27th October 2026
The Government has announced plans to make higher tax-free business mileage rates permanent and increase the rate paid on higher annual mileage. The changes could benefit millions of employees and self-employed workers, including nurses, care workers, builders and other people who use their own vehicles for work.
But there is another side to the announcement. While workers may benefit, employers could face higher costs. For councils, the NHS and other publicly funded services, any increase in mileage payments could create an additional bill at a time when budgets are already under pressure.
The Treasury estimates that around three million employees and self-employed people could benefit from the changes.
What is changing?
The Government intends to retain the rate of 55p per mile for the first 10,000 business miles and increase the rate for additional miles from 25p to 35p.
These rates relate to qualifying business journeys in a privately owned car or van. They are not compulsory payments that every employer must make. Rather, they establish the amount that can generally be paid tax-free and, in appropriate circumstances, the basis for claiming tax relief.
Employees who receive less than the applicable approved rate may be able to claim tax relief on the difference. Self-employed people using the simplified mileage method can use the rates to calculate an allowable deduction from their taxable business profits.
The important distinction is that a higher tax-free rate does not automatically mean every worker will receive more money. The outcome depends on the employer's expenses policy and the individual's circumstances.
Nurses and care workers could benefit
Nurses who visit patients in their homes, community healthcare staff and care workers travelling between clients are among those who could benefit.
In rural areas, the distances involved can be substantial. A care worker based in Wick might visit several clients across surrounding villages, while a community nurse could spend much of the working day travelling between patients.
For these workers, a personal vehicle is often essential to doing the job. The cost of fuel, insurance, servicing, tyres and depreciation can make frequent business travel expensive.
The rules generally distinguish between travelling for work and ordinary commuting. A journey from home to a permanent workplace does not normally qualify, whereas travelling between patients or other work locations may do so.
However, the increase in the approved rate does not necessarily mean an employer must increase its payments. Workers whose employer continues to pay a lower rate may be able to claim tax relief on the eligible shortfall, subject to the applicable rules.
Builders and other self-employed workers
Self-employed builders are specifically mentioned in the announcement, but the potential beneficiaries extend much further.
Electricians, plumbers, joiners, heating engineers, gardeners, repair specialists and other tradespeople often travel between customers, suppliers and jobs. Those operating across Caithness and Sutherland can face particularly long journeys.
For a self-employed person using the simplified mileage method, the higher rate increases the deduction available against taxable business profits. That can reduce the tax payable, but it is not a payment from the Government covering the full cost of running a vehicle.
Someone driving an ageing van with high insurance premiums and expensive repairs may still find that the actual cost of motoring exceeds the allowance.
Other potential beneficiaries include sales representatives, engineers, surveyors, estate agents, inspectors, social workers and charity employees who undertake qualifying business journeys in their own vehicles.
The other side of the story: employers must pay
The announcement raises an important question: if employees are to receive higher mileage payments, where will the money come from?
Private businesses will need to consider whether to increase their reimbursement rates. Some already pay the full approved rate, while others pay less or operate different expenses arrangements. The effect will therefore vary between employers.
For councils and the NHS, the issue is more complicated because mileage payments are part of the cost of delivering public services.
Consider a council care worker who drives 5,000 eligible business miles a year. If the council increases the reimbursement rate by 10p per mile, the additional annual payment would be £500.
If 100 workers received the same increase, the extra cost would be £50,000 a year. Across a large organisation with many staff undertaking business journeys, the total could be considerably greater.
That money would help employees meet the cost of using their vehicles, but it would also have to be found in the employer's budget.
There is an important qualification. The approved tax-free rate does not, by itself, force every employer to pay that amount. The actual cost will depend on the final arrangements and the reimbursement policies already in place.
Nevertheless, where public bodies decide or are required to increase payments, the money must ultimately come from public funds unless additional funding is provided.
The NHS and councils face a particular challenge
Healthcare and social care provide clear examples of why mileage costs matter.
Community nurses, district nursing teams, social workers and care staff can travel considerable distances, particularly in rural areas where public transport is limited. Reimbursing staff fairly is important if organisations expect them to use their own vehicles to deliver essential services.
The NHS already operates mileage reimbursement arrangements. The new announcement therefore needs to be considered alongside existing NHS rates and any changes to the rules, rather than assuming that every NHS employee will automatically receive an increase.
Councils face similar questions. Home care, social work, environmental health and other services may depend on staff travelling between locations.
For Highland Council, where services can cover large geographical areas, the cost of business mileage is a practical consideration. A worker covering several communities in one day may accumulate substantial mileage even though the individual visits are relatively short.
Yet councils across Scotland are already having to make difficult choices about staffing, services and spending priorities. If mileage reimbursement costs rise, they will need to find the additional money somewhere unless the Government provides extra funding.
The same principle applies to the NHS. An additional cost may be justified, but it still has to be accommodated within budgets that are under pressure from many competing demands.
Will the Government provide extra funding?[/b]
This is the question that deserves further attention when the full Budget details are published.
The Government has highlighted the number of workers who could benefit, but the public-sector consequences are also relevant. How much will the changes cost councils, the NHS and other publicly funded organisations? Has the Treasury assessed the impact, and will additional funding be provided?
If no extra money is allocated, public bodies may have to absorb the cost from existing budgets. That does not mean services will automatically be cut, but it does mean that the additional expenditure competes with other priorities.
There is also a wider economic consideration. Employers who reimburse business mileage are helping to meet the cost of work-related travel. If those payments have failed to keep pace with vehicle costs, increasing them may be reasonable. But the cost does not disappear simply because the Government changes the tax treatment.
A benefit for workers, but not a cost-free measure
The mileage announcement could provide meaningful help to people who drive thousands of miles for work. For rural workers in particular, where journeys can be long and alternatives to driving limited, the issue is important.
But the policy should be judged on both sides of the ledger. Workers may benefit from higher rates, while employers could face higher expenses. In the public sector, that could mean additional pressure on council and NHS budgets unless the extra cost is funded.
The real test will be whether the final arrangements deliver the intended support to workers while recognising the financial consequences for the organisations that employ them.
A mileage allowance may look like a small technical detail in a Budget. For a care worker driving between patients, it can make a difference to household finances. For a council or health board paying thousands of mileage claims, it can also become a significant operating cost.
Helping workers meet the cost of doing their jobs is one objective. Ensuring that employers, particularly publicly funded services, can afford to meet that cost is another. The Budget needs to address both.