Motorists could soon reclaim greater expenses for mileage, after Rachel Reeves revealed she was examining an increase to the minimum tax-free threshold. The Chancellor acknowledged that driving costs have surged "significantly" in recent years, noting the current rate of 45p-per-mile has not been revised for 15 years.
The Approved Mileage Allowance Payment determines how much workers can be reimbursed tax-free when using their personal vehicles for business purposes. Motorists can presently claim 45p-per-mile tax-free for the initial 10,000 miles, which is intended to cover vehicle operation, including insurance and maintenance.
Beyond that threshold, drivers can claim 25p-per-mile. An extra 5p/mile can be claimed for each passenger carried. Employers may opt to pay staff more, though this could attract income tax. Ms Reeves's remarks in the House of Commons follow a campaign by trade unions arguing their members, including care workers, are financially disadvantaged when travelling to visit clients.
She informed MPs that the adjustments could be implemented in an upcoming budget or statement. Ms Reeves stated: "Whilst the approved mileage allowance payment rates have not changed since 2011, I recognise that motoring costs have evolved significantly and it's an important issue for many people who claim motoring expenses," reports Yorkshire Live.
"We're therefore looking at the issue and will consider the matter further in the usual way as part of a future fiscal event."
Her response came after Labour former minister Jim McMahon questioned whether the modification would proceed. He highlighted the situation of Gemma, a social worker with over two decades of experience, who was forking out more than £1,000 annually just to carry out her duties.
Trade union Unison has long championed this cause. Back in 2022, it revealed that motoring expenses had surged by 39% in the ten years following the introduction of the 45p rate.
The RAC Foundation reported in 2023 that employees using their own vehicles for work were typically £6,000 a year worse off due to the outdated mileage rates.
Mr McMahon remarked: "I welcome it and so will millions of working people.
"The 45p a mile rate set 15 years ago is nowhere near the true costs of running a vehicle today, recently assessed at 67p a mile, that was before fuel costs rocketed in the last week.
"Working people like Gemma and millions like her will welcome the Chancellor's statement today, but can I ask that the work is expedited given the cost-of-living crisis?".
Ms Reeves responded: "We've got a standard Treasury policy of keeping all taxes under review ahead of fiscal events, but this is one area I will be keeping a very close interest in."