Chancellor Rachel Reeves has confirmed a significant increase in the mileage allowance for petrol and diesel drivers who use their cars for work purposes. Under the new rule, employees who drive their own vehicles for work (excluding commuting) can claim tax relief on 55p per mile for the first 10,000 miles driven in the tax year, up from the previous rate of 45p per mile.
Martin Lewis Praises the Move
The change has been welcomed by financial expert Martin Lewis, who described it as a "really important" update. Speaking on BBC and ITV, Lewis explained: "The big one that I think is going to be under-covered, but is actually really important, is the increase in the mileage allowance for people who drive as part of their work. This has been frozen at 45p since, I think 2011, so the increase from 45p to 55p for the first 10,000 miles that you drive is really important."
How the Mileage Allowance Works
Lewis clarified the mechanics: "If you drive your own car (not a company car) as part of your work—for example, care workers driving from house to house—this mileage allowance is the amount your employer can give you to cover costs, and you don't pay tax or National Insurance on it. It doesn't count as earned money. It's a special allowance."
He added that if an employer pays less than the full allowance, employees can claim tax relief on the difference. "If your employer gives you 30p and the allowance is 55p, you can claim tax back on that 25p per mile. And if they didn't give you anything, you could claim tax back on the full 55p."
Backdated to April 2026
The new rate is backdated to April 2026, meaning drivers can benefit from the increase for the current tax year. However, the 55p rate only applies to the first 10,000 miles; after that, a lower rate applies. Self-employed individuals can also claim the allowance for work-related driving.
Lewis concluded: "This has long been a complaint I've got, so I think the change from 45p a mile to 55p a mile backdated to April 2026 is really going to be quite useful for people."
