Mileage Allowance: 55p a Mile Made Permanent, and 35p Above 10,000 Miles

If you use your own car or van for work, the 2026 Budget made the higher 55p-a-mile tax-free rate permanent and increased the rate above 10,000 miles to 35p. Around 2 million employees and 1 million self-employed people use these rates, including care workers, social workers, electricians and plumbers. Here’s what’s changed and how to make sure you get the benefit.

The new rates

For business journeys in your own car or van:

• First 10,000 business miles in a tax year: 55p a mile. A temporary rate announced in May 2026, backdated to 6 April 2026, is now permanent.
• Over 10,000 business miles: 35p a mile, up from 25p, from 6 April 2027.

These are the tax-free rates for employees and the tax-deductible rates for the self-employed. The Budget doesn’t change the rates for motorcycles or bicycles.

If you’re an employee

Your employer can pay you up to these rates tax-free for business journeys in your own vehicle. If they pay less, or nothing at all, you can claim tax relief on the difference, called Mileage Allowance Relief.

For example, if you drive 6,000 business miles and your employer pays 35p a mile:

• the tax-free amount is 6,000 × 55p = £3,300
• your employer pays 6,000 × 35p = £2,100
• you can claim relief on the £1,200 difference - worth £240 a year if you’re a basic-rate taxpayer

The Treasury’s own figures put the gain from the new rates at £120 a year for a basic-rate taxpayer driving 6,000 business miles, and up to £300 a year at 15,000 miles once the 35p rate applies.

Claiming should also get easier. The Budget says it will remove the need for around 160,000 employees to file a Self Assessment return just to claim tax relief on employment expenses.

If you’re self-employed

If you use simplified expenses for your vehicle, you claim business mileage at the same rates instead of working out your actual running costs. The higher rates mean a bigger deduction from your taxable profits:

• At 55p, 6,000 business miles is a £3,300 deduction, up from £2,700 at the old 45p rate.
• From 2027/28, miles above 10,000 are deducted at 35p rather than 25p.

If you’re working out your figures for the 2026/27 tax year, the 55p rate applies from 6 April 2026. For more on managing irregular self-employed income, see our guide to budgeting on a variable or freelance income.

What counts as business mileage

Only journeys made for work count, such as travelling between clients, to a temporary workplace or to a job site. Your normal commute to a permanent workplace doesn’t count, even if you’re paid mileage for it. Keep a simple log of dates, destinations, the reason for each trip and the miles driven - it’s the evidence HMRC will expect if you claim.

Other motoring changes in the Budget

• The 5p fuel duty cut has been extended to 1 July 2027, and the planned January 2027 rise is cancelled.
• From spring 2027, £100 million will go towards cutting the cost of local, lower-powered public EV chargers, which the Treasury estimates will save drivers who charge on the street around £150 a year.

For a sinking fund approach to car costs like MOTs, servicing and car tax, see our guide to the sinking fund method.

What to do now

• If your employer pays less than 55p a mile, check whether you’re claiming Mileage Allowance Relief on the difference.
• If you’re self-employed and use simplified expenses, use 55p a mile for the first 10,000 business miles in 2026/27.
• Start or tidy up your mileage log now, so claims for this tax year are easy to back up.
• If you drive more than 10,000 business miles a year, note that the higher 35p rate starts from 6 April 2027.

The bottom line

The permanent 55p rate and the higher 35p rate above 10,000 miles are a real tax saving for anyone who drives their own vehicle for work. The money only reaches you if your employer pays the full rate or you claim the difference, so it’s worth checking. For everything else in the Budget, see our Budget 2026 round-up.