Chancellor Rachel Reeves has unveiled a 10p per mile increase in the tax-free mileage rate for individuals who use their personal vehicles for work purposes. The announcement, made in the House of Commons on Thursday, forms part of a broader package of measures designed to alleviate the cost-of-living pressures exacerbated by Donald Trump's involvement in the Middle East conflict. However, immediate relief for rising energy bills was notably absent.
Details of the Mileage Rate Increase
The new rate, backdated to April 2026, raises the tax-free allowance from the current 45p per mile to 55p per mile. This change is expected to benefit a wide range of workers, including care workers, plumbers, and other professionals who rely on their cars for their jobs.
Addressing MPs, Reeves stated: "For hauliers, the Government is granting a 12-month road tax holiday for HGVs, saving the typical heavy lorry up to £912. To support farmers and the rail freight industry, I have decided to cut duty on red diesel by over a third until the end of this year. And having heard from Labour former minister Jim McMahon 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."
Union Reactions
The announcement has been warmly received by trade unions, many of which have campaigned for years for an increase in the rate. Unison general secretary Andrea Egan commented: "This simple measure will provide immediate help for countless frontline workers in public services. Particularly at a time when living costs are going through the roof once again. People who need their own cars for work have been left thousands of pounds out of pocket for far too many years. Unison has campaigned hard for this long overdue change. It's good to know the Chancellor has listened to the concerns of staff penalised by frozen rates. There's still more to do to ensure no-one is losing out and the union will continue to campaign for more over the coming months."
Additional Measures in the Cost-of-Living Package
Alongside the mileage rate increase, Reeves announced several other initiatives under the banner of "Great British Summer Savings." These include:
- A temporary reduction in VAT on summer attractions from 20% to 5% during the school holidays, covering theme parks, zoos, museums, cinemas, concerts, soft play, and theatre tickets.
- A £350 million critical chemicals resilience fund and a £120 million fund to support the ceramics sector.
- The cutting of import tariffs on more than 100 types of food products.
- Free bus travel for children in England throughout August.
The VAT cut on children's meals in restaurants and cafes will also be reduced from 20% to 5%. These changes are set to apply from 25 June to 1 September.
Impact on Workers and Businesses
The mileage rate increase is particularly significant for workers in sectors such as healthcare and social care, where employees often use their own vehicles for home visits. The backdated nature of the increase means that those who have already incurred expenses since April 2026 will be able to claim the higher rate retrospectively. The road tax holiday for HGVs and the reduction in red diesel duty are aimed at easing financial pressures on the transport and agricultural sectors.
Reeves concluded her statement by emphasising the government's commitment to supporting households and businesses through challenging economic times, though she acknowledged that more work remains to be done.
