People who rely on their vehicles for work will benefit from an increase in tax-free mileage rates announced by Rachel Reeves. The Chancellor disclosed a rise of 10p per mile, taking the new rate to 55p from the previous 45p, effective from April 2026.
This mileage allowance is intended to cover expenses incurred when using a personal vehicle for business purposes, such as traveling to provide care at different locations. It does not include costs for commuting to your regular workplace.
Individuals can seek reimbursement for these expenses from their employer or claim tax relief from HMRC. Typically, employees need to submit an expense claim to their employer if they are reimbursed. If the employer pays less than the set rate, the employee can claim tax relief for the difference.
The increased rate of 55p per mile applies to the first 10,000 miles driven in a tax year using a car or van, decreasing to 25p per mile thereafter. The rates for motorbikes and bicycles are fixed at 24p and 20p per mile, respectively, regardless of the distance traveled. Different rules apply if you have a company car.
In a statement to MPs, the Chancellor stated, “Having heard from Labour’s former minister Jim McMahon and the trade union Unison, I can announce a 10p per mile increase in tax-free mileage rates retroactively to April 2026 – benefiting individuals who require a vehicle for work, from care providers to tradespeople.”
Martin Lewis praised the adjustment, highlighting the significance of the increase in mileage allowance for work-related drivers. Unison general secretary Andrea Egan welcomed the move, emphasizing the immediate relief it would provide to frontline workers in public services who have been financially burdened by frozen rates.
Egan added that while the change is a step in the right direction, further efforts are needed to ensure fair compensation for individuals using their vehicles for work. Unison commits to advocating for additional improvements in the future.