Workers who rely on their vehicles for job-related tasks received a significant boost following an announcement by Rachel Reeves regarding an increase in tax-free mileage rates. The Chancellor revealed a raise of 10p per mile in the tax-free mileage rates, up from the previous rate of 45p and applied retroactively to April 2026.
This mileage allowance is intended to cover expenses incurred when using a personal vehicle for business purposes, such as caregivers traveling to different locations to provide care. However, it does not cover commuting costs to one’s primary workplace.
Individuals can seek reimbursement for these expenses directly from their employers or claim tax relief from HMRC. Typically, employees need to submit an expense claim to their employer for reimbursement. If an employer pays less than the full rate, employees can claim tax relief for the difference.
The new rate of 55p per mile is applicable for the first 10,000 miles driven in a tax year using a car or van, after which the rate decreases to 25p per mile. For motorcycles and bicycles, the rates are 24p and 20p per mile, respectively, regardless of the distance traveled. Different rules apply if an individual has a company car.
In an address to MPs, the Chancellor stated, “Having taken into account feedback from Labour former minister Jim McMahon and the trade union Unison, I am pleased to announce a 10p per mile increase in tax-free mileage rates retroactive to April 2026, benefiting workers who need to drive for work, from care providers to tradespeople.”
Martin Lewis praised the adjustment, emphasizing the significance of the mileage allowance increase for individuals who drive as part of their job responsibilities. Unison general secretary Andrea Egan highlighted the immediate assistance this measure would offer frontline workers in public services, especially amid rising living costs. Egan also expressed appreciation for the Chancellor’s responsiveness to concerns raised by staff affected by stagnant rates and affirmed Unison’s commitment to advocating for further improvements.
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