The Chancellor of the Exchequer, Rachel Reeves updated Parliament on 21 May 2026 on the Government’s economic response to the war in Iran and the wider measures being taken to support households and businesses with rising cost pressures. One of the measures announced was an increase in approved mileage rates for those using their own vehicles for work.
The approved mileage rates for cars and vans will increase from 45p per mile to 55p per mile. This increase has been backdated to the start of the tax year, 6 April 2026. This rate applies only to the first 10,000 business miles in each tax year, with the approved mileage rate remaining at 25p per mile for any additional mileage over the threshold. The change is intended to support employees and the self-employed who rely on travel for work. It has been confirmed that all other mileage rates remain unchanged for the time being although this may be reviewed again at the next Budget.
If an employer reimburses mileage at less than the approved rates, the employee may claim the shortfall through Mileage Allowance Relief (MAR). This ensures tax relief is given on the difference. For example, if an employer reimburses 35p per mile, tax relief may be claimed on the remaining 20p per mile for qualifying business journeys (excluding ordinary commuting). If no mileage allowance is paid then tax relief can usually be claimed on the full 55p per mile rate (up to 10,000 business miles).
The approved mileage rates for motorcycle journeys remain at 24p per mile and for bicycle journeys at 20p per mile. Where employees carry colleagues on business journeys, employers may also pay an additional 5p per passenger per mile. There are no overriding distance limits for these payments.
