Rachel Reeves on Thursday announced a 10p per mile increase in tax-free mileage rates for people who have to use their cars for work, lifting the payment from 45p to 55p a mile and backdating the change to April 2026. She told MPs the rise would help workers from care staff to plumbers who rely on their own vehicles to do their jobs.
The announcement landed as part of a wider package aimed at easing household and business costs, but it was the mileage change that drew the sharpest reaction from the trade union Unison. General secretary Andrea Egan said it would offer immediate help for frontline staff in public services at a time when living costs were climbing again, and said people who needed their own cars for work had been left thousands of pounds out of pocket for too many years.
Egan said Unison had campaigned hard for the change and welcomed the fact the chancellor had listened to workers affected by frozen rates. She added that there was still more to do to make sure nobody was losing out, and said the union would keep pressing for further reform over the coming months.
The mileage rise matters because the current rate has stood at 45p per mile, leaving workers in many jobs paying a growing share of fuel and running costs out of their own pockets when they travel for work. The increase backdated to April 2026 means it will apply to a period that has already begun, giving it immediate financial significance for employees who have been waiting for a settlement.
Reeves paired the mileage announcement with several other measures. She said summer attractions would see VAT cut temporarily from 20 per cent to 5 per cent over the summer holidays, and set out a Great British Summer Savings scheme that includes free bus travel for children in England during August. She also announced 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.
Her wider package also included support for haulage and freight. Reeves said the government would grant hauliers a 12-month road tax holiday for HGVs, saving the typical heavy lorry up to £912, and would cut duty on red diesel by over a third until the end of this year to support farmers and the rail freight industry.
The immediate political test now is whether the spending package, and the promised rise in tax-free mileage rates, will be enough to show that the government is responding to the squeeze on wages, fuel bills and travel costs that many workers say has been building for years. For the care worker, the plumber and the many others who drive because their job demands it, the answer is straightforward: the rate is going up, and the money is due from April 2026.
