Martin Lewis has drawn attention to a significant yet largely overlooked measure in Chancellor Rachel Reeves' latest package aimed at alleviating the cost of living crisis. The money-saving expert shared his insights on the change, which increases the mileage allowance for motorists who use their vehicles for work purposes.
Chancellor's 'Great British Summer Savings' Scheme
On Thursday, May 21, Chancellor Rachel Reeves unveiled a series of measures designed to ease financial pressures on struggling Britons. These include a VAT reduction on summer attractions and children's meals, free bus travel for youngsters, and targeted food tariff reductions. Dubbed the Government's 'Great British Summer Savings' scheme, it is partially funded by reforms to the taxation of energy firms' overseas operations.
Martin Lewis on the Mileage Allowance Increase
However, Martin Lewis highlighted a different measure that has flown under the radar. Motorists who drive for work can now claim tax relief at 55p per mile for the first 10,000 miles travelled in a tax year, up from the previous 45p rate. Speaking to Adrian Chiles on BBC Radio 5Live, Lewis said: "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 as part of your work — and a big sector that is very important here is 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." He added that even if an employer does not provide the full 55p per mile, employees can claim tax relief on the difference. For example, if an employer gives 30p per mile, the employee can claim tax back on the remaining 25p per mile. Self-employed individuals can also claim the full 55p per mile for work-related driving.
Additional Details and Implications
The increase is backdated to April 2026, meaning it applies to the current tax year. Lewis noted that the 55p rate only applies to the first 10,000 miles; after that, a lower rate applies, which has not been changed. He also questioned whether the cycling allowance would be updated, stating: "I've just got my team trying to check on that." The mileage allowance applies to cars and vans, with a reduced rate of 25p per mile beyond 10,000 miles. For motorbikes and bicycles, fixed rates of 24p and 20p per mile respectively apply, regardless of distance. Claims can be made through HMRC or via self-assessment tax returns.
In a post on X, Lewis reiterated: "The work mileage allowance for under 10,000 miles will rise by 10p to 55p backdated to April 2026. So this means if you drive for work in your own car (like many care workers for example) you can be given up to 55p a mile tax and NI free. And if you're not given that level you can claim the tax back on the difference between what you're given and that amount."
