Millions of UK workers who use their own vehicles for business travel are set to benefit from changes to HMRC mileage rates announced in the Autumn Budget. The Government has confirmed that higher tax-free allowances will become permanent, while drivers covering more than 10,000 business miles annually will receive an increased rate from April 2027.
The measures are expected to benefit around three million employees and self-employed workers, including nurses, care workers, engineers and builders. They form part of a wider package intended to ease household and business costs, with estimated annual savings of £120 for some drivers and £300 for those travelling longer distances.
Higher Mileage Allowances Will Take Effect From April 2027
Chancellor John Healey confirmed that the tax-free mileage rate of 55p per mile for the first 10,000 business miles will remain in place permanently. The allowance had previously increased from 45p to 55p for the 2026–2027 tax year under changes introduced by Rachel Reeves.
According to the Daily Express, the Chancellor also announced that the allowance for business mileage exceeding 10,000 miles annually will rise from 25p to 35p per mile. The revised rate will apply to eligible drivers using petrol, diesel or electric vehicles for work.
The changes are scheduled to take effect in April 2027, following the temporary increase introduced earlier this year. Workers using their own cars or vans for business purposes may claim tax relief on approved mileage allowances, which are designed to cover vehicle ownership and running costs.
Government estimates suggest that somebody driving 6,000 business miles annually could save approximately £120 compared with the rates in place before April 2026. Drivers covering 15,000 business miles could benefit by as much as £300 a year. The existing rates for motorcycles and bicycles remain unchanged at 24p and 20p per mile respectively. The revised allowances therefore primarily affect employees and self-employed workers who rely on cars and vans for professional journeys.
Government Targets Motoring Costs As Businesses Face Financial Pressure
The mileage announcement forms part of a broader Budget package addressing everyday expenses. Chancellor Healey also confirmed that fuel duty would remain frozen until July, while the existing 5p-per-litre reduction would continue during that period.
According to GB News, Steve Walker, head of digital content at Auto Express, welcomed the decision to retain the higher mileage allowance, particularly given the continuing cost of driving.
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.” Walker also noted that raising the allowance beyond 10,000 miles would benefit those regularly travelling substantial distances for their jobs.
The financial pressures facing working motorists were highlighted by research from Close Brothers Motor Finance. As reported by the Express.co.uk, its analysis found that 47% of UK motorists use their vehicles for work or business, while 52% identify fuel and energy bills as their biggest operational challenge.
John Cassidy, managing director at Close Brothers Motor Finance, described the increased higher-mileage allowance as helpful for millions of people dependent on personal vehicles to earn their living. The Budget measures also include changes to parental pay, extending eligibility to more than 150,000 additional parents annually, including self-employed fathers and partners.
For workers whose jobs involve regular driving, the mileage changes represent a permanent adjustment to tax-free allowances, with the largest estimated savings directed towards those covering more than 10,000 business miles each year.
