Tax-free mileage rates have been increased by 10p per mile, a move hailed by Martin Lewis as a 'really important change'. Chancellor Rachel Reeves announced the increase, raising the rate from 45p to 55p per mile, backdated to April 2026.
Who Benefits from the New Mileage Rate?
This mileage allowance covers costs for employees who must use their personal car for business purposes, such as care workers visiting clients or plumbers traveling to jobs. It does not apply to commuting to a regular workplace.
Workers can claim expenses directly from their employer or claim tax relief from HMRC. If an employer pays less than the full rate, employees can claim tax relief on the difference.
Details of the New Rates
- The new 55p per mile rate applies to the first 10,000 miles driven in a tax year in a car or van.
- After 10,000 miles, the rate drops to 25p per mile.
- For motorbikes and bicycles, the rates are 24p and 20p per mile respectively, regardless of mileage.
- Different rules apply for company car users.
Reactions to the Announcement
Chancellor Reeves told MPs: '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.'
Martin Lewis commented: '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.'
Unison general secretary Andrea Egan said: '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.'
