Rachel Reeves raises Mileage Allowance 2026 by 10p per mile

Rachel Reeves has raised the mileage allowance 2026 by 10p per mile and backdated the change to April 2026, announcing the move in the House of Commons. The tax-free increase applies to workers who use their own cars for business journeys rather than commuting to their normal workplace.

A worker doing 6,000 business miles in a year could save around £120 under the new rate. Reeves said: "I can today announce a 10p per mile increase in tax-free mileage rates backdated to April 2026, benefiting those who drive to work."

Rachel Reeves and HMRC rates

Approved mileage allowance payment rates have not changed since 2011. Under the current HMRC system, workers can claim 45p per mile for the first 10,000 business miles travelled each year and 25p per mile after that threshold.

The new rates are intended to support workers across the UK, and Reeves said the change would benefit those who drive to work. If an employer pays less than the approved HMRC mileage rate, workers can usually claim tax relief on the difference.

House of Commons announcement

Reeves made the announcement as part of a wider set of measures that included fuel duty and benefit changes. She said: "This comes on top of support we've already put in place, including freezing fuel duty, taking £117 off energy bills, freezing prescriptions, fuel duty and rail fares."

She also said: "We are able to do this because we have made the right choices, resulting in the UK having the fastest-growing economy in the G7, with inflation going down."

Fuel duty and benefit charges

Fuel duty announced this week will no longer rise in September in line with inflation and will instead be extended until 2027. The car fuel benefit multiplier will rise to £29,200 for the 2026-27 tax year, up from £28,200 in 2025-26, while van fuel benefit charges will increase from £769 to £798.

For drivers who claim mileage through work, the practical change is straightforward: the approved rate goes up, and the backdated start date means the higher allowance can apply from April 2026. Workers using their own cars for business trips will need the new rate when they work out claims against what their employer pays.