News

Yesterday’s announcement from the Government stated that businesses and employees who rely on their own vehicles for work have received a long overdue increase in the approved mileage allowance rate.

In a move designed to ease the burden of rising fuel costs, the Chancellor confirmed that the tax free mileage rate for cars and vans will increase by 10p per mile.  This marks the first rise in more than 15 years, with the previous rate having been frozen since April 2011.  HM Revenue and Customs (HMRC) has confirmed that these updated rates will apply for the 2026/27 tax year, effective from 6 April 2026.

The approved mileage rates will be as follows:
• 55p per mile for the first 10,000 business miles (increased from 45p)
• 25p per mile for any additional mileage over 10,000 miles
• No change to motorcycle rates

The increase has been introduced to reflect the sharp rise in petrol and diesel prices, ensuring that those who depend on their vehicles for work, such as care workers, tradespeople and mobile professionals are better supported.

In her statement, the Chancellor highlighted the growing pressures facing businesses, particularly following disruption linked to the Iran conflict and closure of the Strait of Hormuz, both of which contribute to global fuel price increases.

Alongside this, the Government has also confirmed a continuation of the 5p fuel duty freeze, helping to prevent further cost increases at the pump.

Additional targeted support has been announced for industries most exposed to rising fuel costs, including:
• For hauliers, a 12 month road tax holiday for HGVs, potentially saving operators up to £912 per lorry.
• To support farmers, a temporary reduction in red diesel duty by over a third until the end of the year, which will also apply to the rail freight industry.

While the mileage increase will be a welcome relief for many, the Chancellor emphasised that future support for businesses will remain carefully targeted.  Although some sectors have been protected by fixed price contracts, others continue to face ongoing challenges linked to energy costs and wider economic pressures.

At David Allen, we will continue to monitor developments and provide guidance on how these changes may impact your business or personal tax position.

If you would like advice on mileage claims or any of the measures announced, please get in touch with our specialist teams.

Speak to our team