Business mileage rates rise as Budget delivers relief for drivers

October 28, 2026

Employees using their own cars for business travel will benefit from more generous tax-free mileage allowances following the Autumn Budget, offering some relief as motoring costs continue to put pressure on household finances.

Chancellor John Healey confirmed that the increased rate of 55p per mile for the first 10,000 business miles will become permanent, following its introduction earlier in 2026. The rate was previously 45p per mile.

For higher-mileage drivers, the allowance for business travel beyond 10,000 miles will rise from 25p to 35p per mile from April 2027.

Business mileage	Previous allowance	New allowance*
5,000 miles	£2,250	£2,750
10,000 miles	£4,500	£5,500
15,000 miles	£5,750	£7,250
20,000 miles	£7,000	£9,000

The changes will help employees who use their own vehicles for work, while giving employers an opportunity to review their expenses policies and reimbursement arrangements.

John Stride, Chair of the Association of Taxation Technicians (ATT), said: “We highlighted ahead of the Budget that those travelling more than 10,000 business miles were particularly poorly served by the existing system, with the tax-free rate dropping sharply from 55p to 25p. Increasing the higher-mileage rate to 35p therefore partly addresses that concern.

“However, we still believe there is a strong case for going further. ATT proposed a simpler single rate of at least 60p per mile, which would remove the cliff edge at 10,000 miles and better reflect the costs of running and maintaining a vehicle."

For fleet managers, the updated rates are a timely reminder to assess the balance between grey-fleet use, company vehicles and alternative travel options.

Businesses should ensure their mileage policies, payroll processes and expense systems reflect the revised rates when they take effect.

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