Rachel Reeves said on Thursday that workers who use their own cars for jobs such as care work and plumbing will get a 10p per mile rise in tax-free mileage rates, with the increase backdated to April 2026.
The change lifts the current 45p rate and follows years of pressure from unions, which argued that people who need their own cars for work had been left paying thousands of pounds out of pocket. Andrea Egan of Unison said the union had campaigned hard for the change and that it would bring immediate help to frontline workers as living costs rise again.
Reeves set the move alongside a package of summer and sector-specific measures in the Commons, including a 12-month road tax holiday for HGVs that she said would save the typical heavy lorry up to £912. She also said duty on red diesel would be cut by over a third until the end of this year to support farmers and the rail freight industry.
Unison had pressed for years for a higher mileage allowance, arguing that frozen rates were forcing staff to absorb the cost of doing their jobs. Reeves said the increase came after hearing from former Labour minister Jim McMahon and the union, putting the government on the side of workers who drive as part of their employment rather than on the side of the bill they have carried for years.
The broader package included a temporary cut in VAT on summer attractions from 20 per cent to 5 per cent over the school holidays, a £350 million critical chemicals resilience fund, a £120 million fund for the ceramics sector and cuts in import tariffs on more than 100 types of food products. Reeves also said her Great British Summer Savings scheme would include free bus travel for children in England during the August holidays.
The relief measures are aimed at easing pressure in a number of parts of the economy, but they stop short of one immediate step some households have been waiting for. The government did not announce help with rising energy bills, leaving the mileage rise and the other targeted cuts as the main short-term support in the package.
