Chancellor Rachel Reeves has increased tax-free business mileage rates by 10p for cars and vans, backdated to April 2026, marking the first rise since 2011. However, the rate for cycling to work remains unchanged at 20p per mile. Reeves is reportedly set to be replaced by Birmingham MP Shabana Mahmood as Chancellor, following the expected succession of Prime Minister Andy Burnham from Sir Keir Starmer.
Mileage Rate Changes
In one of her final acts as Chancellor, Reeves confirmed that approved tax-free mileage rates would now be 55p for cars and vans for the first 10,000 business miles in the tax year. Rates for motorcycles and bicycles remain unchanged at 24p and 20p respectively, for all miles in a tax year. The rates for each business mile after the first 10,000 are unchanged at 25p.
Reeves said the change will benefit those who need to drive for work, from care workers to plumbers. She also announced that the 5p fuel duty freeze would be extended until the end of 2026, as well as a 12-month road tax holiday for HGV operators.
Cycling Rate Unchanged
The rate for bicycles, which is 20p for those doing under 10,000 miles and 20p for those doing over 10,000 miles, will stay the same, Reeves added. This means cyclists will not see any increase in tax-free mileage payments, despite rising costs.
Her stint in No11 is likely to end with Sir Keir's departure, but people have praised the shake-up. David Bushnell, director of consultancy and strategy at Fleet Operations, said: “Any move to ease cost pressures for drivers is welcome, and this 10p increase in tax-free mileage rates will certainly be helpful for employees who use their own cars for business mileage and rely on AMAP payments. Mileage rates have felt increasingly out of step with the real cost of running a vehicle, so this is a positive step for grey fleet drivers and the employers that rely on them.”
Political Implications
Reeves' replacement by Birmingham MP Shabana Mahmood is expected to take place after Andy Burnham becomes Prime Minister. The changes to mileage rates are among Reeves' final policy moves, and while they have been welcomed by some, the lack of increase for cyclists has drawn criticism from cycling advocates.
