Chancellor Rachel Reeves has announced a 10p per mile increase in tax-free mileage rates claimed by people who have to use their cars for work.
In the Commons on Thursday, Ms Reeves gave details of policies to tackle the cost-of-living squeeze triggered by Donald Trump’s war in the Middle East, but did not announce immediate help with rising energy bills.
Rachel Reeves announced a 10p per mile increase in tax-free mileage rates claimed by people who have to use their cars for work, backdated to April 2026, up from the current rate of 45p.
The Chancellor told MPs: “For hauliers, the Government is granting a 12-month road tax holiday for HGVs, saving the typical heavy lorry up to £912.
“To support farmers and the rail freight industry, I have decided to cut duty on red diesel by over a third until the end of this year.
“And having heard from (Labour former minister Jim McMahon) and the trade union Unison, I can today announce a 10p per mile increase in tax-free mileage rates backdated to April 2026 benefiting those who need to drive for work, from care workers to plumbers.”
Unions have welcomed the announcement, with many campaigning for years for the rate to be increased.
Unison general secretary Andrea Egan said: “This simple measure will provide immediate help for countless frontline workers in public services. Particularly at a time when living costs are going through the roof once again.
“People who need their own cars for work have been left thousands of pounds out of pocket for far too many years.
“Unison has campaigned hard for this long overdue change. It’s good to know the Chancellor has listened to the concerns of staff penalised by frozen rates.
“There’s still more to do to ensure no-one is losing out and the union will continue to campaign for more over the coming months.”
Other measures announced by Ms Reeves included a temporary cut in the rate of VAT on summer attractions from 20 per cent to 5 per cent over the summer holidays, £350 million critical chemicals resilience fund and a £120 million fund to help the ceramics sector, and the cutting of import tariffs on more than 100 types of food products.
Her “Great British Summer Savings” scheme also includes free bus travel for children in England during the school holidays in August.
She told the Commons on Thursday: “This will apply to ticket prices for both adults and children, covering attractions such as fairs, theme parks, zoos and museums.
“It will include children’s tickets for cinemas, concerts, soft play, and the theatre, and it will cut the cost of children’s meals in restaurants and cafes from 20% VAT to 5% as well.”
She said the changes would apply from 25 June until 1 September.
