Chancellor of the Exchequer Rachel Reeves has confirmed that the work mileage allowance for under 10,000 miles will increase by 10p to 55p, backdated to April 2026. This marks the first rise since 2011, providing long-awaited financial relief to frontline workers such as community carers, tradespeople, and mobile engineers.
Drivers have given a two-word verdict on the development, calling it "about time." One Reddit user wrote: "It's about time it was updated." Another agreed: "About time. 15 years it's been stuck at 45p." A third commented: "Yeah I say this all the time to clients at work! Nearly 15 years." A fourth said: "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, which one person called "difficult to justify."
How the Change Affects You
The impact depends on how your employer handles expenses. If your employer pays the full HMRC rate, they can now give 55p per mile tax-free. For someone driving 5,000 work miles, this means an extra £500 per year compared to the old rate. If your employer pays less than 55p per mile (e.g., 35p), you can claim Mileage Allowance Relief from HMRC's Job Expenses page, receiving a tax refund on the 20p difference. Self-employed individuals and sole traders can write off 55p per mile against their business profits on their next self-assessment tax return, lowering their overall tax bill.
Important Rules to Keep in Mind
- Keep records – You must track the date, purpose, start and end locations, and exact distance of every business trip to claim these tax-free amounts.
- 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.
Speaking in the Commons on Thursday, May 21, 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 addressed oil and gas taxation, stating: "Today, I am bringing forward specific changes to the taxation of foreign branch profits; changing how companies are taxed in relation to their overseas activities."
The announcement has been widely welcomed, though some drivers express caution. One Reddit user noted: "A sensible change given the increased cost of driving. No increase in the rate for those who drive over 10,000 miles per year though, which seems difficult to justify. Is there any evidence to suggest that those who drive over 10,000 miles per year have access to economies of scale have not been affected by inflation?"
