Chancellor Rachel Reeves has confirmed an increase in tax-free mileage rates for drivers, with the approved allowance rising by 10p per mile. The change, backdated to April 2026, raises the rate from 45p to 55p per mile for the first 10,000 miles of business travel in a petrol or diesel vehicle.
The Treasury said the move, the first since 2011, would benefit those who drive as part of their work, potentially saving a worker covering 6,000 business miles a year up to £120. It also cited increased costs due to geopolitical factors, including the war in Iran and Russia's invasion of Ukraine.
Personal finance expert Martin Lewis has highlighted the change, describing it as "really important" and "undercovered." Speaking on BBC Radio 5 Live with host Adrian Chiles, Lewis explained that the mileage allowance is the amount employers can give to cover driving costs without incurring tax or National Insurance.
He noted that if employers do not pay the full amount, workers can claim the difference for driving done as part of their work. Self-employed people driving for their work can also reduce their overheads through the allowance, he added.
The increase follows pressure from industry experts, who have pointed to the marked rise in car running costs since 2011.
