Good news for 3 million people who drive for work in the UK
Key Points
- The 55p tax-free rate for the first 10,000 business miles is now permanent
- The rate above 10,000 miles rises from 25p to 35p per mile
- Around 3 million employees and self-employed people benefit
- High-mileage drivers get up to £300 a year in extra tax savings
Chancellor John Healey has made the 55p tax-free mileage rate permanent for around 3 million people who use their own vehicle for work.
Healey also raised the rate for business mileage above 10,000 miles a year from 25p to 35p per mile. The 55p rate covers the first 10,000 business miles each year.
HM Treasury called it the biggest increase in mileage rates for 15 years. It said a worker driving 6,000 business miles a year would get £120 in extra tax savings.
Someone driving 15,000 business miles a year would get up to £300 in extra tax savings.
The rates apply to employees and self-employed people alike, including nurses, care workers and self-employed builders. The government said the change helps workers with the cost of fuel, servicing and other motoring expenses.
Employers can pay staff up to these rates per business mile without the payment counting as taxable income. Employees whose employer pays less than the approved rate can claim tax relief on the difference from HMRC.
Self-employed workers can use the same rates to claim simplified expenses for their business driving.
“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,” said Prime Minister Andy Burnham.
The mileage change forms part of a package of “everyday fixes” announced on 26 October. Healey will deliver the Budget on Wednesday (28 October).
