Workers who rely on their vehicles for job-related travel have received a positive development with an announcement by Rachel Reeves regarding an increase in tax-free mileage rates. The Chancellor has disclosed a raise of 10p per mile for tax-free mileage rates, up from the current 45p rate and retroactive to April 2026. This adjustment aims to cover expenses incurred when using a personal vehicle for business purposes.
For instance, individuals like caregivers who need to travel to various locations to provide care are eligible for this allowance, excluding expenses for commuting to their primary workplace. Reimbursement for these costs can be sought directly from the employer or through tax relief from HMRC, typically requiring an expense claim submission for employed individuals.
In cases where employers compensate below the full rate, tax relief can be claimed for the difference. The new rate of 55p per mile applies to the initial 10,000 miles traveled in a tax year using a car or van, decreasing to 25p per mile thereafter. Motorcycles and bicycles are set at 24p and 20p per mile, respectively, regardless of mileage. Different rules apply if a company car is used.
The Chancellor’s announcement highlighted the importance of the adjustment, emphasizing its benefits for workers ranging from care providers to tradespeople who rely on driving for work. This move has been praised by financial expert Martin Lewis for its significance in increasing the mileage allowance after a prolonged freeze at 45p.
Unison general secretary Andrea Egan expressed support for the change, noting its immediate assistance to frontline workers in public services facing rising living costs. The increase in mileage rates addresses a long-standing issue where workers using personal vehicles for work have incurred significant financial losses over the years. The union continues to advocate for further improvements to ensure fair treatment for all affected individuals.
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