Drivers who use their own vehicles for work could benefit from a 55p-per-mile allowance under Government plans to make higher mileage rates permanent.
The Chancellor has confirmed that workers will continue to be able to receive up to 55p per mile tax-free for the first 10,000 business miles they drive each year. Those who travel longer distances for work are also set to benefit, with the rate for mileage above 10,000 miles rising from 25p to 35p.
Changes announced ahead of Budget
The changes were announced on Monday, October 26, as part of a package of measures aimed at easing everyday costs ahead of Wednesday's Budget. Around three million employees and self-employed people are expected to benefit, including nurses, care workers and builders who rely on their vehicles for their jobs.
The Government says the changes will help with the rising cost of fuel, servicing and other expenses that come with running a car.
Rate increase details
The 55p rate was introduced earlier this year, replacing the previous allowance of 45p per mile for the first 10,000 business miles. For people who drive more than 10,000 business miles, the additional increase to 35p is intended to provide further help.
According to the Treasury, someone driving 6,000 business miles a year could make an additional £120 in annual tax savings. A worker covering 15,000 business miles could see tax savings of up to £300.
How the allowance works
The allowance does not mean every driver will automatically receive 55p for each mile travelled. The tax-free mileage rate applies to eligible journeys made for work using a person's own vehicle, rather than ordinary commuting or personal trips.
Employers can choose how much they reimburse staff for business travel. If a worker receives less than the approved mileage rate, they may be able to claim tax relief from HM Revenue and Customs on the difference. Self-employed people who use simplified mileage expenses can also use the approved rates when calculating eligible business costs.
The announcement is part of five measures unveiled by the Government, which also include changes to Carer's Allowance, parental pay and import tariffs on certain food products. Ministers say the package is designed to help households with everyday expenses while giving working people more financial breathing space.
