gap and proactive communication will go a long way either way.

Which expense reimbursements are now tax-free? 

To make things clearer, here’s a breakdown of what’s changing to taxable employee expenses for specific benefit categories: 

This is good news, but it does mean your internal expense processes will need updating. Claims for eye tests, flu jabs, and homeworking equipment will now come through as reimbursements rather than direct purchases, and your finance team needs to be ready to handle them correctly. 

The reimbursement rule that hasn’t changed 

It’s worth remembering that HMRC’s underlying test for allowable expenses remains the same. For a reimbursement to qualify as tax-free, the expense must be incurred wholly, exclusively, and necessarily for employment duties. 

So, while reimbursing your employee for a desk is now cleaner from a tax perspective, reimbursing them for a coffee machine—even if they use it while working from home—still won’t pass that test. Much to the sadness of many caffeine-fuelled workers, the equipment must be strictly for work. 

Who’s going to feel this most? 

The 2026 changes will touch almost every modern business, but some teams are more affected than others. 

• Employers with hybrid or remote teams: You’ll need to update your expense policy to reflect the new homeworking equipment reimbursement rules. The good news is that this is now far simpler; you can reimburse without worrying about the tax implications. 
• Employees who work from home: If they’ve been claiming the £6 weekly homeworking relief via Self-Assessment, they’ll lose that from April 2026. Unless you introduce an employer-funded allowance to replace it, they’ll notice the difference in their pay. 
• Payroll and HR departments: The influx of newly tax-free receipts will need to be handled through your internal expense claims process. If that process is still manual, now’s a very good time to review how you manage expense reimbursements. 

Areas to keep an eye on 

Even with the best intentions, many organisations will stumble over the details here. Here are the pitfalls surrounding taxable employee expenses that are most likely to catch people out: 

• Not updating your expense policy in time: The rules changed on 6 April 2026. If your expense policy still reflects the old approach, where direct employer purchases were tax-free, but reimbursements weren’t, you could either miss out on valid tax-free reimbursements or process them incorrectly. 
• Forgetting about your employees’ lost relief: If your staff have been claiming the £6/week homeworking relief independently, many won’t know it’s been applied until they see their pay. Communicating this proactively (and considering whether to offer an employer allowance) will go a long way. 
• Assuming all homeworking equipment reimbursements qualify: The “wholly, exclusively, and necessarily” test still applies. A monitor is clearly for work; a kitchen table that doubles as a dining surface isn’t. Make sure your expense compliance approach reflects this nuance. 
• Not reviewing your record-keeping approach: More tax-free reimbursements mean more receipts to process and store. HMRC requires proper documentation for all expense claims, and that’s not changing. Good HMRC record-keeping has always mattered; it matters even more as your reimbursement volumes increase. 

Ready to handle the 2026 changes with less effort? 

A lot of what’s changing in April 2026 comes down to one thing: more taxable (and untaxable) employee expense reimbursements going through your business. Eye tests. Flu jabs. Homeworking equipment. Possibly a new employer’s homeworking allowance. That’s a meaningful increase in the number of claims to process, approve, and record accurately. 

If your current process is built on spreadsheets and email approvals, that increase will be felt. Capture Expense helps finance teams handle exactly this kind of complexity. With receipt scanning that captures the data automatically, spend controls that keep claims within policy, and reimbursement workflows that integrate directly with your payroll and accounting systems, we have all you need to manage every aspect of expenses. 

If you pay employees for business miles driven in their own vehicles, a big change has just come into force—and it affects every mileage claim from April 2026 onwards.  

For the first time since 2011, HMRC has increased the Approved Mileage Allowance Payment (AMAP) rate. Cars and vans now attract a rate of 55p per mile for the first 10,000 business miles in a tax year, up from 45p. That’s a 22% increase, and it marks the end of a 15-year freeze that left many employees significantly out of pocket as fuel costs rose around them.  

This is genuinely good news for people who use their own vehicles for work. But for employers, it also means that expense policies need updating, payroll processes may need reviewing, and mileage calculations that have run on autopilot for years now need reconfiguring.  

Here’s everything you need to know about the HMRC mileage rate increase!  

What’s changed, and when did it take effect?  

The new AMAP rates from April 2026  

The change applies from 6 April 2026 (the start of the 2026–27 tax year) and has been backdated to that date. HMRC has published the updated rates officially on GOV.UK and they are:  

The rate above 10,000 miles—25p per mile for cars and vans—remains the same. Motorcycle and bicycle rates haven’t changed either. So, this update is squarely focused on car and van users for the portion of miles below the 10,000-mile threshold.  

It’s also worth noting that the passenger payment rate (5p per passenger per business mile) hasn’t been updated, so it remains unchanged.  

Why now, after 15 years?  

The 45p rate was set back in 2011. Since then, fuel costs, vehicle running costs, and inflation have all increased considerably—leaving employees who use their own cars for work effectively subsidising the cost themselves. Many employers have responded by paying above the AMAP rate (which is fine, though the excess becomes taxable), but plenty of others have simply paid the HMRC rate without reviewing whether it was still fair.  

The increase to 55p brings the rate more in line with real-world running costs, reflecting ongoing pressure from business groups and payroll professionals who’ve been calling for a review for several years.  

What does the HMRC mileage rate increase mean for your organisation?  

Updating your expense policy  

If your business reimburses employees at the AMAP rate—or references HMRC’s approved rate in your expense policy—you’ll need to update your documentation to reflect the new 55p figure. This applies whether you’re running a small team or managing mileage claims across hundreds of employees.  

A few questions worth asking right now:  

• Does your current expense policy reference a specific mileage rate? If so, it needs updating.  
• Do you pay above or below the HMRC rate? If you pay below, you may now be under-reimbursing employees (which is a tax issue—more on that below).  
• Do your employees know the rate has changed? Clear communication is especially important for people who submit regular mileage claims.  

Tax and National Insurance implications  

The AMAP rate is the maximum you can pay employees for business mileage in their own vehicles without triggering a tax liability. As long as you pay at or below that rate, neither the employer nor the employee has a tax or National Insurance (NI) liability on those payments.  

Pay above it, and the excess is subject to tax and NI. Pay below it, and employees can claim Mileage Allowance Relief (MAR) for the difference via their Self Assessment return—but that’s an admin burden you can avoid by simply reimbursing at the correct rate.  

Now that the rate has moved to 55p, any reimbursements you’ve been making since 6 April 2026 at the old 45p rate are technically under-reimbursements. Employees have been driving at a loss. You’ll want to review whether any back-payments are needed.  

Make the HMRC mileage rate increase work for you  

The increase to 55p is long overdue, and it’s a positive change for employees who’ve been bearing the rising cost of vehicles. For employers, it’s a prompt—not just to update a figure in a spreadsheet, but to take a proper look at how mileage claims are managed end to end.  

The good news is that getting this right doesn’t have to be complicated. Update your policy, check for any backdated claims since April, communicate the change to your team, and make sure your systems reflect the new rate. It’s as simple as that.

If you’d like to see how Capture Expense automatically handles mileage tracking, rate management, and compliance, book a demo with a member of our team or take a product tour at your own pace! 

Business travel has its upsides: getting out of the office, meeting clients face to face, maybe even a halfway decent hotel breakfast. But when the trip’s over, the expense admin that follows? Not quite so appealing. 

That’s where per diems come in. Rather than asking employees to track every coffee, sandwich, and taxi ride with a receipt, a per diem system gives people a set daily allowance to cover those costs. It’s simpler, more predictable, and—when it’s set up correctly—much easier for everyone to manage. 

Whether you’re updating your company expense policy, making sure you’re HMRC compliant, or an employee who just wants to understand what they’re entitled to, this guide has you covered. 

We’ll walk through what per diem actually means, the UK rates for 2026/27, what you can and can’t claim, and how to handle it all without it becoming a headache. 

What does per diem mean? 

A per diem is a fixed daily allowance paid to employees to cover the cost of meals (and sometimes other incidental expenses) while they’re travelling for work. 

Rather than reimbursing each individual expense, a £3.80 coffee here or a £9.50 lunch there, the per diem system pays a flat daily rate. Employees don’t always need to provide receipts for each item (though they do need to show the meal happened during the trip), and employers don’t have to spend hours cross-checking itemised claims. 

It’s worth noting that per diem is sometimes used more broadly to refer to any form of daily subsistence allowance, including accommodation. In the UK, though, it most commonly refers specifically to meal allowances based on journey duration—as set by HM Revenue & Customs (HMRC). 

To make things clearer, here’s the key difference: 

• Per diem: a fixed flat rate, paid regardless of exact spend (up to the HMRC-approved limit), covering meals during qualifying business travel. 
• Expense reimbursement: the employee is paid back the actual amount they spent, supported by receipts. 

What are the UK per diem rates for 2026/27? 

HMRC sets benchmark scale rates for meal allowances that can be paid to employees during qualifying business travel. These are the maximum tax-free amounts you can pay. If you pay more than the benchmark rate without agreeing a bespoke rate with HMRC, the excess becomes taxable. 

For 2026/27, the UK benchmark meal allowance rates remain as follows: 

A couple of things worth knowing here. HMRC doesn’t define rates by breakfast, lunch, or dinner—instead, the rates are based on how long you’ve been travelling and whether you’re working late into the evening. The 24-hour rate of £25 covers the full day, and it can be split across meals however is practical. 

It’s also worth knowing that benchmark scale rates are not mandatory. Organisations can choose to pay less, or can apply to HMRC for a bespoke rate that better reflects their employees’ actual costs. This works well when your teams regularly travel to locations where the benchmark rates don’t quite stretch far enough, but be aware that agreed bespoke rates do require a formal application and some evidence of typical spend. 

You can find the full HMRC guidance on benchmark scale rates on GOV.UK. 

When can employees claim a per diem allowance? 

The qualifying conditions 

Not every work-related meal qualifies. HMRC has specific conditions that must be met for a per diem meal allowance to be paid tax-free. The employee must: 

• Be travelling for work, either as part of their role or to a temporary workplace (not just their regular commute). 
• Be away from their normal place of work or home for more than 5 or 10 continuous hours (depending on which rate applies). 
• Have actually bought a meal or drink during the trip, after the qualifying journey started. 

If all three conditions are met, the per diem rate can be applied without the individual needing to provide a receipt for every item. That said, employees should keep some record that the meal took place during the business trip—a note of the time, location, and rough cost is good practice, even when receipts aren’t strictly required. 

When you can’t claim 

It’s equally important to know when the allowance doesn’t apply. You can’t claim a per diem meal allowance if: 

• No meal or drink was actually purchased. 
• The meal was provided for free. For example, as part of a training course, event, or conference. 
• The meal was eaten at home before leaving or after returning. 
• A meal was included with travel or accommodation (such as a train or flight). 
• The expense included alcohol (this isn’t covered under HMRC’s rules). 
• The journey was a regular commute to a permanent workplace. 

A per diem example 

Meet Jamie. He works for a civil engineering consultancy based in Leeds, and he’s heading down to Bristol for a two-day site visit. 

His company uses HMRC’s benchmark per diem rates for domestic travel. Rather than collecting every receipt, Jamie receives a daily meal allowance based on his journey duration. 

Day one: Jamie leaves home at 6:30am and doesn’t get back to his hotel until 9pm. He’s been travelling and working for well over 10 hours, and he finishes work past 8pm—so he qualifies for the £25 24-hour rate. He grabs breakfast at the train station, buys lunch near the site, and has dinner at a restaurant close to the hotel. He notes the times and locations, just in case HR needs confirmation that the meals happened during the working day. 

He doesn’t try to claim the glass of wine with dinner as he knows alcohol isn’t covered, and he doesn’t claim for the snacks he bought from the hotel minibar, which he knows aren’t part of the allowance. 

Day two: A shorter day. Jamie wraps up by 4pm and is back home by 7pm. His journey was around 5 hours including travel, so he qualifies for the one-meal rate of £5 for lunch. The train home and hotel were booked and paid centrally on the company card, so his per diem only needs to cover meals and incidentals. 

At the end of the trip, Jamie submits his per diem claim through Capture Expense. No envelope stuffed with crumpled receipts. No hunting through his bank statements. Just a quick submission that goes straight to his manager for approval. 

What happens if you go over the HMRC per diem rate? 

This is a question that comes up a lot, so it’s worth getting right. 

If an employee spends more than the benchmark rate (say, they spend £40 on a meal when the daily rate is £25), the employer has two options: 

• Reimburse only the HMRC rate: the company pays £25, and the employee covers the remaining £15 themselves. Clean, simple, and no tax implications. 
• Reimburse the full amount: this is fine, but only if the company has a formally agreed bespoke scale rate with HMRC. If they haven’t, the excess (£15 in this example) is treated as taxable income and is subject to income tax and National Insurance contributions (NICs). 

A lot of organisations don’t realise the second point until it shows up in a PAYE (Pay As You Earn) audit. If your teams regularly travel to high-cost areas like London, major airports, or even international destinations, it’s worth reviewing whether a bespoke rate agreement with HMRC might be a better fit than the benchmark rates. 

How to report per diem payments to HMRC 

How you report per diem payments depends on whether they’re within the HMRC benchmark rates or over them. 

Payments within HMRC benchmark rates 

If you’re paying at or below the benchmark rates, and the qualifying conditions are met, payments can be made tax-free and don’t need to be reported to HMRC. No P11D needed. No additional payroll reporting required. This is one of the main reasons the per diem model is so popular as it genuinely cuts down on reporting admin. 

There’s one caveat: from April 2019, HMRC removed the requirement for employers to check that employees have actually bought a meal. However, employees do still need to have bought a meal for the rate to apply—it’s just that employers are no longer expected to verify every claim. A good expense reporting process will still make sure there’s some basic evidence in place. 

Payments over HMRC benchmark rates 

If you’re reimbursing above the benchmark rates (without a formally agreed bespoke rate), the excess is taxable. In this case, you’ll need to: 

1. Report the excess amount on a P11D form for each affected employee at the end of the tax year. 
2. Complete a P11D(b) to summarise total expenses and calculate any Class 1A NICs due. 
3. Pay any Class 1A NICs owed by 22 July following the end of the tax year (or 19 July if paying by post). 

It’s also worth flagging an important change on the horizon. From April 2027, all benefits in kind—including taxable expense payments—will need to be reported and taxed directly through payroll, rather than via P11D forms. If you’re planning your expense processes now, it’s a good idea to make sure your payroll software and expense platform will be ready for that change. 

You can find the full guidance on reporting expenses and benefits on the HMRC website. 

Common per diem mistakes to avoid 

Even with a simple system, things can go wrong. Here are the most common pitfalls organisations run into with per diem allowances: 

• Paying the allowance without checking qualifying conditions: if the employee’s journey doesn’t meet the 5- or 10-hour threshold, the payment isn’t tax-free. Even if it’s within the benchmark rate. 
• Including alcohol in the claim: it’s an easy mistake, but alcohol isn’t covered under HMRC’s rules. Make sure your expense policy makes this clear. 
• Applying the same rate for all travel: domestic and international rates are different. Using UK rates for overseas trips could leave employees out of pocket—or leave the company overclaiming. 
• Not updating rates when HMRC revises them: HMRC doesn’t always make a big announcement when rates change. It’s worth reviewing your policy at least once a year. 
• Not having a written expense policy: without a clear company expense policy, employees don’t know the rules—and inconsistent claims become much harder to manage. 

Make per diem management simpler 

Managing per diem allowances doesn’t have to mean hours of admin, chasing receipts, or worrying whether your rates are still compliant. With the right tools in place, you can set your rates, automate approvals, and keep everything properly documented—without it taking over your week. 

Capture Expense makes it straightforward to manage travel and subsistence claims, including per diem allowances. Employees can submit claims on the go using the mobile app, managers get clear visibility over what’s being claimed, and your finance team can be confident that everything lines up with your expense policy and HMRC’s rules. 

If you’d like to see how it works in practice, you’re warmly invited to book a personalised demo. No pressure—just a chance to see whether it’s a good fit for your organisation. And if you want to go deeper on related topics, our guides on HMRC meal allowances and subsistence allowance in the UK are a good next step. 

A new tax year is here—and with it, a fresh set of rates, rules, and updates that affect how you handle expenses. While some are minor adjustments, others are more significant. Either way, now’s the time to make sure your expense policy, your reimbursement processes, and your system settings are all reflecting the right figures. 

For 2026/27, the key expense changes are: van benefit charge up to £4,170, car fuel multiplier up to £29,200, AMAP rates unchanged at 45p/25p, and mandatory BIK payrolling from April 2027.

Approved mileage allowance payments (AMAPs) have increased 

After 15 years frozen at 45p, HMRC has increased the approved mileage rate for cars and vans. Published on GOV.UK on 21 May 2026 and backdated to 6 April 2026, the new rate now applies:

The passenger payment rate also stays at 5p per mile, per passenger.

This is the change most likely to need action right now. If you reimburse employees for business travel in their own vehicles, your expense system and policy should reflect the 55p rate—and because the increase is backdated to 6 April, you may want to consider a top-up for any mileage already reimbursed at 45p this tax year. Employees reimbursed below the approved rate can claim Mileage Allowance Relief on the shortfall.

Advisory fuel rates for company cars 

Advisory fuel rates (AFRs) apply to company cars; approved mileage allowance payments (AMAPs) apply to employees’ personal vehicles—they are different rates for different situations.

While AMAP rates are static, HMRC’s advisory fuel rates for company cars are reviewed every quarter—so these can change throughout the year. The rates effective from 1 March 2026 are: 

Petrol 

Diesel 

Electric 

For hybrid vehicles, HMRC treats them as either petrol or diesel—so apply the relevant rate based on the engine type. 

These advisory rates matter if your employees drive company cars and reclaim fuel costs. Reimbursing above the advisory rate creates a benefit in kind (BIK) liability unless the employee repays the excess. HMRC updates these rates on 1 March, 1 June, 1 September, and 1 December each year—so it’s worth bookmarking and checking them regularly.