Autumn Budget 2026: the 25p mileage rate goes to 35p

When the mileage rate went from 45p to 55p in May, the government said it would look at rates again in the Budget. It did. And for once the news on mileage is all one direction.

The Autumn Budget on 28 October did two things. It confirmed that the 55p rate for the first 10,000 business miles is here to stay (it's already been legislated). And it raised the rate for business miles above 10,000 from 25p to 35p, starting on 6 April 2027.

That second part was the surprise. The 25p rate has been 25p since 2002 and nobody was really campaigning for it. Most of the noise in May was about the headline 45p figure.

The rates, tax year by tax year

The 35p applies to both sides of the fence. Employees get it as the tax-free Approved Mileage Allowance Payment rate. Self-employed people using simplified expenses get it as the fixed deduction for a car or goods vehicle. Same number, same date.

The 10,000-mile threshold hasn't moved, and it still resets every 6 April.

It isn't backdated

This is the bit to get right, because the May change trained everyone to expect backdating. The 55p rise was applied from 6 April 2026, the start of the tax year it was announced in. The 35p rise is not. It starts on 6 April 2027.

So if you've already gone past 10,000 business miles this tax year, those extra miles are still worth 25p each. That stays true when you file your 2026/27 return next year, even though by then the rate will have changed. What counts is the tax year the journey happened in, not the date you file.

Strictly speaking, the 35p is still a proposal until the Finance Bill goes through. Budget measures like this almost always survive intact, but I'll update this post if anything changes.

Who actually gains

Only people who drive more than 10,000 business miles a year. If you're a plumber doing 8,000 miles, your claim in 2027/28 is exactly what it is now: 8,000 × 55p = £4,400. Nothing to see.

Go above 10,000 and it starts to count. Some worked examples, comparing the current tax year with 2027/28:

The extra expenses come off your taxable profit, so the actual saving is that figure times your tax rate. For the 15,000-mile driver that's £100 at basic rate or £200 at higher rate. For the 25,000-mile courier it's £300 or £600, plus a bit less Class 4 National Insurance on top.

Compare 2027/28 with the old 45p/25p rates and the numbers get bigger. Someone doing 15,000 miles a year was claiming £5,750 two years ago. In 2027/28 the same miles are worth £7,250. At basic rate that's £300 less tax a year, which matches the government's own figure.

The people this really helps are delivery drivers, couriers, sales reps and anyone covering a big patch. They were the ones worst served by 25p. At 25p a mile, a high-mileage diesel van wasn't even covering fuel some months, let alone tyres and servicing. 35p still won't make anyone rich, but it's a lot less insulting.

Should you switch to actual costs?

If you're a high-mileage driver who's been weighing up simplified mileage against actual costs, the maths has shifted towards simplified again. It was already closer after the 55p change, and 35p on the upper miles closes more of the gap.

Remember the lock-in, though. Once you use simplified mileage for a vehicle, you have to stick with it for as long as you use that vehicle in the business. If you're on actual costs now and want to switch, it generally has to wait until you change vehicle.

Other Budget changes worth knowing about

Most of the Budget had nothing to do with mileage. A few things are relevant if you're self-employed:

• The trading allowance rises from £1,000 to £3,000 from 6 April 2027, and the Self Assessment reporting threshold for trading income goes up to match. You can claim the allowance or your actual expenses, not both. If you drive a lot, your mileage claim alone will normally beat £3,000, so for most KeptMiles users this changes nothing.
• For people joining Making Tax Digital for Income Tax in April 2027, late submission penalty points won't apply to quarterly updates in the 2027/28 tax year. You still have to send them before you can submit your tax return, so it's a grace period, not a pass.
• For employees, the £2,500 expenses limit that forces you into Self Assessment to claim unreimbursed expenses is being removed from April 2028. That makes Mileage Allowance Relief easier to claim through PAYE if your employer pays less than the approved rate.

If your accounting year doesn't line up with the tax year (say it ends on 31 December), the switch to 35p gets split across two tax years. That needs pro-rating, the same as the 55p change did. Your accountant will know how they want to handle it.

What we've done in KeptMiles

KeptMiles 1.3.2 already knows about the 35p rate. Rates are worked out per tax year, so business journeys from 6 April 2027 onwards will automatically get 35p once you pass 10,000 miles. Your 2026/27 journeys stay at 55p and 25p, which is correct.

The PDF claim report, the tax year card on the Today screen and the vehicle settings screen all show the right over-10,000 rate for the tax year you're looking at. You don't need to change any settings.

If you drive a lot for work and haven't been logging it, this is a good reason to start before April. Proper records are what make the claim stick, and at 35p every mile above 10,000 is worth 40% more than it used to be.

KeptMiles tracks your business journeys automatically and applies the right HMRC rate for each tax year, including the new 35p rate from April 2027.

The short version

55p for the first 10,000 business miles is permanent. From 6 April 2027, miles above 10,000 go from 25p to 35p, for employees and self-employed alike. It's not backdated, so 2026/27 miles over 10,000 stay at 25p. If you drive under 10,000 business miles a year, nothing changes for you.

Sources: Ross Martin's Budget summary and HMRC's policy paper on the 55p increase. For the background on the May change, see HMRC mileage rate rises to 55p.