Chancellor Rachel Reeves has confirmed a 10p increase in the HMRC mileage allowance for journeys under 10,000 miles, raising it to 55p per mile. The change, backdated to April 2026, marks the first rise since 2011 and has been welcomed by drivers across the country.
What the Change Means
Employees who use their own vehicles for work—such as care workers, tradespeople, and mobile engineers—can now receive up to 55p per mile free from tax and National Insurance. For someone covering 5,000 work miles annually, this equates to an additional £500 per year compared to the previous rate.
If your employer reimburses you less than 55p per mile, you can claim Mileage Allowance Relief through HMRC’s Job Expenses page, receiving a tax rebate on the difference. Self-employed individuals and sole traders can deduct 55p per mile from their business profits on their next self-assessment tax return, reducing their overall tax bill.
Drivers React
The announcement has drawn widespread approval, with many drivers describing it as "about time." One Reddit user commented: "It's about time it was updated." Another echoed: "About time. 15 years it's been stuck at 45p." A third added: "Great idea. Putting money back into the hands of key workers." However, some noted that the rate for those driving over 10,000 miles per year remains unchanged, questioning the fairness of that decision.
Chancellor's Statement
Addressing the House of Commons, Ms Reeves said: "Having heard from my honourable friends the members for Oldham West, Chadderton and Royton and the trade union Unison, I can today announce a 10p per mile increase in tax-free mileage rates, backdated to April 2026; benefiting those who need to drive for work, from care workers to plumbers." She also outlined measures to ensure oil and gas companies pay their fair share, including changes to the taxation of foreign branch profits.
Rules to Keep in Mind
- Keep records – To claim these tax-free amounts, you must track the date, purpose, start/end locations, and exact distance of every business trip.
- Company cars don't count – This 55p rate is strictly for people using their own personal cars. Separate advisory fuel rates apply if you drive a vehicle owned or leased by your company.
- Commuting is excluded – Normal everyday travel between your home and your regular workplace is not eligible for mileage claims.
