HM Revenue and Customs (HMRC) has introduced a significant update to the mileage allowance for employees and self-employed individuals using their personal vehicles for work purposes. The mileage rate has been increased from 45p to 55p per mile for the first 10,000 miles driven in a tax year, effective and backdated from 6 April 2026.
This increase, confirmed by Labour Party Chancellor Rachel Reeves, marks the first rise since 2011 and is a welcome boost for those who drive for business, such as care workers traveling between appointments. The mileage allowance reimburses business-related vehicle expenses without being subject to income tax or National Insurance contributions.
Financial expert Martin Lewis highlighted the importance of this change, noting that many people may not be fully aware of their entitlement. “If your employer reimburses you at any rate lower than 55p per mile, you can claim back the difference through your tax return. Even if no reimbursement is provided, you can claim up to the full 55p per mile allowance,” he explained.
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After the initial 10,000 miles, the mileage rate remains at 25p per mile. However, there are currently no indications this lower rate will change, nor any confirmed updates on allowances for cyclists.
This adjustment benefits a wide range of workers, including those who are self-employed, ensuring fairer compensation for the costs incurred while working. The backdated application means eligible drivers can claim the increased rate for miles traveled since the start of the current tax year.