Drivers who commute for work in their own cars will receive higher tax-free mileage payments under changes announced by Prime Minister Andy Burnham, with the rate for journeys over 10,000 miles rising from 25p to 35p per mile.
The announcement forms part of a list of “everyday fixes” unveiled ahead of the Budget, covering action on food, fuel and various benefits. The tax-free mileage rates are designed to cover the costs of running a vehicle, including fuel, repairs and servicing, with the amount per mile varying depending on the type of vehicle and the number of miles covered each year.
What Are the New Mileage Rates?
HMRC increased rates to 55p per business mile for the first 10,000 miles travelled this year for personally owned cars and vans used for business, the first change in 15 years. The 25p rate for each business mile over 10,000 in the tax year had remained unchanged since 2001.
Under the new rule, the Treasury and HMRC will increase the rate above 10,000 miles from 25p to 35p. In his announcement, Mr Burnham said higher tax-free mileage rates will be made permanent, while nurses, care workers, self-employed builders and others who drive for work will be given higher rates.
Who Will Benefit?
In the announcement, the government said: “The Government will lock in the biggest increase in mileage rates for 15 years, ensuring employees and self-employed people can continue to receive up to 55p per mile tax-free for the first 10,000 business miles they drive each year. Following a review, the government is also going further with the rate for those who drive over 10,000 miles also rising from 25p to 35p, supporting those who drive significant mileage for work.
“Around 3 million people are expected to benefit. The change means workers who rely on their vehicle for their job can receive greater support with the costs of fuel, servicing and other motoring expenses. These changes will provide £120 a year in additional tax savings for a worker doing 6,000 business miles, with someone driving 15,000 business miles receiving up to £300 in additional tax savings.”
Business Secretary Jonathan Reynolds said: “This is a real boost for working families and carers. This Budget is about making hard-earned money go further, easing the pressure of everyday costs and giving families much-needed breathing room.”
He added: “Families have so much to juggle, from paying the bills to balancing work and caring for loved ones. This support can make a real difference—not just in managing today’s costs, but in helping families look ahead with greater confidence and optimism.”
