Use your own car or van for work? You could get extra tax relief worth £100s as mileage rates rise announced

Mileage rates – what's changing

The mileage rate is the maximum amount your employer can pay you tax-free to reimburse you for using your own vehicle for work (not including your normal commute). Here's how it's changing:

These changes are expected to benefit some 3 million people. Combined, they're worth £120 a year in "additional tax savings" for a worker doing 6,000 business miles, or £300 for someone driving 15,000 business miles (compared to the rates before April 2026), the Treasury says.

In May 2026, when the previous mileage rate increase was announced, MoneySavingExpert.com founder Martin Lewis described it as a "really important" change that would be "really quite useful for people".

How mileage rates work in practice

If you use your own vehicle as part of your job – you're a care worker driving from house to house, for example – your employer can reimburse you up to a specific amount without the payment being subject to income tax or National Insurance.

Your employer doesn't have to pay the full amount (or anything at all). If it pays less, you can usually claim tax relief on the difference, either via HMRC or through your tax return if you're registered for self-assessment.

For example, say you drive 6,000 miles. As the approved rate is 55p per mile, your employer could pay you up to £3,300 tax-free. If your employer pays you less – say, 30p per mile (£1,800 total) – you can claim tax relief on the difference. So in this example, a basic rate (20%) taxpayer could therefore get back an extra £300 (20% of £1,500).

If you're self-employed, you can also benefit from the changes to mileage rates under HMRC's 'simplified expenses' system. Here, instead of calculating the exact costs of buying and running your vehicle when working out your profits, you can use the flat mileage rates instead. For example, 10,000 qualifying business miles would produce a deductible expense of £5,500. This would reduce your taxable profits and therefore potentially cut the amount of income tax and National Insurance you have to pay.