Martin Lewis says Rachel Reeves 55p rule ‘for drivers under 10k miles’ | Personal Finance | Finance

Martin Lewis has highlighted how drivers overlaying fewer than 10,000 miles yearly for work functions stand to benefit from a new 55p fee. Motorists utilising their autos for skilled causes will now be eligible to claim tax reduction at 55p per mile for the first 10,000 miles accomplished within the tax 12 months — an increase of 10p from the earlier price of 45p per mile.

Mr Lewis described this as doubtlessly the most ‘important’ of all the modifications unveiled by Chancellor Rachel Reeves. Last week, Ms Reeves announced a discount in the VAT price on tickets for theme parks, zoos and museums from 20% to 5% all through the summer time holidays.

The Chancellor outlined the measure as half of a broader package deal designed to alleviate the value of dwelling pressures stemming from the Iran struggle.

Further bulletins from Ms Reeves included a 10p per mile rise in tax-free mileage charges backdated to April, a £350 million crucial chemical compounds resilience fund, a £120 million fund to support the ceramics industry, and the removing of import tariffs on more than 100 classes of food merchandise.

Mr Lewis advised BBC listeners: “The big one that I think is going to be under-covered, but is actually really important, is the increase in the mileage allowance for people who drive as part of their work. This has been frozen at 45p since, I think 2011, so the increase from 45p to 55p for the first 10,000 miles that you drive is really important.

“To clarify to people how this works, if you drive as a half of your work, and the massive sector that’s very important on this is care employees who are driving from home to home to home.””What this mileage allowance does is this is the quantity that your employer can give you to cowl your prices, and you do not pay tax and National Insurance on it. So it does not rely as like earned money. It’s a particular allowance.”

SG Accounting’s managing director Dan Mepham warned in a assertion to ContractorUK: “It’s good to see HMRC increasing the approved mileage allowance by 10p [because] fuel, insurance, servicing and vehicle costs have all gone up significantly over recent years.

“[While this will feel] like a fairer reflection of the real cost of using your own car for work, it won’t undo all the tax hits contractors and small businesses have had to face over the last few years. [Plus], don’t forget those temporary workplace rules to ensure you and your claims are staying on the right side of HMRC.”

Mr Lewis explained that an exemption applies – it’s not for people going to and from work – but even if the employer doesn’t pay that rate they can claim it back in tax. He said: “So transferring that from 45p to 55p is important. It is also value noting that even if your employer does not give you the full quantity of the mileage allowance, lets say they give you 30p. And the allowance is 55p.”

“For quantities that you drive for work, not commuting, not to and from work, this is intra-work journey, intra-day work journey, you can claim that 25p per mile back – tax back on it – because you’d have been paid that in your wages, you’re having to pay it, you can get the tax back in the distinction between what they give you and the full allowance. And if they did not give you anything, you could claim the full 55p back.

“And similar applies to people who are self-employed for driving in their work.

“This has long been a grievance I’ve got, so I think the change from 45p a mile to 55p a mile backdated to April 2026, so backdated a couple of months, is actually going to be fairly helpful for people.”

“It’s only for the first 10,000 miles, there’s a decrease price after that. I have not heard anything about that price being modified. I also have not heard anything about whether they’re altering the price for people who cycle, because there is an allowance for biking that you’re allowed to claim too. I’ve just got my workforce making an attempt to verify on that.”

In a post on X, Mr Lewis continued: “The work mileage allowance for under 10,000 miles will rise by 10p to 55p backdated to April 2026.””So this means if you drive for work in your own car (like many care employees for instance) you can be given up to 55p a mile tax and NI free. And if you’re not given that degree you can claim the tax back on the distinction between what you’re given and that quantity. So if you’re given 30p per mile. You can reclaim tax paid on your wages for the 25p/mile distinction.”

The 45p, now 55p, per-mile rate covers cars and vans, dropping to 25p beyond 10,000 miles. For motorbikes and bicycles, a fixed rate of 24p and 20p respectively applies, irrespective of mileage travelled. Claims are usually submitted through HMRC or included within your tax return for those completing self-assessment. Unions have welcomed the announcement regarding the increased mileage rate for workers required to use their personal vehicles for work.

Rachel Reeves announced a 10p per mile rise in tax-free mileage rates, backdated to April 2026, increasing from the existing rate of 45p. The Chancellor told MPs: “Having heard from (Labour former minister Jim McMahon) and the commerce union Unison, I can at the moment announce a 10p per mile increase in tax-free mileage charges backdated to April 2026 – benefiting those who need to drive for work, from care employees to plumbers.”

Unions have been campaigning for years for the rate to be increased. Unison general secretary Andrea Egan said: “This easy measure will present fast help for numerous frontline employees in public companies. Particularly at a time when dwelling prices are going through the roof once again.””People who need their own vehicles for work have been left 1000’s of kilos out of pocket for far too many years. Unison has campaigned exhausting for this long overdue change. It’s good to know the Chancellor has listened to the considerations of workers penalised by frozen charges.””There’s still more to do to guarantee no-one is shedding out and the union will proceed to marketing campaign for more over the coming months.”