Rachel Reeves increases mileage rate for drivers using cars for work
Chancellor Rachel Reeves has announced a 10p per mile increase in tax-free mileage rates claimed by people who need to use their cars for work.
In the House of Commons on Thursday, Ms Reeves detailed policies to tackle the cost-of-living squeeze triggered by Donald Trump’s war in the Middle East but did not announce immediate relief for rising energy bills.
Rachel Reeves has announced an increase in tax-free mileage rates charged by people who have to use their cars for work, by 10p per mile until April 2026, from the current rate of 45p.
The Chancellor told MPs: “The government is giving hauliers a 12-month road tax exemption on HGVs, saving typical HGVs up to £912.
“To support farmers and the rail transport industry, I have decided to reduce the tax on red diesel by a third by the end of this year.
“And having heard from (former Labor minister Jim McMahon) and union Unison, I can today announce a 10p per mile increase in tax-free mileage rates due April 2026, which will benefit everyone who needs to drive for work, from care workers to plumbers.”
Unions welcomed this announcement and have campaigned for years to increase rates.
Unison general secretary Andrea Egan said: “This simple measure will provide immediate relief to countless frontline workers in public services, especially at a time when living costs are once again skyrocketing.
“Thousands of liras have been coming out of the pockets of people who need their own cars to work for many years.
“Unison has campaigned hard for this change, which is long overdue. It is good to know the Chancellor has listened to the concerns of staff who have been penalized by the rates freeze.
“There is more to do to ensure no one loses out and the union will continue to campaign for more in the coming months.”
Other measures announced by Ms Reeves include a temporary reduction of the VAT rate on summer entertainment from 20 per cent to 5 per cent during the summer holidays, a £350 million critical chemicals resilience fund and a £120 million fund to help the ceramics industry, and a reduction in import tariffs on more than 100 types of food products.
The “Great British Summer Savings” scheme also includes free bus travel for children in England during the August school holidays.
He told the House of Commons on Thursday: “This will apply to ticket prices for both adults and children, covering attractions such as fairs, theme parks, zoos and museums.
“It will include children’s tickets for cinemas, concerts, soft plays and theatre, and will also reduce the cost of children’s meals in restaurants and cafes from 20% VAT to 5%.”
The changes will be effective from June 25 to September 1, he said.
