The IRS moves to 65.5 cents, and Britain does not move at all

Update, April 2026: the UK approved rate for cars and vans rose from 45p to 55p a mile for the first 10,000 business miles. The 25p rate above that, and the 5p passenger payment, are unchanged. This post describes the position as it stood when it was written.

The IRS standard mileage rate for business use is 65.5 cents a mile for 2023, up from the second half of 2022. Britain's approved rate is 45p, where it has been since April 2011.

The gap in the numbers is smaller than it looks. The gap in how the two are maintained is enormous.

America revises, Britain declares

The IRS sets its rate annually, based on a study of the fixed and variable costs of running a car. When fuel moves sharply enough, it will revise mid-year rather than wait: it did exactly that in 2022, lifting the rate on 1 July because petrol had run away from the figure set in January.

That is a rate that is maintained. It can be too low for a given driver in a given year, but the mechanism is pointed at the actual cost of motoring and is checked against it.

Britain sets a figure and leaves it. 45p was set in 2011 and has survived a decade in which fuel, insurance, tyres and servicing have all risen substantially. There is no annual review that produces a number, and no trigger that forces one.

What that does to a driver

For an American, the rate broadly tracks costs, so the claim broadly covers them.

For a British driver, the rate has been slowly detaching from reality. The consequence is not that claims get refused. It is that the approved amount covers less of the cost each year, and the shortfall is absorbed by the driver rather than by anyone who decided anything.

The drivers who feel it first are the ones running older, thirstier or more heavily used vehicles, where the real cost per mile was already above average.

The banding difference

The other structural difference is the threshold.

The IRS rate applies to every business mile at the same rate, all year. There is no equivalent of Britain's drop to 25p after 10,000 miles.

For a high mileage driver this dwarfs the headline gap. A British driver covering 30,000 business miles gets 45p on the first third and 25p on the rest, blending to a little under 32p. An American gets the full rate on all 30,000.

Who can actually use it

One caveat that catches British readers admiring the American rate: most US employees cannot deduct an unreimbursed business mile at all, because unreimbursed employee expenses were suspended as an itemised deduction. The standard mileage rate mainly serves the self employed, and employees whose employers run an accountable reimbursement plan.

Britain is the more generous of the two to an ordinary employee, because Mileage Allowance Relief lets you claim the gap when your employer pays below the approved rate. There is no American equivalent for most people.

So: the US rate is better maintained and better for the self employed. The UK system is better for employees. Neither is simply more generous.

The bit both agree on

Both tax authorities expect a contemporaneous record, and both are unimpressed by reconstructions. The IRS is unusually explicit that a log should be made at or near the time of the journey. HMRC's expectation is the same in substance even where the wording is softer.

A well maintained rate applied to journeys you never wrote down is worth exactly as much as a badly maintained one.

Sources

• Standard mileage rates (IRS)
• Topic no. 510, Business use of car (IRS)
• Publication 463, Travel, Gift, and Car Expenses (IRS)
• Travel, mileage and fuel rates and allowances (HMRC)

General information for UK and US drivers, not tax advice. Rates change: check the current figure in the jurisdiction you are filing in.