Workers who rely on their vehicles for job-related travel will benefit from an increase in tax-free mileage rates, announced by Rachel Reeves. The Chancellor revealed a rise from 45p to 55p per mile, effective from April 2026. This allowance aims to cover expenses incurred when using personal vehicles for business purposes, such as for caregiving duties that involve multiple locations. Notably, it does not include commuting costs.

Individuals can seek reimbursement directly from their employer or claim tax relief through HMRC. Employees typically need to submit expense claims for reimbursement. If employers pay below the standard rate, workers can claim tax relief for the difference. The new 55p per mile rate is applicable for the initial 10,000 miles driven annually in a car or van, reducing to 25p thereafter.

For motorcycles and bicycles, the rates are set at 24p and 20p per mile, regardless of mileage. Different regulations apply if one uses a company-provided vehicle. The Chancellor’s decision to increase tax-free mileage rates has been praised by various stakeholders, including financial expert Martin Lewis and Unison general secretary Andrea Egan, who highlighted the positive impact on frontline workers facing rising living costs.