The recent announcement from HMRC regarding a new mileage allowance marks a significant shift for many UK workers. For the first time in 15 years, the tax-free mileage rate has increased from 45p to 55p per mile for the first 10,000 business miles. This change is expected to impact up to three million workers, particularly those who drive for work but do not exceed the mileage threshold. The backdated implementation to April 6, 2026, means that eligible drivers can claim additional deductions on their tax returns, potentially saving them over £120 annually.
Self-employed individuals, such as mobile hairdressers and tradespeople, stand to gain the most from this adjustment. For instance, a self-employed worker driving 8,000 business miles can now claim £4,400 against their taxable profit, a significant increase from the previous £3,600. This translates to an extra £160 in income tax savings for basic-rate taxpayers, highlighting the financial relief this change could provide amidst rising living costs.
However, experts caution that while the increase is beneficial, it may not fully cover the overall expenses of vehicle ownership, which include insurance and maintenance. Additionally, those who drive more than 10,000 miles will still face limitations, as the higher rate does not apply beyond that threshold. This could leave high-mileage workers feeling underserved by the new policy.
To maximise benefits, workers are advised to maintain accurate mileage records and consult with accountants to determine whether to opt for the simplified mileage allowance or actual vehicle costs. As the new rates take effect, proactive record-keeping will be essential for ensuring that self-employed drivers can fully leverage these changes in their tax filings.
Source: GB News
