Government to Raise Higher-Mileage Tax-Free Rate to 35p from April 2027
The government has confirmed that tax-free mileage rates for employees and self-employed people who use their own vehicles for work will rise further from 6 April 2027, with the rate for business miles above 10,000 increasing from 25p to 35p.
The change, announced on 26 October 2026 as one of a series of pre-Budget measures, locks in the existing 55p rate for the first 10,000 miles and extends additional support to higher-mileage drivers. Officials said the package would help around three million people, including nurses, care workers, builders and others who rely on their cars or vans for their jobs.
Under the current rules, which took effect on 6 April 2026, employees can receive up to 55p per mile tax-free for the first 10,000 business miles in a car or van, falling to 25p thereafter. From April 2027 the over-10,000-mile rate will move to 35p, while the 55p threshold becomes permanent. Motorcycles remain at 24p, bicycles at 20p, and the passenger supplement at 5p. The same rates apply to self-employed people using HMRC’s simplified expenses system.
**Approved mileage rates from 6 April 2027**
| Vehicle type | First 10,000 business miles | Over 10,000 business miles |
| Cars and vans | 55p | 35p |
| Motorcycles | 24p | 24p |
| Bicycles | 20p | 20p |
| Passenger (per person) | 5p | 5p |
Employers are not obliged to pay these rates. The figures are the maximum amounts that can be reimbursed free of tax and National Insurance; they are advisory rather than mandatory. Many employers, particularly in care, agency and other lower-margin sectors, continue to reimburse below the approved rates. Where an employer pays less, the employee can claim tax relief on the difference through Mileage Allowance Relief, though take-up of this option remains uneven. Employers who pay above the rates must treat the excess as taxable pay.
The Treasury estimates the combined effect of the 2026 increase and the further rise from 2027 will be worth around £120 a year in additional tax savings for someone doing 6,000 business miles, or £300 for a driver covering 15,000 miles, compared with the long-standing pre-2026 rates. High-mileage workers stand to gain more from the new 35p tier.
Emma Rawson, director of public policy at the Association of Taxation Technicians, welcomed the move, saying it directly addressed concerns raised about the previous drop-off after 10,000 miles. The rates remain distinct from HMRC’s quarterly Advisory Fuel Rates, which apply only to company cars.
For workers who use their own vehicles, the practical effect from April 2027 will be a higher tax-free ceiling on higher annual mileages. The government has framed the change as support for people who depend on their cars to do their jobs, particularly in roles involving significant travel.