Lewis Hamilton has agreed a two-year contract extension through to the end of the 2020 Formula One season.

It is understood the four-time world champion will earn up to £40-million-a-year.

The Englishman's new contract cements his status as Britain's biggest sporting earner as well as the best-paid driver in Formula One history.

Mercedes' announcement comes ahead of the team's home race in Germany, with Hamilton trailing Sebastian Vettel in the championship by eight points.

Hamilton said on the Mercedes website: "This contract extension has basically been a formality since Toto and I sat down during the winter, so it's good to put pen to paper, announce it and then get on with business as usual.

Lewis Hamilton has signed a new deal (
Image:
Getty Images North America)
Hamilton has put pen to paper on a bumper new contract (
Image:
Getty Images Europe)

"I have been part of the Mercedes racing family for 20 years and I have never been happier inside a team than I am right now.

"We are on the same wavelength both on and off track - and I am looking forward to winning more in the future and shining even more light on the three-pointed star. I'm very confident that Mercedes is the right place to be over the coming years.

"Although we have enjoyed so much success together since 2013, Mercedes is hungrier than ever - from Dr Zetsche and the board members at the top of Daimler, through (team boss) Toto (Wolff) and the team management, to every single person I meet in the corridors of Brixworth and Brackley.

"The competitive passion that burns bright inside me is shared by every single member of this group - always chasing the next improvement and digging even deeper to make sure we come out on top. I can't wait to see what we can achieve together in the next two-and-a-half seasons."