New HMRC rates to impact millions of UK drivers after Budget announcement

Chancellor John Healey confirmed that the Government would make higher tax-free mileage rates permanent.

This includes locking in the 55p per mile rate for the first 10,000 business miles and increasing the rate above 10,000 miles from 25p to 35p per mile.

The latest “everyday fix” from the Government will support nurses, care workers, self-employed builders and others who drive for work.

It represents the biggest increase in mileage rates in 15 years and will support millions of people who drive for work.

Estimates suggest that a worker doing an average of 6,000 business miles a year will save around £120.

High-mileage drivers, who travel an average of 15,000 miles, could receive up to £300 in additional tax savings.

Prime Minister Andy Burnham said: “We are taking on the big challenges facing the country.

“But that doesn’t mean losing sight of the everyday problems that cost people money or simply aren’t fair.

“If you’re a nurse driving for work, a parent spending those precious first weeks with your new baby, or an unpaid carer picking up an extra shift, these changes will make life a little easier and put more money back in your pocket.”

HMRC rates outline that the first 10,000 business miles in the 2026-2027 tax year are 55p for cars and vans, 24p for motorcycles and 20p for bicycles.

Anything over 10,000 miles in the tax year stands at 25p for cars and vans, 24p for motorcycles and 20p for bicycles.

Steve Walker, head of digital content at Auto Express, praised the new rules, noting that it was coming at an important time when the cost of driving remains high.

He said: “Keeping the higher tax-free mileage rate is welcome news for drivers who use their cars for work, particularly as motoring costs remain high.

“Increasing the rate for miles travelled beyond 10,000 will also help those who cover the biggest distances.”

Labour announced new mileage rates alongside extending parental pay to more than 150,000 additional parents per year.

For the first time, this will include self-employed fathers and partners who have previously missed out.

Chancellor Healey said: “Today’s everyday fixes are just a small part of what we are doing to give families a bit of breathing space.

“Conflict in the Middle East and Europe is hitting families here at home through higher everyday costs. We can’t control global events, but we can act where we can make a difference.”