HMRC Raises Mileage Allowance to 55p per Mile for First 10,000 Business Miles

HMRC raised the tax-free mileage allowance for cars and vans from 45p to 55p per mile for the first 10,000 business miles, GB News reported. The rate above that threshold stays at 25p per mile. The change took effect retroactively from April 6, 2026, marking the first adjustment in 15 years.

Up to three million workers are expected to benefit. The government said a driver completing 6,000 business miles would save more than £120 a year. The measure forms part of a broader package of tax changes announced by Chancellor Rachel Reeves.

Lee Murphy, managing director at The Accountancy Partnership, said the prior 45p rate had remained fixed despite higher vehicle operating costs. A self-employed driver logging 8,000 business miles can now deduct £4,400 from taxable profit, compared with £3,600 previously. Murphy added that the extra £800 deduction could reduce income tax by around £160 for a basic-rate taxpayer.

Murphy noted that workers such as mobile hairdressers, cleaners, consultants, tutors, care workers and tradespeople who travel between sites are likely to see the largest gains. He cautioned that the higher rate applies only to the first 10,000 miles, so a driver completing 15,000 business miles receives an extra £1,000 deduction on the initial segment but reverts to 25p for the remainder.

Murphy advised self-employed drivers to maintain detailed mileage records rather than estimates and to compare the simplified allowance against actual vehicle costs.

He urged workers to update records promptly to capture the backdated increase.