HMRC has confirmed a "really important" new 55p rate for drivers using their cars for work. Labour Party Chancellor Rachel Reeves has announced a 10p increase in the mileage rate for drivers using their vehicles for business purposes, specifically for the first 10,000 miles driven per year.
Martin Lewis Highlights Key Change
Martin Lewis, the BBC and ITV star, emphasised the significance of this update. He stated: "The big one that I think is going to be under-covered, but is actually really important, is the increase in the mileage allowance for people who drive as part of their work. This has been frozen at 45p since, I think 2011, so the increase from 45p to 55p for the first 10,000 miles that you drive is really important."
Lewis explained how the allowance works: "If you drive your own car (not a company car) as part of your work, for example, care workers driving from house to house, this mileage allowance is the amount your employer can give you to cover your costs, and you don't pay tax and National Insurance on it. So it doesn't count as earned money. It's a special allowance. So moving that from 45p to 55p is important."
Details of the New Rate
The 45p rate, now increased to 55p, applies to cars and vans for the first 10,000 miles per tax year. After that, the rate drops to 25p per mile. The uplift is applicable to both employees and self-employed workers and is backdated to April 6, 2026.
Lewis further advised: "It is also worth noting, if your employer doesn't give you the full amount of the mileage allowance – let's imagine they give you 30p (and the allowance is 55p) – you can claim tax back on that 25p per mile that you drive as part of your work (not commuting). In other words, you can get the tax back on the difference between what your employer gives you and the full allowance. And if they didn't give you anything, you could claim tax back on the full 55p. Similar applies to people who are self-employed for driving in their work."
Impact and Further Considerations
Lewis expressed his long-standing complaint about the frozen rate, noting: "This has long been a complaint I've got, so I think the change from 45p a mile to 55p a mile backdated to April 2026, so backdated a couple of months, is really going to be quite useful for people." He also mentioned that the higher rate only applies to the first 10,000 miles, with a lower rate thereafter, and that he has not heard about any changes to that lower rate. Additionally, he noted that he is checking whether the cycle allowance has been updated.
