If you use your own car for work, here is the single fact that matters: HMRC's approved tax-free rate is now 55p a mile for the first 10,000 business miles in a tax year. The 10p increase was announced in the House of Commons by the chancellor, Rachel Reeves, and HMRC has confirmed it applies to cars and vans and is backdated to 6 April 2026. The lower 25p rate still applies beyond 10,000 miles, and the change covers both employees reimbursed by employers and self-employed drivers.
If you drive your own car for work, here is the single fact that matters: the approved tax-free rate you can be paid without extra tax or National Insurance is now 55p per business mile for the first 10,000 miles in the tax year. That's up from 45p, and the difference is effective from 6 April 2026. I'll save you the trouble of hunting through tax guidance. Read your payslips and mileage payments for 2026 and treat any shortfall as recoverable, one way or another.
How the 55p rate changes take-home pay
The headline change was set out by Rachel Reeves in the House of Commons. HMRC has confirmed the new 55p rate applies to both cars and vans. It covers just business mileage, not commuting between home and a regular workplace. After the first 10,000 business miles in a tax year, the lower 25p per mile rate continues to apply.
That distinction is crucial. Business mileage means journeys you make for a trade, profession or employment that aren't ordinary commuting to your usual place of work. But if you pick up a client, visit a second site, or do calls out in the field, those are business trips. If you drive from home to the same office every day, that's commuting and not eligible for the approved mileage allowance.
The practical effect for pay is straightforward. Employers may reimburse drivers up to the HMRC approved rate without the payment being subject to tax or National Insurance. And if your employer already reimburses you at 55p per mile or more, there's nothing further to claim. If they paid less than 55p, you can either ask your employer for back pay or claim tax relief on the shortfall.
That said, still if your employer pays nothing for business miles, you can claim relief on the full HMRC allowance for qualifying journeys.
Martin Lewis, the personal finance broadcaster, has emphasised why the change matters. He noted that the 45p rate had been frozen for many years, and that workers who were underpaid relative to the approved rate can claim tax back on the difference. The government itself offered a worked example: a worker doing 6,000 business miles a year using their own vehicle would save around £120 under the new rate.
Thing is, first, check your records. Look at payslips and expense reimbursements from 6 April 2026 onwards. But if your employer used the old 45p rate, you may be able to ask for back pay or to correct the payroll. If that route isn't available, you can make a claim to HMRC for the tax relief you are owed. HMRC publishes guidance on how approved rates are used for tax purposes and how to claim for underpaid mileage allowances.
If you are an employee the usual routes are a payroll adjustment from your employer or a claim through self-assessment where appropriate. And if you are self-employed you can use the approved mileage allowance when working out allowable expenses, or you may choose to use your actual vehicle costs instead. The brief rule is to pick whichever method gives the larger tax benefit for your circumstances. If you are unsure, your payroll department, accountant or tax adviser can confirm whether a reimbursement is taxable and whether a claim is required.
Some roles were singled out during the announcement. Reeves cited care workers and plumbers as examples of occupations that will benefit, which is why public sector unions quickly reacted. Unison welcomed the increase and Andrea Egan, general secretary of Unison, said, "This simple measure will provide immediate help for countless frontline workers in public services."
The mileage change was one part of a larger package Reeves announced. She bundled the uplift with other measures including a 12-month road tax holiday for heavy goods vehicles, a temporary cut in duty on red diesel lasting until the end of this year, a temporary VAT cut to 5 percent for some summer attractions, and a package aimed at industry resilience and trade. For those planning budgets or negotiating mileage payments, the practical takeaway is to apply 55p per mile for the first 10,000 business miles in 2026 and 25p per mile beyond that.
Two practical points often confuse drivers. First, the approved rates are maximums for tax-free reimbursement. Employers can pay less, and that shortfall can be reclaimed by the employee as tax relief. Second, the allowance doesn't apply to ordinary commuting. Treat your business and commuting mileage separately when you log journeys and when you talk to payroll or your accountant.
Finally, even where employers are cooperative, reclaiming past shortfalls can involve paperwork. Keep accurate journey logs, dates and mileages, and copies of expense claims and payslips. If you intend to claim through self-assessment, include the mileage figures for the tax year and note whether you used the approved rates or actual costs. HMRC guidance explains the steps; where the case is unclear, get a professional to advise.
Related Articles
- Airlines cut two million seats as jet fuel spikes
- NPS Vatsalya: how to open a child pension
- Carrie Johnson: Why Worboys' second parole refusal matters
The change is backdated to 6 April 2026. Apply 55p per business mile up to 10,000 miles and 25p thereafter, and check payslips and expense records to recover any shortfall.
This article was created with AI assistance.
