People who rely on their cars for work received a positive development as Rachel Reeves announced an increase in tax-free mileage rates. The Chancellor revealed a rise of 10p per mile, up from the current 45p rate and retroactive to April 2026.
This adjustment in mileage allowance aims to offset expenses incurred when using a personal vehicle for business purposes. For instance, individuals like carers who travel to different locations to provide care can benefit from this provision. However, it does not cover commuting costs to one’s primary workplace.
Employees can seek reimbursement for these expenses directly from their employer or claim tax relief through HMRC. Typically, submitting an expense claim to the employer is necessary for employed individuals. In cases where the employer pays less than the full rate, employees can claim tax relief for the difference.
The new rate of 55p per mile applies to the initial 10,000 miles driven in a tax year using a car or van. Beyond this threshold, the rate decreases to 25p per mile. Motorbikes and bicycles have fixed rates of 24p and 20p per mile, respectively, regardless of the distance traveled. Different rules apply if using a company car.
Chancellor acknowledged the need for the increase, stating, “benefiting those who need to drive for work, from care workers to plumbers.” Martin Lewis highlighted the significance of the mileage allowance adjustment, emphasizing the importance of the increase from 45p to 55p for the first 10,000 miles driven.
Andrea Egan, Unison general secretary, commended the change, noting its immediate assistance to frontline workers in public services facing rising living costs. She expressed satisfaction that the Chancellor addressed concerns regarding frozen rates, emphasizing the need for further improvements to ensure fair treatment for all affected workers.